Yangzijiang Financial Holding

[weijian]

wow this spin off is indeed unique... with 2 separate entities isn't it more difficult for ships that was built but not delivered to be injected into this entity?

and without raising capital... interesting that he is still savvy

See my post on 2 Oct 2013...wow how time flies... but Chairman Ren is indeed savvy
https://www.valuebuddies.com/thread-588-...#pid165284

But holding ships in inventory is nothing new. Most savvy I think was Jaya Holdings. That's what some of our shipping companies tried to do in the past before a sharp shipping correction undo some of them

Arguably I would say our local tycoons could learn a thing or two from Chairman Ren, in terms of creating value/wealth for themselves and OPMIs. Of course, most of them are more focused on wealth preservation and so they can surely ignore what Chairman Ren has to offer.

An interesting thing to note: YZJMD is going to take up 55% of the NAV in the split entity but it is going to take away 1bil from the 1.4bil cash (or 71.5% of it). Based on my own tracking, ~150mil of cash was injected by GPs for the Maritime Fund but even after accounting for it, it still looks to me that a larger pile of cash is going to YZJMD. Together with a 250mil share placement option by YZJMD post split, it seems like Chairman Ren is loading up his elephant gun at YZJMD side?

THE PROPOSED SPIN-OFF OF THE MARITIME FUND AND MARITIME INVESTMENTS BUSINESS (AS DEFINED HEREIN) OF THE COMPANY THROUGH THE DISTRIBUTION IN SPECIE OF 100% OF THE ISSUED SHARES IN THE CAPITAL OF YANGZIJIANG MARITIME DEVELOPMENT PTE. LTD. (TO BE RENAMED YANGZIJIANG MARITIME DEVELOPMENT LTD.)

Following the Proposed Spin-off, YZJ Maritime will function as a dedicated maritime investment platform, and its focus will be on unlocking value across the entire maritime value chain. From finance leasing and brokerage services to broader investment participation, YZJ Maritime aims to capitalise on its expertise in both shipbuilding and investment to proactively capture high-growth opportunities in the maritime industry, thereby generating sustainable long-term value for its shareholders. As a pure-play maritime development company, it is anticipated that YZJ Maritime will enhance market valuation through sharper capital allocation, tighter strategic focus, and improved operational efficiency.

https://links.sgx.com/FileOpen/YZJF%20-%...eID=855307

[Big Toe]

Fascinating the difference a year makes. No one is quite bothered when YZJF was trading below cash just a year ago except maybe a few guys here. Fast forward to present day, with some allocation, structural changes and an impending spin off, it is valued at 3.X times more?

Granted it attracted institutional investors along the way but essentially it is the same guy running the same show with the same assets.

Reminds me somewhat of MSTR/strategy, where money is raised to buy bitcoin and share price goes up exponentially relative to the increase in bitcoin holdings.
Nothing could be more absurd in MSTR. But between YZJF and MSTR, they are polar opposites.

[weijian]

Cant comment much on Vincent Toe even though he shares the same sir same. (Actually no.)
But it would be nice good to see some stability within a new organization irregardless of capability.
I wouldnt read too much into the departure, for now.

What is true is that it would be extremely difficult and rare to find a capable person to run an entire company for you. Be it fund management or otherwise. If the person is capable enough to do that, usually the heart and the head would not be at the same place. If both the heart and head is at the right place, the person would be working for himself, no reason to do otherwise.

So, Mr Vincent Toe is back in YZJFH's picture and this probably closes the chapter of our earlier "speculation" in Oct2023.

While many tries to take advantage of MAS 5billion EQDP from applying to be the GP to front running the small/med caps that the GPs will buy, Chairman Ren + Vincent Toe will take the approach of pre/post-IPO financing of Spore SMEs. Sounds a little bit like Temasek's 65 Equity Partners but this 100mil fund is considerably smaller and so it will probably operate more in the early stages of the company life cycle.

This is music to the ears of the decision makers at MAS.

Yangzijiang Financial to anchor S$100 million fund of firm led by ex-CEO Vincent Toe

Yangzijiang Financial will be the anchor investor in a S$100 million fund by ICH Asset Management (ICHAM), which is led by the Singapore-listed company’s former chief executive, Vincent Toe.

The fund will focus exclusively on Singapore’s small and medium-sized enterprises (SMEs), and is expecting to start investing from September, Yangzijiang Financial announced in a Monday (Aug 18) bourse filing.

The fund will back SMEs from before they undergo an initial public offering, through to market entry and beyond, including strategic placements after listing.

https://www.businesstimes.com.sg/compani...incent-toe

[weijian]

About 2 years ago, I started to look at YZJFH because it was cheap. It was cheap for a reason and arguably, Mr Market's reasons were not unreasonable - (1) China's property market had already started its downturn. YZJFH's loan book had ~50% in property related financing and was generally on the lower quality side. Many of us will still remember the US subprime in 2008. (2) Since the property market had led the Chinese economy for almost 2 decades, any downturn would mean everything all goes down together. Abeit a strengthening of the RMB in late 2020/early 2021 since China opened up earlier than other economies, the RMB has been on a 1 way weakening path against USD/SGD. (3) The loan book was a black box and foreign to many local investors. It didn't get better when Ship Building and Finance Holdings split.

So when Ship Building disposed of the remaining problematic loan book on its balance sheet at 55cents to the dollar, it gave OPMIs a peak of the real market value of YZJFH's own loan book. At that time, YZJFH was trading almost as if that loan book was ZERO. VB Squirrel's blog had also put out a very valid reference that the loans on Ship Building's books were "more problematic". So while Mr Market's reasons for selling YZJFH cheap were valid but at a certain market values (~0.3x BV), it didn't make sense anymore, especially for people who are patient enough.

Now fast forward to today. OPMIs who had invested in YZJFH because it was cheap, have been vindicated as it is now almost trading at close to book value (1H25's BV is at 1.11sgd). But there also comes the problem (although I have to say it is a "good problem to have") - Because if the main investment thesis of a company is because it is cheap, that thesis disappears when it isn't cheap. YZJFH is akin to a close-end fund - investing directly in other assets and also a fund of funds, mainly all marked to market. There are no operating businesses with depreciated PPE that has higher replacement value or intangibles know-hows. Therefore, trading at NAV is probably as good as it gets, isn't it?

OPMIs who invested at deep discounts to book, have gotten great returns in the last 1.5years. Most are actually asking if these returns are actually "borrowed from the future". Most of us will prefer a 10% consistent gain each year over 5 years, than a company that gave 50% in the first year and then nothing for the next 4. But of course, investing doesn't give us the returns we want, only the returns we deserve.

So beyond cheap, what can OPMIs look for in YZJFH since it is already trading at close to book value? IMHO, there are probably 2 things one could look out for:

(1) Even though it is trading close to BV, there may still be value! My own compilation of the FVOCI losses show ~20cents/share sgd due to currency translations (RMB/USD as the functional currencies "translated" to SGD as the reporting currency). These FVOCI losses will not be realized as long as Chairman Ren doesn't convert significant RMB/USD amounts to SGD. Therefore, if some of these currency related translation losses eventually revert, the BV will actually increase at a faster rate than just the profits been retained on the balance sheet.

(2) To improve the book value faster, the ROE baseline needs to be higher. Geeks like us know that there are so many ways to do that - from taking on debt, improving your investing prowess, taking on more risks (not dumb ones of course) or carrying out asset light activities (eg. an LP that attracts significant portion capital for your funds from GPs).