Yangzijiang Financial Holding

[dreamybear]

It appears there were lessons learnt .... cld the initiatives on the investment/fund mgmt business been better executed or it just takes time to accumulate the expertise / experience ?

In the meantime, the focus seems to be back to the Maritime space ...

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

https://links.sgx.com/FileOpen/YZJFH%20E...eID=807374
"Mr Ren responded that following the spin-off from YSL, the Group initially focused on its investment and fund management business. The Group quickly realised that it lacked the same level of deep expertise and experience as compared with other established and leading global financial services firms like JPMorgan, Goldman Sachs Group, and Temasek. "

https://links.sgx.com/FileOpen/Change%20...eID=808009
"Effective 1 July 2024, Mr. Chen Timothy Teck Leng (“Mr. Chen”) and Mr. Xu Wen Jiong (”Mr. Xu”) will be appointed as Lead Independent Non-Executive Director and Independent Non-Executive Director, respectively.

The appointments are in line with the Group’s recently approved diversification to Maritime Services, Loan Services, Maritime Business, and Import and Export Business (collectively known as “New Businesses”) (refer to Circular dated 16 May 2024 for more information) as both Mr. Chen and Mr. Xu have prior experiences as directors in the maritime industry. "

[Yoyo]

Just a simple note, I have exited my position in YZJFH. Cost $0.40, Sales $0.35, Accum Dividend $0.04 over a 2 years timeframe.

I still feel that YZJFH is undervalued, but uncertain how long it takes to be appropriately valued.  In 1H2024 results release, its earning is affected by the sharp deduction in DI income.  Given that dividend is a % of EPS, we may be looking at reduced dividend at the end of the year.  As the real estate situation is getting from bad to worse, more provisioning may be expected in the coming years.

[CY09]

YZJFH has an immense amount of cash on its balance sheet $1,360 million (market cap $1,267 million). Price to book ratio = 0.35 times.

All I want for christmas is YZJFH deploys its spare cash to buy back shares (which it has not done so). There is a 100% earnings yield from a SBB; this is better than its current EPS yield or maritime investment or investing in Debt Investments. Yes, I am aware the company has done 6.6% in share buyback but that was when it was 32 SG cents and many moons ago- A blue supermoon has pass since then and YZJFH has not done SBB.

However, one thing Chairman Ren has been generous about is financing shipping assets with a few ships built by YZJSB, its how it looked like prior to its demerger. Given that Chairman Ren has a controlling stake in YZJFH, minority shareholders will not be able to do anything as he can deploy the cash as he deems fit.

Pherhaps the only way for shareholders to realise value from YZJFH is to do a "best world" and propose to vote out all the independent director on YZJFH's board. It will definitely work. The only difficulty is getting 10% in votes to pass the motion. Any takers? to try to spur shareholder friendly return actions?

Alternatively given that we know that YZJFH previously defended the 32 SG cents mark, puts 60% of earnings back to the balance sheet and rest as dividend, maybe for each passing year, the increase of the "unoffical" share buyback price floor should correspond to the 60% of earnings that is set aside for the balance sheet.

Thinking of a view of asset stripping so that ROE can be maximised

[weijian]

YZJFH has an immense amount of cash on its balance sheet $1,360 million (market cap $1,267 million). Price to book ratio = 0.35 times.

All I want for christmas is YZJFH deploys its spare cash to buy back shares (which it has not done so). There is a 100% earnings yield from a SBB; this is better than its current EPS yield or maritime investment or investing in Debt Investments. Yes, I am aware the company has done 6.6% in share buyback but that was when it was 32 SG cents and many moons ago- A blue supermoon has pass since then and YZJFH has not done SBB.

Hi CY09,

Currently, YZJFH has ROE of ~mid single digits (let's say it is 5%) and at P/B=0.35x as you mentioned, the actual earnings yield would be 5/0.35=14% from a SBB standpoint. So I am not sure how your "100% earnings yield" come about.

