Shipyards ride wave of orders
Investors in three South Korean shipbuilders fared better this year than if they had put their money into technology or Internet stocks such as Apple Inc or Google Inc. The gains will keep on coming.
A rising tide of orders for containerships may lift shares of Hyundai Heavy Industries Co, Samsung Heavy Industries Co and Daewoo Shipbuilding & Marine Engineering Co to record levels as a boom in the global shipping trade shows no sign of slowing. Google's shares surged almost sixfold since going public in August 2004. Hyundai Heavy shares are up 14-fold since then and have added 174 percent this year.
Samsung and Daewoo shares have gained 115 percent and 103 percent, respectively, this year. That compares with an 11 percent gain for Google and 55 percent for Apple. For Park Hyoung-ryol, who manages $217 million at Consus Asset Management Co in Seoul, there's really no comparison.
"For shipbuilders, their earnings are transparent because you know what their order books are going to be like for the next few years," said Park, who owns shares of Hyundai Heavy and other shipbuilders and doesn't plan to sell any in the near future.
The South Korean companies, the world's three largest shipbuilders, are receiving premium prices for their vessels, fattening profit margins, while a growing backlog will keep their dockyards running at full capacity for years to come.
An unexpected wave of contracts for containerships prompted Samsung Heavy and Daewoo Shipbuilding to raise their annual order forecasts in July. Higher selling prices for ships helped push shares of Hyundai Heavy to a record 403,500 won ($435) on July 11. They'll gain 45 percent in the next six months, said Lim Dong-soo a Seoul-based analyst for CLSA Asia-Pacific Markets.
"Demand for large-sized container vessels has been particularly strong this year, something we didn't expect at the start of the year," said Cho In-karp, a Seoul Securities Co analyst who rates all three firms "buy".
Daewoo on July 8 boosted its full-year target for new orders by 55 percent to $17 billion. Samsung raised its goal by 36 percent on July 1 to $15 billion after the Seoul-based company became the first shipbuilder to exceed $10 billion in orders in the first half of a year. South Korean yards captured almost half the $105.5 billion in new worldwide orders last year.
A lower-than-anticipated level of orders for liquefied-natural-gas carriers has opened up limited dockyard slots that can be used to build containerships.
"This will prolong the industry's boom as these contracts may have to be carried over to next year as yard space is tight," said Kim Soo-jin, an analyst at Hannuri Investment & Securities Co in Seoul.
Ships as long as three football fields stacked with 20-foot-long steel boxes carrying products such as computers, furniture and toys accounted for $6 billion of Daewoo's $9.2 billion in first-half orders, or 31 vessels.
Bloomberg News
(China Daily 08/03/2007 page16)
