Yangzijiang Financial Holding

[CY09]

Compared to the Ping An and China banks, YZJFH is weaker in terms of profits. Firstly, it has most of its investments in the shadown banking tier 2 type of clients. This puts their NPL at unreasonably high levels compared to the strong financial comparables.

Hence, if it is indeed true, I dont see much upside from its current share price

[Squirrel]

Compared to the Ping An and China banks, YZJFH is weaker in terms of profits. Firstly, it has most of its investments in the shadown banking tier 2 type of clients. This puts their NPL at unreasonably high levels compared to the strong financial comparables.

Hence, if it is indeed true, I dont see much upside from its current share price

I don't agree with your views. Ping An and China banks are leveraged while YZJ FH is debt free. It makes a world of difference in term of balance sheet strength which give protection to the downside.

A ten percent write down in Ping An's or China Construction Bank's asset value would wipe out its equity. YZJ FH would do well still even if 30% of its asset values are written off.

I really don't get why China Banks and Ping An are always compared to YZJ FH. The leverage in itself is really important especially when asset valuations are cast in doubt.

As long as investors still harp on comparing PB ratios of China Banks/Ping An or asset quality vs YZJ FH, I would remain of the opinion that YZJ FH is undervalued.

[Squirrel]

Did anyone attend the AGM today? I couldn't make it. Would be really grateful if anyone that had attended it could let us know what transpired?

[Yoyo]

Did anyone attend the AGM today? I couldn't make it. Would be really grateful if anyone that had attended it could let us know what transpired?

Hi Squirrel

Sharejunction members pkli899 and Yibaol have shared the happening at the YZJFH AGM and their observation as below
https://www.sharejunction.com/sharejunct...0rewarding

PS:  Not sure if I am allowed to direct traffic to another forum, if not allowed, my apology.

[weijian]

Considering the company supporting the price at 0.32, the downside for OPMIs is somewhat "protected". But what about the upside, i.e. what must happen for it to trade at a better valuation, better investor sentiments towards China ? 

Referring to your earlier post, 80% of its mkt cap is in cash holdings in SG.
https://www.valuebuddies.com/thread-1076...#pid170575

Could the current valuation be the "new normal" moving fwd due to the geopolitical landscape ?

Imho, perhaps this stock could be viewed as more of a long term dividend play, i.e. OPMIs must be comfortable holding it with around 6% yield for a long time. In that case, I wld evaluate its investment merits against stocks like DBS, HKLand, NikkoAM-StraitsTrading Asia ex Japan REIT ETF, CapitaLand China Trust, Ping An, Big China Banks.

Hi dreamybear,

I think one can imagine YZJFH is a closed end fund. So if one add in liquidation costs and lack of control "dis-premium", then it should be trading at a discount to NAV. But, Mr Market can get ahead of itself and assign closed end funds a market value, that is a premium to NAV. When that happens, it means the performance of the fund will be so good that Mr Market has priced in the future outperformance. So leveraging the same line of thought on YZJFH below:

- YZJFH's current investments are giving a blended ~mid single digit ROE and that isn't too far from the risk-free rate, isn't it? So shouldn't it be trading at a steep discount?

- Let's say that an investor requires 10% returns, ie another 5% as premium to take on equity risk, then this would mean that YZJFH would be roughly valued at 0.5x NAV to hit the return demand. If YZJFH increases its ROE from mid single digit to high single digit, while risk free rate doesn't change capping investor requirement at similar ~10%, then the share price should automatically adjust upwards to reflect that.

- So end of the day, my personal conclusion is that ROE needs to improve over the risk free rate. For a start, the protection of "equity" (denominator) would be key so that the return (numerator) has a future chance. That said, one needs to be under no illusion that there will not be permanent impairment of some equity from this property crisis. But of course, all of us have different ways to calculate "our margin of safety" here.

Did anyone attend the AGM today? I couldn't make it. Would be really grateful if anyone that had attended it could let us know what transpired?

Hi Squirrel

Sharejunction members pkli899 and Yibaol have shared the happening at the YZJFH AGM and their observation as below
https://www.sharejunction.com/sharejunct...0rewarding

PS:  Not sure if I am allowed to direct traffic to another forum, if not allowed, my apology.

hi Yoyo,
No issue on the link. There will only be an issue if you had copied stuff elsewhere wholesale and paste it here.