That said, 14% is definitely a huge hurdle rate. Chairman Ren has stated that the long term capital allocation would be 60% equity (funds, PE, private credit, direct investments etc), 30% DI and 10% cash/yield enhancement products. It will be hard to imagine this asset allocation beating an immediate 14%.

Of course, the above is just theory. So key question is understanding what is real practice.

Actually when I look at my own asset allocation, I realize that I definitely do not allocate everything (or mostly everything) into the "highest yielding stuff". Besides diversification of asset type, there is also short and long term duration considerations.... Well, I guess I need to stop justifying Chairman Ren's actions, he surely knows more than me!

[CY09]

Hi Weijian,

my 100% earnings from SBB is based on the idea that I am paying 35 cents to buy back assets that is worth $1.11 on balance sheet. So thats how I derived the 100% via the growth in NAV from SBB

[weijian]

Just a simple note, I have exited my position in YZJFH. Cost $0.40, Sales $0.35, Accum Dividend $0.04 over a 2 years timeframe.

I still feel that YZJFH is undervalued, but uncertain how long it takes to be appropriately valued.  In 1H2024 results release, its earning is affected by the sharp deduction in DI income.  Given that dividend is a % of EPS, we may be looking at reduced dividend at the end of the year.  As the real estate situation is getting from bad to worse, more provisioning may be expected in the coming years.

hi Yoyo,

I think we all have to pay our dues to learn the difference between identifying cheap assets and then making money off cheap assets. The former is a "1 foot hurdle" but the latter is actually a "many feet hurdle".

I am not sure if YZJFH is a good investment in terms of return on capital, but it has definitely been a "good return of brain damage".  So I really appreciate you taking your time to answer my previous layman's accounting questions on its DI.

P.S. There were two Yangzijiangs to look at - Ship Building and Finance. Cheap gets cheaper, while "less cheap" gets "even less cheap". Such things certainly keeps rhyming.

[Big Toe]

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.

On the other hand, its once sibling shipyard is doing extremely well, was it the current management team that steered it into record profit? No, the shipyard had always been well run, the only difference now it is getting tail winds from the increased demand.

YZJ Finance may continue to languish for years to come before we see something positive.
YZJ Shipbuilding will most likely continue to win ship building contracts, but for how long can it continue its record breaking pace?

Your guess is as good as mine.
If we look back in history, when shipbuilding contracts were hard to come by, the finance arm was providing the much needed income/cash flow for the group.

[specuvestor]

If my memory serves me correct, the finance arm was setup to deploy the cash from the shipbuilding business which they were able to secure high initial deposits from their clients for reasons that till today I'm not too sure if I reference to other shipbuillders (my suspicion is that they sell cheaper than market but demand higher deposit or stage payments... this is again evident by the cash piling up in the YZJ shipbuilding thread)

Hence the finance arm had money to lend to the wenzhou property market and trusts etc. The shipbuilding business didn't need the money

Now it will be instructive to see how the shipbuilding business will use their cashpile going forward.

[Big Toe]

They definitely needed the money to smoothen out the unpredictable shipping cycle. I vividly remember reading the earlier financial statements and was glad the finance part of it was helping them through leaner times. But of course they did not need the money as a going concern.

So will the shipbuilding again invest in the finance division going forward, I would think it is wise to do. The sums are sizable, better to manage your own money than to have someone else manage it for you.

[specuvestor]

yes on a PnL basis the finance arm helped to smoothen the shipbuilding cycle but cashflow or money wise the finance arm was like an asset management / treasury department of the entity, and cashpile & loan out grew so big with deemed (correctly or wrongly) risky loans that they finally decided to spin it off as it was dragging the shipbuilding valuations.

So in short the shipbuilding Business was doing well throwing out tonnes of cash, but the return on Asset was declining from suboptimal allocation of the cash and so the Structure was changed by jettisoning the finance arm. The different path they go from here will be the interesting bit