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YZJ Financial Holdings
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Delvyss
Elite |
30-Mar-2026 09:41
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Jipped bit bit |
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Joelton
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28-Mar-2026 10:55
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Yangzijiang Financial clears the decks after China&rsquo s credit boom At the height of China&rsquo s credit boom, Yangzijiang Shipbuilding poured billions into loans through an investment arm closely tied to the country&rsquo s property sector. That business went on to list on the Singapore Exchange (SGX) in 2022 as Yangzijiang Financial, just as Beijing&rsquo s crackdown on credit to developers began to unravel the lending cycle that had powered years of easy returns. As China&rsquo s property downturn deepened, Yangzijiang Financial found itself dealing with troubled loans accumulated during the boom years. This legacy has been weighing heavily on its valuation since its listing. The company acted decisively in 2025 to draw a line under those risks, recognising $291 million in credit-loss allowances &mdash its largest on record &mdash in a sweeping move to clean up its balance sheet. While that sank its bottom line, it signalled an attempt to put the worst of its legacy exposures behind it as it sought to reset its business. The move also reflects the company&rsquo s intention not to commit fresh capital to troubled projects, Liu Hua, Yangzijiang Financial&rsquo s executive chairman, tells The Edge Singapore. &ldquo We don&rsquo t want to put good money into bad money.&rdquo Instead, the group is seeking to recover value as stalled residential projects in China are completed and units gradually sold through restructuring efforts led by local governments and developers. Measures unveiled by Beijing in recent years include easing mortgage rules and lowering minimum downpayment requirements to support homebuyers. Bank financing is also being channelled to viable housing developments to complete stalled projects and deliver presold homes. Local governments have also been told to buy unsold property for conversion into affordable housing. &ldquo Our objective is to recover what we can from the remaining value of these projects,&rdquo says Liu, who succeeded Chinese billionaire Ren Yuanlin as Yangzijiang Financial&rsquo s executive chairman in October last year. Before that, she was deputy CEO and CFO. But even with the aggressive clean-up, shares of Yangzijiang Financial continue to trade at roughly half of its net asset value. The steep discount reflects persistent investor scepticism about the quality of its investment portfolio and the eventual recovery value of loans linked to China&rsquo s real estate market. For now, the timing of any meaningful recovery remains uncertain. Yangzijiang Financial&rsquo s legacy exposures could take up to three years to be resolved, according to Liu. &ldquo Some of them could be resolved a bit earlier, but there could be some delay for others because this is not all within our control.&rdquo The carveout of its maritime business has also reshaped Yangzijiang Financial&rsquo s investment case. Yangzijiang Maritime Development was spun off and listed on SGX last November by way of introduction. That left Yangzijiang Financial squarely positioned as an investment and asset-management platform, without the more promising maritime financing business that once provided a hedge against its China credit exposure. The challenge now for Yangzijiang Financial is convincing investors that the worst of its hangover from China&rsquo s credit boom is behind it and that the business emerging from the clean-up merits a fresh look. Portfolio rebalancing As part of this shift, the company is targeting a long-term portfolio mix of roughly 40% income-generating debt, 40% equities and 20% cash. It now has about $1.71 billion in assets under management, of which about half are in debt investments, mostly in China. About 37% of its current portfolio is in cash and 13% in equities and other investments. Within the equity allocation, about half will be deployed into private equity, targeting strong businesses with room for operational improvement. The rest will be invested in selected equities across China and Southeast Asia. Early attempts to deploy capital under this strategy highlight both the opportunities and the execution risks. In October last year, Yangzijiang Financial announced a RMB1.02 billion ($190 million) investment as part of a consortium to lead the restructuring of Ningbo Shanshan, a producer of lithium battery anode materials used in electric vehicles. That would have given the consortium effective control of about 23% of the Shanghai-listed company. The deal was framed as an opportunity to tap into China&rsquo s fast-growing new-energy supply chain. But the episode also highlights the execution risks that come with such ambitions. The proposed restructuring ultimately did not proceed after it failed to secure approval from Ningbo Shanshan&rsquo s creditors. For Yangzijiang Financial, converting such opportunities into completed investments will be key as it reshapes its own portfolio. Undeterred, it intends to deploy up to RMB1 billion in the first half of 2026 into equities listed in China and Singapore that offer returns of at least 4.5%. In Singapore, it is also applying for a capital markets services licence to expand its fund management business. Over the next three years, the company expects its investment portfolio to shift away from