Allow me to explain.

 

There are various positive factors at play, such as

1. Fed rate has already reduced from 5.5% to 4.5% since mid Sep 2024. This lower interest cost benchmark has served to lower the risk premium demanded from equities, such as dividend yield. Think of it not just as a mediocre " 1%" reduction, but rather as a 1/5.5 = 18% reduction. With a lower yield expectation demanded by the market, most stock prices will generally be adjusted up by market forces at play.

 

2. The positive effect of SBB on DPS. FY24 3480m O/S vs FY23 3597m O/S means shareholders will get a DPS of 0.023 for FY24 (instead of 0.022) even if FY24 were to achieve exactly the same NPAT as in FY23 due to the lower outstanding shares (O/S).

 

3. We should also be expecting, since 1H24 update that : a) MF to deploy more funds to generate more new incomes, b) new maritime business and services incomes to flow in, c) more positive impact on P& L due to improving Chinese equities valuations and their dividend payouts.

 

4. NPL/(gross DI carry amount) in FY22 was $255m/$2.74b = 9.7% (before the property crisis exploded), in FY23 was $259m/$1.85b = 14%, and in 2H24 was $285m/$1.6b = 17.8%. With a huge $285m NPL provision already in place, we could probably assume no more new NPL provision will be needed to dent the P& L going forward. YFH will maintain DI at 30% AUM or ~$1200m at the current ~$4b AUM. The steady state NPL provision needed at ~10% or less of the carry amount means the excess of up to $165m could be written back to P& L over time. 

 

Now, let us not be too carried away by all these positive factors and the enormous price hike. Let us just assume, conservatively, that YFH could just minimally maintain it' s 1H24 performance but without new NPL provision in 2H24. 

 

Reworking back the 1H24 PBT at $130m, add back $31m NPL provision, and take a 21% average tax rate (SG & PRC), and then adjust for a 4 5% MI, the projected 2H24 NPAT will be $121m. The FY24 NPAT would be (107+121) = $228m. Take 40% payout ratio at 3480m O/S, we should be looking at a DPS of 0.026, conservatively without all the anticipating higher incomes from MF or higher dividend payouts from P& PE or write backs from NPL provisions.

 

Will YFH under the strong minded and no nonsense Uncle Ren lives up to even the above conservative and minimal performance that I have just projected ? We will know when the FY24 comes out this 1~2 days.