PP 7767/09/2010(025354)

Malaysia RHB Research

Institute Sdn Bhd
A member of the
New Listing RHB Banking Group
Company No: 233327 -M

Shin Yang Shipping Corp 17 June 2010

MARKET DATELINE

Offer Price : RM1.10/1.05

Public Issue of 176.4m New Shares & Offer For Sale Of
(Institutional/Retail)
128.8m Existing Shares
Fair Value : RM1.15

Table 1: Investment Statistics Bloomberg Ticker: SHIN MK

Net EPS Net
FYE Turnover Profit EPS Growth PER P/NTA Gearing ROE GDY
Jun (RMm) (RMm) (sen) (%) (x) (x) (%) (%) (%)
2009 673.5 101.8 9.9 nm 11.6 1.1 nm 9.3 -
2010f 661.2 103.8 10.1 2.0 11.3 0.9 0.2 8.1 -
2011f 760.4 129.3 10.8 6.2 10.7 1.0 0.2 9.3 1.7
2012f 836.4 145.6 12.1 12.6 9.5 0.9 0.2 9.6 1.7
Issued Capital (m shares) 1,200.0 Major shareholder (%)
Market Capitalisation (RMm) 1,380.0 Shin Yang Holding 55.0
Main Market Listing /Non-Trustee Stock/Syariah Approved Stock By The SC
Valuations based on estimated fair value of RM1.15/share

X Shin Yang Shipping Corp Bhd (Shin Yang) is primarily engaged in: (1)
LISTING DETAILS
Domestic and international shipping with a fleet of 245 vessels (see
Listing Bursa Malaysia Main
Table 1); and (2) Shipbuilding including ship repair and fabrication of Market
metal structures (see Table 2 for shipyards details). For 5MFY06/10, Sector Trading/Services
shipping and shipbuilding contributed 55% and 45% of total gross profit Tax Resident Malaysia
respectively. Listing Date 23 Jun 2010
Public Issue Of 1) 24m shares to
the Malaysian
public
X Shin Yangs shipbuilding division has completed 111 vessels with a total
value of RM1bn over the last five years comprising tugboats, barges, 2) 36m shares to
eligible
anchor handling tugs (AHTs), landing crafts, cargo vessels, offshore
directors,
support vessels, navy vessels (supply, rescue, training and patrol), etc. employees and
business
At present, its outstanding shipbuilding orderbook stands at nine associates
vessels with a total value of RM144.5m. Shin Yangs shipbuilding 3) 116.4m shares
to Bumiputera
division has catered to about 90% of the vessel requirements of the investors
shipping division. In addition, the shipbuilding division also builds approved by
MITI
vessels for third-party customers. For 5MFY06/10, third-party
Offer For Sale Of
customers contributed about 30% of Shin Yangs total shipbuilding 1) 24.2m shares
to Bumiputera
turnover. investors
approved by
MITI
X Generally, we are cautious on the shipping sector as it will continue to 2) 104.6m to
be weighed down by weak freight rates on the back of just a mild institutional
investors
recovery in volumes while new capacity continues to flood the market.
We have also recently turned cautious on the oil & gas sector (the key MAJOR SUBSIDIARIES
Piasau Slipways Sdn Bhd 100%
customers for Shin Yangs shipbuilding division) as: (1) The demand for
Shin Yang Shipping Group 100%
crude oil stays relatively lacklustre while supply remains ample; (2) The
financial demand for crude oil has dwindled on the back of credit MANAGEMENT FORECAST
tightening; and (3) The global exploration and production (E&P) FY06/10
Net Earnings (RMm) na
activities are likely to be held back or delayed on the heels of the BP oil Net EPS (sen) na
spill in the Gulf of Mexico as well as the proposed Resources Super- Net DPS (sen) na

Profit Tax in Australia.

Joshua CY Ng
Please read important disclosures at the end of this report. (603) 92802151
joshuang@rhb.com.my

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 17 June 2010

Table 1: Shin Yang's Fleet

Type Quantity '000 GRT*
Tugboat 108 15.6
Barge 105 192.7
Cargo vessel 18 73.6
Others# 14 21.5
Total 245 303.4
*Gross registered tonnes
#Landing craft, crew boat, container vessel, oil tanker & chemical vessel
Source: Company

Table 2: Shin Yang's Shipyards

Location Area Capacity
(acres) (units p.a.)
Kuala Baram, Miri 248 48
Bintulu 17 -
Tanjung Manis, Sibu 214 Future expansion
UAE 15 For ship repair & maintenance
Total 494 48
*Gross registered tonnes
Source: Company

Having engaged in both shipping and shipbuilding businesses, Shin Yang can benefit from synergy in
terms of flexibility in fleet expansion, lower investment costs for ships as well as cheaper ship repair and
maintenance costs.

