Yangzijiang Financial Holding

(21-08-2024, 11:19 PM)Big Toe Wrote: Some investments will just take more time for results to show. Not saying that this will end up well but in all likelyhood, it stands a good chance. The circumstances by which it operates in is difficult and there is no light that can be seen at the end of the tunnel yet. This is when business owners hold on and the more impatient investors bail.

Well, I used to find pride/identity as an investor who invests like a business owner.  Then I realize that this identity actually held me back from selling "my businesses" that had fundamentally changed. I had identified the change but the "business owner" identity prevented me from action. When I finally realized my mistake, the investment with once-superb risk-adjusted returns had turned into one with average returns. The difference in returns was paid as my tuition fees.

Jason Zweig said that there are 7 virtues of investing - curiosity, scepticism, independence, humility, discipline, patience and courage. But taken on their own, each virtue can give good and bad outcomes. The key is actually discerning how/when to use each of them accordingly.

Using my free time to read up more on YZJFH and noticed the following. Also thanks for the mgmt beingtransparent which reveals the terrible state of its Debt investments in China.

Period/Total amount of DI (million)/Credit Loss Allowance/Ratio
1H2024/1,597/285/17.8%
End2023/1,846/249/13.4%
End2022/2,639/236/8.9%

Expected credit loss rates have been increasing with redemption of more and more DIs.

Its good that the plan is to reduce the DI to form 30% of AUM ($4B), but seems the expected credit loss is getting worse and worse with each passing debt redeemed.

Just logging the progress of YZJFH redemption of China debts and credit allowance rates. Amount of government bonds held has increased a lot as well (253 million vs 82 million in just 6 months)

Second, market cap= $1,267 million, Cash= $1,360. So there is a 7% discount on cash holdings assuming complete impairment of all other investments

(23-08-2024, 10:28 AM)weijian Wrote:

(21-08-2024, 11:19 PM)Big Toe Wrote: Some investments will just take more time for results to show. Not saying that this will end up well but in all likelyhood, it stands a good chance. The circumstances by which it operates in is difficult and there is no light that can be seen at the end of the tunnel yet. This is when business owners hold on and the more impatient investors bail.

Well, I used to find pride/identity as an investor who invests like a business owner.  Then I realize that this identity actually held me back from selling "my businesses" that had fundamentally changed. I had identified the change but the "business owner" identity prevented me from action. When I finally realized my mistake, the investment with once-superb risk-adjusted returns had turned into one with average returns. The difference in returns was paid as my tuition fees.

Jason Zweig said that there are 7 virtues of investing - curiosity, scepticism, independence, humility, discipline, patience and courage. But taken on their own, each virtue can give good and bad outcomes. The key is actually discerning how/when to use each of them accordingly.

The effort needed to invest in public companies/trading stocks is becoming so easy and so cheap that it somewhat dilutes the sense of business ownership.

On the other hand, the effort, time, labour needed for the founder/Ceo/chairman (who owns a significant stake ) to grow the company to where it is today. The relationships built over the years with stakeholders; employees,suppliers, customers, etc. 

The mindset will never be the same. And strangely enough it is sometimes the non-monetary motivation at the top level that drives the company through very tough times. Investors/traders on the other hand do not have the emotional baggage  and will bail during tough times. And all businesses will experience tough times.

Strongly agree with Big Toe that's where the disconnect is... it's the timeline and vestedness

When you have people saying to liquidate the company becuase it is trading below book value or RNAV it's obvious where the disconnect is. That's why I actually told companies that most funds, especially hedge funds or ETFs, are not your stakeholders. You can ask them for suggestions like we can ask tourists their feedback but don't imagine they are thinking about the long term business

(02-09-2024, 01:31 PM)Big Toe Wrote: The effort needed to invest in public companies/trading stocks is becoming so easy and so cheap that it somewhat dilutes the sense of business ownership.

On the other hand, the effort, time, labour needed for the founder/Ceo/chairman (who owns a significant stake ) to grow the company to where it is today. The relationships built over the years with stakeholders; employees,suppliers, customers, etc. 

The mindset will never be the same. And strangely enough it is sometimes the non-monetary motivation at the top level that drives the company through very tough times. Investors/traders on the other hand do not have the emotional baggage  and will bail during tough times. And all businesses will experience tough times.