[dreamybear]

Considering the company supporting the price at 0.32, the downside for OPMIs is somewhat "protected". But what about the upside, i.e. what must happen for it to trade at a better valuation, better investor sentiments towards China ? 

Referring to your earlier post, 80% of its mkt cap is in cash holdings in SG.
https://www.valuebuddies.com/thread-1076...#pid170575

Could the current valuation be the "new normal" moving fwd due to the geopolitical landscape ?

Imho, perhaps this stock could be viewed as more of a long term dividend play, i.e. OPMIs must be comfortable holding it with around 6% yield for a long time. In that case, I wld evaluate its investment merits against stocks like DBS, HKLand, NikkoAM-StraitsTrading Asia ex Japan REIT ETF, CapitaLand China Trust, Ping An, Big China Banks.

Hi dreamybear,

I think one can imagine YZJFH is a closed end fund. So if one add in liquidation costs and lack of control "dis-premium", then it should be trading at a discount to NAV. But, Mr Market can get ahead of itself and assign closed end funds a market value, that is a premium to NAV. When that happens, it means the performance of the fund will be so good that Mr Market has priced in the future outperformance. So leveraging the same line of thought on YZJFH below:

- YZJFH's current investments are giving a blended ~mid single digit ROE and that isn't too far from the risk-free rate, isn't it? So shouldn't it be trading at a steep discount?

- Let's say that an investor requires 10% returns, ie another 5% as premium to take on equity risk, then this would mean that YZJFH would be roughly valued at 0.5x NAV to hit the return demand. If YZJFH increases its ROE from mid single digit to high single digit, while risk free rate doesn't change capping investor requirement at similar ~10%, then the share price should automatically adjust upwards to reflect that.

- So end of the day, my personal conclusion is that ROE needs to improve over the risk free rate. For a start, the protection of "equity" (denominator) would be key so that the return (numerator) has a future chance. That said, one needs to be under no illusion that there will not be permanent impairment of some equity from this property crisis. But of course, all of us have different ways to calculate "our margin of safety" here.

I wonder what is the catalyst/trigger for the diversification into new business areas now. Since the new areas are also maritime-related activities, why not branch into all these earlier or even before the spin-off ? Wldn't it be strange if it was an afterthought ? Will there be more of such in the future ?

Hopefully, the new initiative will improve the ROE and with interest rate cuts(forecasted); China economic situation gradually stabilizing, things will be brighter for the company and OPMI.  

----------------

https://www.theedgesingapore.com/news/co...e-industry

https://links.sgx.com/FileOpen/Yangzijia...eID=803532

Recent YZJFH AGM - can buddies spot yourself in the video ?   [I didn't attend]
https://www.linkedin.com/posts/gem-comm-...60993-acVM

[weijian]

Considering the company supporting the price at 0.32, the downside for OPMIs is somewhat "protected". But what about the upside, i.e. what must happen for it to trade at a better valuation, better investor sentiments towards China ? 

Referring to your earlier post, 80% of its mkt cap is in cash holdings in SG.
https://www.valuebuddies.com/thread-1076...#pid170575

Could the current valuation be the "new normal" moving fwd due to the geopolitical landscape ?

Imho, perhaps this stock could be viewed as more of a long term dividend play, i.e. OPMIs must be comfortable holding it with around 6% yield for a long time. In that case, I wld evaluate its investment merits against stocks like DBS, HKLand, NikkoAM-StraitsTrading Asia ex Japan REIT ETF, CapitaLand China Trust, Ping An, Big China Banks.

Hi dreamybear,

I think one can imagine YZJFH is a closed end fund. So if one add in liquidation costs and lack of control "dis-premium", then it should be trading at a discount to NAV. But, Mr Market can get ahead of itself and assign closed end funds a market value, that is a premium to NAV. When that happens, it means the performance of the fund will be so good that Mr Market has priced in the future outperformance. So leveraging the same line of thought on YZJFH below:

- YZJFH's current investments are giving a blended ~mid single digit ROE and that isn't too far from the risk-free rate, isn't it? So shouldn't it be trading at a steep discount?

- Let's say that an investor requires 10% returns, ie another 5% as premium to take on equity risk, then this would mean that YZJFH would be roughly valued at 0.5x NAV to hit the return demand. If YZJFH increases its ROE from mid single digit to high single digit, while risk free rate doesn't change capping investor requirement at similar ~10%, then the share price should automatically adjust upwards to reflect that.