its current China-heavy exposure towards a roughly even split between China and the wider Asia-Pacific region. While the broad strokes are in place, translating the strategy into a rebalanced portfolio will take time. For investors, the question is whether the company can deliver on that transition quickly enough to close the persistent gap between its share price and net asset value, which amounted to 50.2 cents a share as at Dec 31, 2025. For now, the numbers suggest the rebalancing still has some way to run. China&rsquo s debt legacy lingers The biggest overhang on Yangzijiang Financial is still its legacy debt in China. As of Dec 31, 2025, it had $1.36 billion in gross debt investments, of which slightly more than half were non-performing. Its non-performing loan (NPL) ratio rose to 50.3% last year, crossing the 50% mark for the first time and reaching its highest level since its 2022 listing on SGX. In absolute terms, NPLs rose from $675 million in 2024 to $685 million last year. That&rsquo s more than the $638 million cash on its balance sheet. Based on current conditions, the company is assuming expected credit losses of about 63% of its NPLs. Liu believes the stock&rsquo s steep discount to book value may overstate the risks embedded in the loan portfolio. As at end-2025, Yangzijiang Financial had about 18 cents of net cash per share. Even if the entire net balance of its NPLs &mdash $254 million after provisions, or 7 cents a share &mdash were written off, the group&rsquo s adjusted net asset value would still be roughly 43 cents per share. &ldquo That is still significantly higher than where the stock is trading today,&rdquo she says. Whether those loans ultimately recover meaningful value will depend largely on the trajectory of China&rsquo s economy. The backdrop remains challenging, with the property market still strained and deflationary pressures lingering. Earlier this month, Beijing issued its strongest pledge yet to end deflation, signalling a renewed push to revive demand and stabilise prices after years of sluggish growth. A sustained recovery could ease financial pressure on developers and improve recovery prospects for lenders such as Yangzijiang Financial. &ldquo This is definitely a positive sign by Beijing,&rdquo says Liu. &ldquo Even though we have made provisions based on current market conditions, they will be reassessed at every reporting period. If conditions improve, we should be able to recover some of the loans and even reverse part of those provisions.&rdquo Enough for a re-rating? Ultimately, the real test lies in execution. After years of navigating the fallout from China&rsquo s property downturn, Yangzijiang Financial will have to convince investors that its future lies not in unwinding the past but in redeploying capital into a new cycle of regional investments. One sign of that shift is its growing interest in Singapore&rsquo s equities market. The company is anchoring a $100 million fund managed by ICH Asset Management to back Singapore&rsquo s small- and mid-cap firms from the pre-IPO stage through to public markets. The initiative dovetails with the central bank&rsquo s Equity Market Development Programme, which has helped revive liquidity and investor interest in the local stock market since last year. But even as it looks to new opportunities, the key challenge is working through its loan book in China. By recognising large provisions and accelerating loan recoveries, it appears intent on clearing legacy risks, even at the cost of short-term earnings. This will go some way towards helping reset expectations and enabling the group to rebuild its deployable capital as cash is gradually recovered from its debt investments. The question is whether that reset will be enough to trigger a re-rating. If China&rsquo s property market stabilises and loan recoveries come in stronger than expected, the heavy allowances booked in 2025 could mark the trough of the cycle. At the same time, the push to diversify its investments across Asia &mdash alongside its pledge to pay out 40% of earnings as dividends &mdash could gradually reshape investor perceptions. Until then, Yangzijiang Financial remains a company in transition, one still working through the after-effects of China&rsquo s credit boom while repositioning itself for a different investment landscape. For investors, the real signal will come when the clean-up finally begins to show up in the share price. |
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salim88
Member |
31-Jan-2025 10:02
Yells: "20 years professional/ institutional trading, investment " |
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YZJ Financial Holdings (YZJF) .... one of the best risk/ reward opportunities I have seen for SGX Stocks The Opportunity A Singapore investment company listed on the Singapore Exchange (SGX) operating very much like a fund structure that invests in debt and equity securities. It is trading at $0.45 while its net cash is $0.49 and NAV is $1.11. In other words, you pay the current market price $0.45 per share, you get $0.49 of cash + $0.62 worth or debt and equity securities. A rare Benjamin Graham' s Net-Net value investing opportunity in a company with a great historical track record + fast improving business fundamentals. The technical chart is extremely bullish with the recent breaking of a 2 year downtrend + multiple subsequent upside breakouts and a very strong momentum vs the general market. Its relatively high daily short interest (sometimes as high as 30-50% of daily volume) serves as a potential upside force in short covering. Remember the Gamestop (GME) Saga back in 2021? 
