Yangzijiang Shipbuilding (Holdings) Ltd has terminated a contract with Greek shipowner FreeSeas Ltd after it failed to make payments, which may weigh on its stock price, DBS Vickers said.
The cancelled contract was for Yangzijiang to build two bulk carriers for FreeSeas, an external spokeswoman for the Chinese shipbuilder said.
Although the orders from FreeSeas account for only 1 percent of Yangzijiang’s $4.5 billion order book, “the cancellation will still be negative on sentiment as this is Yangzijiang’s first contract cancellation on default,” said DBS Vickers in a report.
It added that among the Singapore-listed shipyards, COSCO Corp Singapore Ltd has the highest exposure to Greece and Europe, with more than 60 percent of its order book from the region, while Yangzijiang will be the least affected among Chinese yards.
DBS advised investors to avoid COSCO’s shares, which are likely to underperform the market on concerns about their European exposure.
At 0419 GMT, shares of Yangzijiang were unchanged at S$1.045, while COSCO has fallen about 1 percent to S$0.995.
“We believe the cancellation is a reflection of tightening in ship financing as European banks become more selective in lending, while Chinese banks have not stepped in to fill the gap,” said Credit Suisse, which has an outperform rating and target price of S$1.60 on Yangzijiang.
The brokerage estimates that only about 5 percent of Yangzijiang’s order book consists of bulk carrier orders from Europe-based customers.
(Reporting by Charmian Kok in Singapore; email@example.com)
11:07 STOCKS NEWS SINGAPORE-STX OSV shares up 3 pct on order wins
Shares of Singapore-listed shipbuilder STX OSV Holdings Ltd rose as much as 3 percent after it won two contracts worth 700 million Norwegian crowns ($118.1 million) to build two platform supply vessels.
Shares of STX were up about 2 percent at S$1.55 at 0301 GMT and have risen 34 percent so far this year.
“We believe that order momentum in the North Sea underscores robust sector dynamics, despite ongoing Euro concerns,” CIMB Research said.
The contracts bring the shipbuilder’s order wins so far this year to 6.7 billion Norwegian crowns, two-thirds of the broker’s total order target for fiscal 2012.
CIMB Research kept its target price of S$2.09 on STX OSV and maintained its ‘outperform’ rating, saying it liked the company for its high-end capabilities, market leadership and entrenchment in Brazil.