(02-09-2024, 01:31 PM)Big Toe Wrote: The effort needed to invest in public companies/trading stocks is becoming so easy and so cheap that it somewhat dilutes the sense of business ownership.

On the other hand, the effort, time, labour needed for the founder/Ceo/chairman (who owns a significant stake ) to grow the company to where it is today. The relationships built over the years with stakeholders; employees,suppliers, customers, etc. 

The mindset will never be the same. And strangely enough it is sometimes the non-monetary motivation at the top level that drives the company through very tough times. Investors/traders on the other hand do not have the emotional baggage  and will bail during tough times. And all businesses will experience tough times.

I believe the above discussion originates from the holding period. 

To extend the discussion further, I think there is some unavoidable "friction" between controlling and OPMIs, especially if OPMIs do not add value to the business and are only interested in getting the most $ out of the company/stock OPMI SH friendly actions like more dividends, higher delisting price.

If the logic is why shd people who did not put in the effort reap the rewards, then I think an anchor OPMI SH with significant ownership or dispersed ownership could really make a difference in advancing SH interests.

In the local context where there is less dispersed ownership, perhaps it might well be a win-win situation, e.g. if OPMIs start to put in significant time and effort to engage actively with mgmt and provide constructive ideas to advance the business. But it takes two hands to clap - it wld only be good if the controlling are receptive to the idea.

https://governanceforstakeholders.com/20...ional-aim/ 
"One good example is the ownership structure of our public companies. In Singapore, and much of Asia, concentrated ownership by families and founders is common, while in markets such as the US, the UK and Australia, dispersed ownership is the norm."

Bringing it into the context of Yangzijiang Finance,

One area OPMIs can engage the management in is the utilisation of its Singapore Funds. Since end 2023, maritime fund has grown $174 to $340 million, Equity from $75 million to $140 million, debt investment from $124.6 million to $180 million, cash management from $909 million to $1,340 milion. Seen in this context, the increase in YZJFH Sg investments saw only a deployment of $289 million out of the initial $909 million.

Now with the increase in cash pile, even more cash needs to be deployed. In my view, YZJFH could deploy its $1,340 million in areas of debt investment, there are a few US listed REITs that YZJFH could work with to finance a few of their buildings or even local REITs by buying their issued debts, like those by Ascott. US REITs are taking loans at SOFR+margin (their interest is 6.5% and higher). In the area of equity, consideration could be put in to buy a few SGX-listed shares which yields a good dividend. All as opposed to leaving the cash idle. YZJFH could even tap on OPMI's experience in investing in Singapore here to give them an idea of building a portfolio of SGX companies worth a few hundred million

I will caution against deploying all of its present $1,340 cash in maritime assets, however a mixture of buying stakes in SGX listed companies and further debt investment can be done and deployed quickly. If YZJFH needs help, I can always link them up with the management of PRIME US, Manulife US, APTT, Suntec; companies who now seem to be constantly seeking financing,

This is now a cash rich company that can deploy a large amount of cash in Singapore or other parts of the world. However, I feel they can do it faster. At a rate of $300 million deployed per half a year and definitely another round of cash inflow from China to Singapore (because YZJFH has $285 million impairment credit loss allowance in PRC DI which may not be fully utilised). Investors are going to see a long period of low returns on its idle cash in Singapore.

Most listed small-medium listed local firms do not give a hoot about what OPMIs think. But even as they dont listen, that doesnt really mean they dont protect the interest of all shareholders. The good ones do care deeply about the business, its long term profitability/sustainability, the returns to the shareholders, but not to what OPMI might come to expect.

So what can OPMIs do? Well, for a start, understand how the management behaves and accept it if you are going to invest in it(same can be said for marriage.) Personally I want a tough, honest and competent management and many times, it also means that they dont really communicate well or dont bother to. Not ideal but I am fine with that.

There are exceptions, side track a bit, one example I could think of is Ifast's CEO/chairman Lim Chung Chun. Of the little I know about this guy, he seems to be the most transparent and he answers OPMIs in great clarity. Probably due to the fact that his core business is about dealing with investors.

Pretty insightful video for me.

China's financial system was touched on around the 13:30 mark and made me think about how YZJFH fit into the picture.

Keyju Jin: China from within: Myths and realities in a new era
https://www.youtube.com/watch?v=6gDqOqeKARM

https://www.yzjfin.com/services/debt-investment/