Shin Yangs operations are less vulnerable to business cycles thanks to steady demand from internal
customers, i.e. Shin Yang Group of companies. For 5MFY06/10, Shin Yang Group of companies
contributed 31% of Shin Yangs turnover. Also, for 5MFY06/10, Shin Yang Group of companies only
sourced about 60% of their international freight requirements from Shin Yang, with the balance 40%
from third-party operators. Subject to the availability of new capacity at Shin Yang, the sourcing of
more international freight requirements of Shin Yang Group of companies from Shin Yang will underpin
growth at Shin Yang.

However, the business dealings with internal customers, i.e. Shin Yang Group of companies, can cut
both ways too. As far as the market is concerned, the onus lies with Shin Yang to prove transfer
pricing that may jeopardize the interest of the minority shareholders does not exist.

At the helm of the company is chairman Datuk Ling Chiong Ho who has been in the shipping business
since the 1970s and has had extensive hands-on experience in shipbuilding and ship repair.

At retail and institutional offer prices of RM1.05 and RM1.10 respectively, the IPO will raise RM191m
gross proceeds (see Table 3 for IPO proceeds utilisation). Post IPO, Shin Yangs net debt is estimated at
RM306.3m, translating into a net gearing of 0.24x that is manageable.

We expect FY06/11-12 net profit to grow at 6-13% per annum driven largely by: (1) Growth at the
shipping division , i.e. the increase in fleet size from 245 to 252 by end-2012 with the delivery of four
cargo vessels and three AHTs; and (2) Growth at the shipbuilding division, i.e. the expansion of
shipyards in Sarawak and UAE.

We have arrived at a fair value of RM1.15/share for Shin Yang based on 10x CY11 EPS of 11.5sen, in
line with our 1-year forward target PER of 10x for the transportation and oil & gas sectors.

SHIN YANG 2 SHIPPING CORP

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 17 June 2010

Table 3: Utilisation Of Gross IPO Proceeds

RM m
Part finance of seven new vessels 115.7
Part finance of shipbuilding capacity & facilities 61.2
Working capital 6.1
Listing expenses 8.0
Total 191.0

Table 4: Earnings Review And Forecasts (RMm)

FYE Jun 2007 2008 2009 2010F 2011F 2012F

Turnover 486.6 595.1 673.5 661.2 760.4 836.4

Shipping 352.1 413.0 423.6 437.2 502.8 553.1
Shipbuilding* 134.5 182.0 249.9 224.0 257.6 283.4
Gross profit 123.7 131.7 158.0 149.6 177.2 194.9
Shipping 101.3 96.2 106.2 109.3 125.7 138.3
Shipbuilding* 22.3 35.5 51.7 40.3 51.5 56.7
Admin exp (11.5) (16.8) (22.0) (18.1) (20.0) (20.0)
Others 8.3 57.6 (10.4) 9.0 5.0 5.0
EBIT 120.5 172.5 125.6 140.6 162.2 179.9
Net interest expenses (17.3) (18.2) (25.2) (13.2) (11.9) (10.7)
Associates 0.0 2.3 12.3 (2.7) 0.0 0.0
Pretax profit 103.2 156.6 112.7 124.7 150.4 169.3
Taxation (4.4) 5.2 (11.4) (21.3) (21.1) (23.7)
Minority interest (1.2) (2.8) 0.4 0.5 0.0 0.0
Earnings 97.7 159.0 101.8 103.8 129.3 145.6
Chg (%) - 62.8 (36.0) 2.0 24.6 12.6
EPS (sen) 9.5 15.5 9.9 10.1 10.8 12.1
Chg (%) - 62.8 (36.0) 2.0 6.2 12.6
PER (x) 12.1 7.4 11.6 11.3 10.7 9.5
Gross dividend per share (sen) - - - - 2.0 2.0
Gross dividend yield (%) - - - - 1.7 1.7
Weighted shares (m) 1,023.6 1,023.6 1,023.6 1,023.6 1,200.0 1,200.0
*Including ship repair & metal fabrication
Valuations based on estimated fair value of RM1.15/share

SHIN YANG 3 SHIPPING CORP

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 17 June 2010

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Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

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Industry/Sector Ratings

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SHIN YANG 4 SHIPPING CORP

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 17 June 2010

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