Today, Yangzijiang Financial made its first share buyback, purchasing 1 million shares at 51 cents apiece. See here. The company has established a $200 million share buy-back programme following a buyback mandate granted by its shareholders at the extraordinary general meeting of the Company held on 8 June 2022.

Excerpts from CGS-CIMB report

Analysts: LIM Siew Khee & Izabella TAN

Yangzijiang Financial Holdings
A force to be reckoned with

■ We like YZJFH for its generous 40% dividend payout and yield of 4.15%-6.24% in FY22F-FY23F with consistent returns of funds of c.11%.

Yangzijiang Financial

Share price: 
54 c

74 c

■ If we include its debt investments that are maturing by end-2022F as cash, its cash balance could amount to c.S$1.8bn or c.85% of its current market cap.

■ We initiate coverage with an Add rating and TP of S$0.74, based on blended valuations of 0.6x CY23F P/BV (70%) and 9x CY23F P/E (30%).

Targets to double AUM to S$7bn in 3-5 years

1Ren Yuanlin annExecutive Chairman Ren Yuanlin. File photoYZJFH is the carved-out and spun-off debt investment and investment management division of YZJ Shipbuilding (Add, TP: S$1.63, CP: S$1.00). It had S$4.2bn in net book value as of Apr-22, which it also considers as its asset under management (AUM).

Together with AUM via engagement for investment advisory services (c.S$500m) and the establishment of GEM Asia Growth Fund (c.S$60m, S$140m pending), YZJFH’s current AUM is S$4.76bn, in our estimate.

YZJFH aims to grow its total AUM to S$7bn in 3-5 years, according to management.

Invested 75% of S$4.2bn portfolio; trading close to cash value

YZJFH’s current market cap of S$2.1bn is slightly above its c.S$1.8bn of cash by end-FY22 (S$0.46/share).

We understand from the management that 75% of its S$4.2bn asset portfolio or c.S$3.15bn has been invested – c.S$2.52bn (60%) in debt investments, and c.S$0.63bn (15%) in private equity funds, as at May-22.

Of the balance, c.S$0.42bn (10%) will be gradually invested into Singapore funds, and c.S$0.63bn (15%) will be conserved.

YZJFH’s current market cap of S$2.1bn is slightly above its c.S$1.8bn of cash by end-FY22 (S$0.46/share).

We believe this has not priced in upside potential for AUM and fee income growth.

50% cash has been moved to Singapore; ready for offshore funds
YZJFH has established itself in debt investment and the private lending market in China.

We believe YZJFH can utilise its strong Chinese network to capture China’s growing wealth management market. Together with the newly acquired asset management firm, GEM Asset Management (GEM), we think the group can replicate its success outside China with existing ammunition and by leveraging third-party money to grow its AUM.

YZJFH intends to deploy c.S$1bn cash into Singapore mainly via Qualified Domestic Limited Partnership (QDLP) and liquidity pool.

Key re-rating catalysts: faster-than-expected AUM growth.

Key downside risks: interest/exchange rate fluctuations.

Initiate coverage with S$0.74 TP; 40% div payout, 4.15% yield
We based our TP on 0.6x CY23F P/BV (comparable to Chinese banks) and 9x CY23F P/E (peer average).

We like the stock as it is the only Singapore mid-size cap proxy to fund management with yield upside of 6.24% by FY23F.

Valuations are conservatively discounted against peers.

We are confident in the success of fund management, as:
(1) it added S$560m AUM within a month of listing;
(2) long-standing relationship among the management; and
(3) consistent annual return (of funds) of 11%, prior to spin-off, a testament of its track record in China.

Full report here.

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