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1H26 revenue met while earnings were below our estimates, at 50%/32% of our forecasts. Earnings fell 29% YoY from 1) operating costs of maritime fund assets rose 186% as YZJM moved expiring time charters onto the spot market, where it collects freight but pays bunkers, port and agency costs, 2) share of joint venture and associate profit halved, with no repeat of the vessel sale gains booked in 1H25, and 3) currency revaluation swung to a US$5.6mn loss from a US$16.1mn gain. It bought back 1.4mn shares in June and remains unleveraged with US$238mn of cash.
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Maritime Business income rose 70% YoY to two-thirds of the total, on charter income up 77% and finance lease interest up 39% from a larger fleet. Only one of the 12 vessels under sale contract has been delivered, and gains are recognised on delivery, so the US$500mn of contracted value falls into 2H26e, FY27e and FY28e. Management targets 9 vessel deliveries in FY26e, 16 in FY27e and 24 in FY28e. It also intends to take on leverage in 2H26e to lift project IRRs to 20-30% (prev. 10-15% unleveraged).
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Downgrade to ACCUMULATE from BUY with a lower target price of S$0.68 (prev. S$0.69) as we lower our FY26e estimates by 27% due to higher maritime fund assets operating cost estimates. Our target price remains pegged to 1.0x P/B FY26e, 25% above peer valuations of 0.8x P/B. We like YZJM for its cost advantage. Building 15-20% below market locks in the margin at the point of order, so weaker resale prices reduce the profit rather than remove it. Sale margins have already risen from 15-17% to 25-26%. However, gains are recognised only on delivery, and just one of the 12 vessels sold has been handed over, with 7 more due only in FY27e. We believe the huge 60 vessels on order worth over US$3bn provides the earnings visibility for YZJM.
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