Yangzijiang Shipbuilding - Quality shipbuilder

3Q10 post-results briefing

Maintain Outperform.
We attended the company’s analysts’ briefing following the
release of its 3Q10 results.

Our takeaways were:

1) sustainable gross margins into 2011;

2) on track for its delivery targets with upside potential; and

3) higher interest income from financial assets.

We keep our earnings estimates and target price of S$2.15, still based on 12x CY12 P/E.

YZJ is our preferred Chinese shipbuilder for its quality execution and strong financial muscles.
We continue to see catalysts from stronger-than-expected orders and margins.

Takeaways

Gross margins from execution of orders before crisis and improving productivity.

We expect YZJ to keep gross margins above 20% going into 2011 on the back of:

1) the execution of high-value contracts;
2) improved productivity from is new yard; and
3) an upgrade in its technical skills to expand capacity.

High-priced contracts (fetching 20% more than current projects) account for about
65% of YZJ’s order book of US$5.3bn.

On track for 48 deliveries in 2010. Management expects to deliver 12 vessels in
4Q10, meeting its target of 48 for 2010. We believe these could be higher-value vessels
which would boost its revenue recognition in 4Q10. With productivity gains, we believe
YZJ could deliver up to 54 vessels in 2011-12, exceeding its target of 50 vessels p.a.

Higher-than-expected investment income. YZJ booked Rmb203m of interest income
in 3Q10, mainly relating to structured financial assets and cash deposits. YZJ had
Rmb7.9bn of financial assets comprising collateral for bridging loans extended to listed
blue-chip companies in China, listed shares, land titles and investment projects
supported by the Chinese government.

Management hopes to raise investments in financial assets to Rmb10bn in the mid-term
with an average return of 10%. We believe 4Q10 earnings could be lifted by higher interest
income as more financial assets are expected to mature.

YZJ booked Rmb347m of interest income in 4Q09.

Slight glitch in Jiangsu Changbo shipyard. No profits were consolidated in 3Q10
from YZJ’s new subsidiary, Jiangsu Changbo Shipyard. There were also two
cancellations during the quarter for which the yard would be compensated. Changbo’s
order book was US$338m, comprising 20 bulk carriers for delivery up until 2012

Yangzijiang Shipbuilding - Quality shipbuilder

3Q10 post-results briefing

Maintain Outperform.
We attended the company’s analysts’ briefing following the
release of its 3Q10 results.

Our takeaways were:

1) sustainable gross margins into 2011;

2) on track for its delivery targets with upside potential; and

3) higher interest income from financial assets.

We keep our earnings estimates and target price of S$2.15, still based on 12x CY12 P/E.

YZJ is our preferred Chinese shipbuilder for its quality execution and strong financial muscles.
We continue to see catalysts from stronger-than-expected orders and margins.

Takeaways

Gross margins from execution of orders before crisis and improving productivity.

We expect YZJ to keep gross margins above 20% going into 2011 on the back of:

1) the execution of high-value contracts;
2) improved productivity from is new yard; and
3) an upgrade in its technical skills to expand capacity.

High-priced contracts (fetching 20% more than current projects) account for about
65% of YZJ’s order book of US$5.3bn.

On track for 48 deliveries in 2010. Management expects to deliver 12 vessels in
4Q10, meeting its target of 48 for 2010. We believe these could be higher-value vessels
which would boost its revenue recognition in 4Q10. With productivity gains, we believe
YZJ could deliver up to 54 vessels in 2011-12, exceeding its target of 50 vessels p.a.

Higher-than-expected investment income. YZJ booked Rmb203m of interest income
in 3Q10, mainly relating to structured financial assets and cash deposits. YZJ had
Rmb7.9bn of financial assets comprising collateral for bridging loans extended to listed
blue-chip companies in China, listed shares, land titles and investment projects
supported by the Chinese government.

Management hopes to raise investments in financial assets to Rmb10bn in the mid-term
with an average return of 10%. We believe 4Q10 earnings could be lifted by higher interest
income as more financial assets are expected to mature.

YZJ booked Rmb347m of interest income in 4Q09.

Slight glitch in Jiangsu Changbo shipyard. No profits were consolidated in 3Q10
from YZJ’s new subsidiary, Jiangsu Changbo Shipyard. There were also two
cancellations during the quarter for which the yard would be compensated. Changbo’s
order book was US$338m, comprising 20 bulk carriers for delivery up until 2012