- So end of the day, my personal conclusion is that ROE needs to improve over the risk free rate. For a start, the protection of "equity" (denominator) would be key so that the return (numerator) has a future chance. That said, one needs to be under no illusion that there will not be permanent impairment of some equity from this property crisis. But of course, all of us have different ways to calculate "our margin of safety" here.

I wonder what is the catalyst/trigger for the diversification into new business areas now. Since the new areas are also maritime-related activities, why not branch into all these earlier or even before the spin-off ? Wldn't it be strange if it was an afterthought ? Will there be more of such in the future ?

Hopefully, the new initiative will improve the ROE and with interest rate cuts(forecasted); China economic situation gradually stabilizing, things will be brighter for the company and OPMI.  

----------------

https://www.theedgesingapore.com/news/co...e-industry

https://links.sgx.com/FileOpen/Yangzijia...eID=803532

Recent YZJFH AGM - can buddies spot yourself in the video ?   [I didn't attend]
https://www.linkedin.com/posts/gem-comm-...60993-acVM

hi dreamybear,

As you mentioned, the "new businesses" are mostly what they have done in the parent group. So there is really nothing new then. Now they are doing things in which they have a track record in, rather than stuff they don't. That may be the real reason why the ex-CEO left.

Doing real business is messy. Changing your 3-year plan is an art, while setting 3-year plan is a science. I suppose, you have to decide whether the jockey (in this case, Chairman Ren) is an artist, or scientist...or both!

[weijian]

Over 20questions documented in the MoM. That's a lot of questions.

MINUTES OF ANNUAL GENERAL MEETING

QUESTION 3:
A shareholder noted that the Group's adopted a conservative strategy for loans and was concerned of the non-performing loans (“NPLs”) despite that the Group obtained land collaterals. The shareholder enquired if the NPLs was caused by the depreciation or write down of land collaterals during the property downturn in China.

The Chairman explained that during China's property peak around year 2000, individual land owners could afford the high-interest payments. The Group had adopted a conservative approach to assess and provide loans. An example is that a potential borrower would provide property or land valued at $10 million as collateral and the Group would offer a $6 million loan at 12% interest per annum taking the property/land as collateral. The unexpected impact of the COVID-19 pandemic severely affected the China property market and the valuation of the collateral had depreciated drastically, resulting in the loans being reclassified as NPLs.

https://links.sgx.com/FileOpen/YZJFH_AGM...eID=804117

[weijian]

Generally as OPMIs, we frown upon "conflict of interest". But IMHO, any possible conflict of interest between YZJFH and parent YZJSB is actually "welcomed".

To recap, the kitty was built from excess earnings retained on the balance sheet of the ship building business. If one excludes the non-shipping portions, we could say that the kitty and the ship building business are actually synergistic in nature, as the kitty is used to finance ship owners/operators who puts in an order.

So we can conclude the new business is just old wine in a new bottle - and probably a win win for both? YZJSB is able to unlock capital that were once used to finance ship owners who made orders with them, will that mean a higher dividend payout ratio? YZJFH will capture a bigger share of the ship financing business, which they have a track record (compared to managing money Toe style) with decent "high single digits" ROEs that beats what it is achieving now.

RESPONSES TO QUESTIONS FROM SHAREHOLDERS IN RELATION TO THE EXTRAORDINARY GENERAL MEETING TO BE HELD ON 31 MAY 2024

Query 1: Given that the sister company of Yangzijiang Financial Holding Ltd (“YZJFH”), Yangzijiang Shipbuilding (Holdings) Ltd (“YSL”), is also in the Maritime Business, and both companies have the same controlling shareholders, is there a conflict of interest?

https://links.sgx.com/FileOpen/YZJFH%20E...eID=804624

[Big Toe]

So it is a case of
resource allocation between
Property debt investment Vs Ship financing/chartering
Toe leaving(not me) may mean less inteerest in the fund management biz.

Personally, I think they should do well with both in the long run, track record shows that both business is cyclical in nature.
However I would prefer for them to have much higher allocation in ships, 2 reasons why.

1. Ship as an asset do not depend on china's legislations and abrupt shifts in policies.
2. The shipping sector is much more mature sector compared to DI in china.

But that doesnt mean that ship finance is more profitable but I do think they have better control of it compared to DI. I am still in the opinion that real estate in china should be viable in the long run subject to policy risks.