China

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Shipyard and then injected additional capital in itAcquired 51% equity stake in the capital of Jiangsu Changbo

�� RMB156.1 million of total amount invested

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book worth USD338 million comprising 20 vesselsThe acquired yard has an outstanding shipbuilding order

SINGAPORE – 28 June 2010 – Yangzijiang Shipbuilding (Holdings) Limited

(“Yangzijiang” or “the Group” or “

enterprising shipbuilder listed on the SGX Main Board, is pleased to announce that it has

through its wholly-owned subsidiary, Jiangsu Yangzijiang Shipbuilding Co. Ltd

(“JYSCO”), today acquired 51% of the equity interest in the capital of Jiangsu Changbo

Shipyard Co., Ltd (

JCSC is located at the downstream of the Yangtze River which is 5 kilometres away

from Yangzijiang’s wholly-owned subsidiary, Jiangsu New Yangzi Shipbuilding Co., Ltd,

and it is at the opposite side of the Yangtze River facing JYSCO. JCSC is a company

incorporated in Jingjiang City on 1 August 2001 with a registered authorised share

capital of RMB100 million and its principle activities are shipbuilding, ship repair,

production and processing of large scales steel structures. JCSC owns shipbuilding

facilities with a production area of 286,471 square meters and has a 926 meters deep

water coast line with production capacity of 400,000 DWT. JCSC currently has an

outstanding order book worth USD338 million comprising 20 vessels that are contracted

to be delivered between the second half of 2010 and mid of 2012.

 

Other than JCSC’s order book and existing yard facilities, the rationale for this

acquisition is also to consider this as an alternative option to construct small capacity

vessels that are currently build in JYSCO. With the completion of the acquisition, JCSC

would be renamed as “Jiangsu Yangzijiang Changbo Shipbuilding Co., Ltd.” (

博造船有限公司江苏扬子长).

“This recent acquisition will be a value-add for the Yangzijiang Group based on

the compelling price of acquisition and on the yard’s strategic location and

proximity to the Group’s existing yards. Moreover, this new yard will serve as an

alternative production area to our old yard in building small sized vessels. We are

enthusiastic about integrating this yard in the Group and are confident that this

will be done without incurring substantial costs.”

Mr Ren Yuanlin (任元林), Executive Chairman, Yangzijiang

Pursuant to the agreements that Yangzijiang entered into with Jiangsu Changbo

Automobile Ferry Co. Ltd (the “Vendor”), Jiangsu Changbo Group Co., Ltd, and Hong

Kong Haitian International Trade Co., Ltd (last two as the “Remaining Equity Holders”),

the capital reserves of JCSC would be increased by RMB156.1 million to RMB241.9

million immediately after the acquisition. The total investment made by Yangzijiang in

JCSC was RMB156.1 million (of which RMB51.0 million was paid to acquire 51% of

equity interest of JCSC and RMB105.1 million was to increase the capital reserves of

JCSC) and Yangzijiang’s share in the increased equity capital of JCSC is RMB174.4

million. The amount of the investment was arrived on an arms’ length negotiations on a

willing buyer, willing seller basis taking into account,

value amount of RMB185.8 million of JCSC for FY2009.

Also, under the agreement, there is a transition period of 6 months (from the date of the

acquisition completion), which can be extended to 12 months. At the end of this

transition period, JCSC is to commission an independent auditor to audit its net tangible

assets at 31 December 2010 or 30 June 2011 (the “NTA”); the Remaining Equity

Holders warrants and guarantees in respect of the NTA, that:

(a) If the NTA is less than RMB156,120,000, any shortfall should be made up by the

Remaining Equity Holders in cash within Twenty (20) Business Days from the

issuance of independent auditor report;

(b) If the NTA is RMB156,120,000 and above but less than RMB306,120,000 (including

the made up of the NTA to RMB156,120,000 as per para (a) above), the Remaining

Equity Holders should make up any shortfall in cash in order to maintain their 49%

equity interest in the capital of JCSC. Otherwise, the Company will be entitled to

increase its equity interest of JCSC based on the percentage of the total investment

cost by the Company over the NTA.

 

If there is a surplus from RMB306,120,000, i.e. the NTA above RMB306,120,000, all

parties will be eligible to share the surplus based on their respective equity interest

in the capital of JCSC.

The investment will not have any significant impact on the earnings per share and net

tangible assets per share of Yangzijiang for FY2010.inter alia, the audited net book扬子江船业控股公司”), one of PRC’s leading and most江苏长博船厂有限公司) (“JCSC”).

European client .According to Beijing's Ministry of Industry

Invests in VC funds.

RMB153m for a 51% stake in Jiangsu Runyuan Microfinance Co, a licensed

company to provide microcredit to enterprises and individuals. The group

has also invested RMB60m for a 20% stake in Jiangsu Huagong Venture

Capital Co with partners such as the Yangzhou City Mangshan District

Government. Together with its 20% interest in Everbright Venture Capital

Jiangyin Co, YZJ has poured in RMB313m into these investments. These

investments represent just 4% of the group's cash and about 4.5% of its

NTA as at 31 Mar 2010, it is comparable to the amount of dividends paid in

a year (RMB311m in FY09 and RMB431m in FY08). As these are fairly

long term investments, we do not expect any significant financial impact

for the near to medium term.Last week, Yangzijiang Shipbuilding (YZJ) invested

Middle Eastern investor takes a stake.

that Middle Eastern investor, QD Asia Pacific, will subscribe for 83.6m new

shares in YZJ, owning 2.24% of the enlarged capital. QD Asia has decided

to proceed notwithstanding the outcome of the PPLH deal. Recall that YZJ

had previously said that it had entered into a placement agreement with

various parties to acquire PPLH. The move will allow YZJ to extend its

reach into the Middle East by tapping into Qatari Diar's network. The group

also intends to use net proceeds for potential M&A opportunities.The group announced yesterday

Upgrade to BUY.

more time may be needed for the PPLH deal to reach a conclusion. Eurozone

uncertainties still remain but assuming a fall-out in the region does not

happen, we think the possibility of substantial order cancellations remains

low for now (refer to earlier report 4 Jun 2010). With an upside potential of

about 19%, we upgrade YZJ to

intact. Depending on the tenacity of the various parties involved,BUY, keeping our S$1.60 fair value estimate(Low Pei Han)

Yangzijiang Shipbuilding: China shipbuilding orders up

New ship orders in China rose from 12.8m gross tons YTD in Apr '10 to

19.6m gross tons YTD in May '10. This compares to just 1.2m gross tons

YTD in May '09. Yangzijiang Shipbuilding (YZJ) has invested RMB313m in

VC funds to generate capital gains, amongst other aims. Though this

represents just 4% of the group's cash and about 4.5% of its NTA, it is

comparable to the amount of dividends paid in a year. As these are fairly

long term investments, we do not expect any significant financial impact

for the near to medium term. Middle Eastern investor, QD Asia Pacific, will

also subscribe for 83.6m new shares in YZJ, owning 2.24% of the enlarged

capital. Eurozone uncertainties still remain but assuming a fall-out in the

region does not happen, we think the possibility of substantial order