Yangzijiang Shipbuilding (Holdings)

[yogi]

A quick look at the AR throw up some interesting facts:

The HTM is no longer made up of mostly of 1 year investment. (See note 15)

2013 2012
Within one year 8,343,505 8,047,060
Between one year to two years 4,361,700 3,362,900
Over two years 2,056,740 620,000

A big increase of investment whose maturity is over 2 years (15%). Maybe some "refinancing" behind the doors? It is fine with me as long as there are no surprises.

There also do not break down the HTM by yield anymore (Hope I didn't miss it )

Impairment is minimum
As at 1 January 653,250 554,280
Allowance made 587,220 405,196
Allowance reversed (605,876) (306,226)
As at 31 December 634,594 653,250

Prudence of type of collateral
Collateralised by: 2013 2012
– Listed shares in PRC 877,000 130,000
– Restricted shares of listed companies in PRC 150,000 230,000
– Unlisted shares in PRC 1,781,440 2,646,000
– Properties and land use rights 8,535,505 6,498,960
– Guaranteed by non-related corporations 3,418,000 2,525,000
14,761,945 12,029,960

If you ask me, rightly or wrongly, I think shares are the most useless collateral as the shares will most be probably be worthless when the company go bust. Glad shares as a collateral is reducing even though HTM is increasing.

How does held to maturity applies to Listed Shares (877M worth)? Unless these are listed bond in which case why do they call it "shares"

[yogi]

Noticed 175m impairment out of total 1.15b loan for microfinance. This is > 10% which probably more than cost of borrowing!!!

[yogi]

Somewhere it was mentioned in AR13 about pledging shares of key shareholders as collateral for borrowing. However I couldn't find % of shareholding pledge as collateral for borrowing? And whose shares are pledged? Mr. Ren's? Anyone has found such detail? Or else I have to ask in AGM.

[CityFarmer]

The HTM is no longer made up of mostly of 1 year investment. (See note 15)

2013 2012
Within one year 8,343,505 8,047,060
Between one year to two years 4,361,700 3,362,900
Over two years 2,056,740 620,000

A big increase of investment whose maturity is over 2 years (15%). Maybe some "refinancing" behind the doors? It is fine with me as long as there are no surprises.

There also do not break down the HTM by yield anymore (Hope I didn't miss it )

Thanks for the highlight. Yes, it is definitely a concern. Need to find out more on that.

[CityFarmer]

Somewhere it was mentioned in AR13 about pledging shares of key shareholders as collateral for borrowing. However I couldn't find % of shareholding pledge as collateral for borrowing? And whose shares are pledged? Mr. Ren's? Anyone has found such detail? Or else I have to ask in AGM.

You can find the detail from Rule 728 disclosures of the company.

The most recent disclosure stated

"The conditions to pledge a total of 372,800,000 ordinary shares, representing 9.73% of the issued shares of the Company held by Newyard Worldwide Holdings Ltd, a limited liability company established under the laws of the British Virgin Islands, which is owned by Mr. Ren Yuanlin, Executive Chairman of the Company, as collateral for the Secured Term Loan Facilities remains unchanged."

http://infopub.sgx.com/FileOpen/Announce...leID=32811

[yogi]

Somewhere it was mentioned in AR13 about pledging shares of key shareholders as collateral for borrowing. However I couldn't find % of shareholding pledge as collateral for borrowing? And whose shares are pledged? Mr. Ren's? Anyone has found such detail? Or else I have to ask in AGM.

You can find the detail from Rule 728 disclosures of the company.

The most recent disclosure stated

"The conditions to pledge a total of 372,800,000 ordinary shares, representing 9.73% of the issued shares of the Company held by Newyard Worldwide Holdings Ltd, a limited liability company established under the laws of the British Virgin Islands, which is owned by Mr. Ren Yuanlin, Executive Chairman of the Company, as collateral for the Secured Term Loan Facilities remains unchanged."

http://infopub.sgx.com/FileOpen/Announce...leID=32811

Thank, CityFarmer

[yogi]

They have huge amount of cash in form of Finance Investment. Why don't they return back to shareholders and let shareholders to make decision where to invest their portion of cash. Surely management will give reason of having strong finance condition of company is important to get confidence of customers to give orders to the company. However what is confidence that company has about impairment outlook of their Finance Investment?

In AR2013, Mr. Ren mentioned "We intend to exit these venture investments by spinning off the subsidiary for an IPO or by reverse takeover of a listed shell in China. This will expand our access to funds to include the domestic PRC capital market, in addition to our Singapore and Taiwan listed company status.". Very much looking forward to this IPO.

[yogi]

Commercial Banks Wary about Credit for Shipbuilders
http://english.caixin.com/2014-04-10/100663552.html

Just take note to check how much deposit clients have to put. I read it is 20% norm but in China, many shipbuilders accept 5% deposit in order to clinch deals.....So if YZJ takes only 5% then the risk is definitely higher and when you compare shipbuilders across the sector, it is not comparing apple to apple......

my two cents worth. Not vested

credit void being created by banks are being filed by Private Equity. Recently there was article in The Edge on this. PE's credit to sipping industry has significantly increased in 2013. Will post article if I can relocate it again.

[CityFarmer]

They have huge amount of cash in form of Finance Investment. Why don't they return back to shareholders and let shareholders to make decision where to invest their portion of cash. Surely management will give reason of having strong finance condition of company is important to get confidence of customers to give orders to the company. However what is confidence that company has about impairment outlook of their Finance Investment?

The cash research isn't idling cash, but an asset that generating ROA of more than 10%. Will that change your opinion on returning the cash to shareholders?

I am supporting the strategy of returning 30% as dividend, and keep the rest for reinvestment.

(vested)

[Greenrookie]

The HTM is no longer made up of mostly of 1 year investment. (See note 15)

2013 2012
Within one year 8,343,505 8,047,060
Between one year to two years 4,361,700 3,362,900
Over two years 2,056,740 620,000

A big increase of investment whose maturity is over 2 years (15%). Maybe some "refinancing" behind the doors? It is fine with me as long as there are no surprises.

There also do not break down the HTM by yield anymore (Hope I didn't miss it )

Thanks for the highlight. Yes, it is definitely a concern. Need to find out more on that.

HI CF,

DO share what you find, after the research. I think Ren is trying to manage the HTM by renegotiating the maturity period. He will try to offload the risk sooner or later through an IPO, but I am not sure can he get a good valuation from investors from this.

Maybe do a twining with the property sector such that there is some promise of growth?

It is mentioned they expect 12% return from their HTM annually. I remember they used to classify their HTM according to yield, like 1-2 times PBOC rate, 2-3 time PBOC rate. If their target is 12%, I think they need to have some HTM at 2-3 times PBOC, which to me, are actually high risk HTM, and I suspect this group of HTM is increasing significantly, which is why they stop giving this figure.