Yangzijiang Shipbuilding First Fully China-funded Firm to List in Taiwan

China's largest private shipbuilder, Yangzijiang Shipbuilding (Holdings) Ltd. based in Jiangsu Province, on September 8, 2010 began trading on the Taiwan Stock Exchange (TWSE) by issuing Taiwan depository receipts (TDRs). Three years ago, the company launched initial public offering on the Singapore Stock Exchange.

Yangzijiang Shipbuilding is the first Chinese-funded firm to list in Taiwan, drawing great interest from domestic institutional and individual investors. The company issued 240 million TDR units, each of which representing two common shares listed in Singapore. On the first trading day, Yangzijiang Shipbuilding closed at NT$20.1 per share, up NT$1.3 from the launch price of NT$18.8, and traded in the last week of September between NT$22 and NT$25.

Raising Recognition
Yangzijiang Shipbuilding executive chairman Ren Yuanlin says the TDR listing will help his company build recognition in Taiwan's shipping market and access Taiwan's shipbuilding segment, mostly dominated by the leading shippers as Evergreen Marine Transport Corp. and Wan Hai Lines Ltd.

Differing from other TDRs now traded on the TWSE, Yangzijiang Shipbuilding has gone public at a depreciated price; but Ren says the lower launch price won't hurt Taiwan's investors as Yangzijiang Shipbuilding is the first Chinese firm seeking to raise fresh funds in Taiwan's capital market. So far, Taiwan's original subscribers to Yangzijing Shipbuilding TDRs are still seeing returns on investment.

Projected to generate NT$4.512 billion from the TDR listing on the TWSE, the shipbuilder will fully remit such receipts abroad to procure raw materials and fund shipbuilding projects.

Ren believes the TDR listing in Taiwan will help his company raise corporate recognition in Taiwan, one of the global hubs for marine-transport, adding that the signing of the ECFA (economic cooperation framework agreement) will also enhance cooperation between the shipbuilding industries in China and Taiwan.

Yangzijiang Shipbuilding is also thinking about forming strategic alliance with Taiwan's leading shipbuilders and shippers to drive industrial development on both sides.

Admitting Taiwan has advantage over China in terms of shipbuilding design capacity, Ren says, however, that Taiwan's designers cannot fully realize their potential due to the limited size of the local market, a shortcoming that can be overcome with cross-Strait cooperation.

The company says choosing to go public in Taiwan, rather than in Hong Kong, is not due to shortage of operating funds. “To list in Taiwan is to access the Taiwan

market, build corporate profile and increase our strength to vie for orders,” says Ren.

Yangzijiang Shipbuilding scored 2.29 billion renminbi (NT$10.717 billion) in earnings on sales of 106 billion renminbi (NT$49.27 billion) last year, with institutional investors predicting the company's earnings to climb to 2.724 billion renminbi, or 0.75 renminbi per share this year.

Concentrating on the production of container ships, Yangzijiang Shipbuilding currently has orders for 124 vessels, 42 of which are container ships and 82 bulk carriers, which will keep the firm's shipyards busy throughout 2012, with the delivery peak in 2011.

Leading Shipbuilder
The listing of Yangzijiang Shipbuilding in Taiwan is especially meaningful, not only for the firm as a leading shipbuilder in China, because such issuance marks the entry into Taiwan's capital market by a fully China-capitalized business.

Incorporated in Singapore on December 21, 2005 as Yangzijiang Shipbuilding (Holdings) Pte. Ltd. with market capitalization of approximately NT$120 billion as the largest China-capitalized firm listed in the Merlion state, the shipbuilder produces a broad range of mini bulk carriers, bulk carriers, multi-purpose cargo vessels, containerships, chemical tankers, offshore supply vessels, rescue and salvage vessels and lifting vessels.

Once its new shipyard is completed in the Jiangyin Economic Development District in Jiangjiang City, Jiangsu Province, the shipbuilder will have 1,200 meters of deepwater coastline suitable for construction and mooring of vessels up to 300,000 DWT (deadweight tonnage).

Yangzijiang Shipbuilding scored 554 million renminbi in earnings, up 28% year-on-year, on sales of 2.6 billion renminbi in the third quarter of 2009, with 2009 earnings that had been projected at an all-time high of 2.3 billion renminbi, up 45% year-on-year.

Operating two production bases in China with shipbuilding capacity of 40 to 50 vessels yearly, Yangzijiang Shipbuilding recently acquired another shipbuilding facility that will help boost annual capacity by 12 vessels, or a total shipbuilding capacity of 1.2 million tons annually.

Sustainable Operations
Believing to achieve sustainable operations is to allow staffers to hold a vested interest in the firm and share dividends resulting from the team's toil, Ren adopts dividend sharing and allows senior managers to hold shares. Such common sensible approach empowers the staffers, whose performance and decisions could make a positive difference in the business to result in better compensation.

Dividend sharing and share ownership by employees is also a form of positive reinforcement that leads to enhanced efficiency, proven at Yangzijiang Shipbuilding where now a vessel takes only 45 days to build, whereas initially it took 75 days on average.

Another means adopted to sharpen the competitive edge at Yangzijiang Shipbuilding, amid fierce rivalry, is a cost-cutting program, which has realized a 5% reduction in production cost, significantly boosting corporate earnings.