The Company YZJF was previously operating under Yangzijiang Shipbuilding (YZJS) investing capital generated from its main shipbuilding business. It was carved out from the successful and well-run YZJS, distributed in-specie to its shareholders and listed on SGX in 2022. Its principal activity is investing its own capital, seeking capital appreciation and investment income from investments in both public and private companies, funds and debt investments. It also provides wealth management and fund management services but the revenues from these 2 businesses are minimal or non-existent. Its AUM is 50-50% split between China and Singapore, deployed in cash management products (42%) , debt investments (37%), Equity (12%) and Maritime investments (8%). It is progressively reducing its weightage in China and deploying into maritime-related investments and credit funds in Southeast Asia, particularly Singapore Why does this mispricing opportunity exist? 1. Approximately 50% of its investments are in China, weighed down by the negative China sentiment in the past few years. 2. spinoff listings like YZJF typically suffer from:(1) heavy selling by shareholders (especially institutional investors) whose mandate prohibits them from holding a business different from its mother company (2) a lack of understanding of the business 3. Market participants not giving enough weight to the positive and mitigating factors, which is explained below: Price has overshot on the downside: The positive and mitigating factors 1. Irrational discount to NAV. Trading below net Cash value!! - The company has a NAV of $1.11, net cash per share of $0.49 vs share price of $0.45. $0.68 is invested in Debt (37%), Maritime Assets (8%), Equity (12%) while total liabilities is $0.06. It is natural to be very concerned about the value of its current investments and future investments. However, given such a steep discount to its asset value, to the extent of below its net cash level. The risk/ reward is extremely attractive considering: a) The NAV is derived after loss provisions on its investments b) The debt investment portfolio is backed by c.50% of loan-to-value (LTV) ratio of collaterals and corporate guarantees c) At current price of $0.45, It has an annualized earnings yield of 15%, dividend yield of 5% and Share Buy Back yield of 3% d) YZJF had an excellent investment track record from 2011-21 (see point 2 below) 2. YZJF and its mothership YJZS have an excellent track record in running the business even during tough economic and industry times. - From 2011-21, when YZJF was operating as YZJS' s investment arm, it has generated an impressive return track record of 9-15% pre-tax ROA. - Unlike many Chinese companies, YZJS' s Revenue, Earnings have approximately doubled and share price is up 5x from 2020-2024 3. Solid reputation and track record + Positive forward outlook for its business - In mar 23 YZJF management guided that the worst is likely over for their industry and expects strong growth in maritime fund and maritime investments going forward - Going forward,YZJF is focused on redeploying more funds into maritime-related investments. Given its entrenched network and deep knowledge in the maritime industry, it is well-equipped to recognize attractive prospects and successfully execute deals in this space. progressively deploying its cash into maritime-related investments and private credit funds in Southeast Asia, particularly in Singapore. In Jan 25, it ordered 4 product tankers from Jingjiang Nanyang Shipbuilding to be delivered in 2026/27. Current charter rates suggest an annual cashflow yield of 20%. Given the impressive track record and reputation of its mother company + its expertise in debt and securities investments in its sector, its fund management business might take off giving it a new source of fee income 4. . Insiders Buying - 2 Directors bought in aug23 at $0.36 ~ 1.3mil shares - Company have been actively buying back shares, 100+ mil shares (approx 3% of outstanding shares) from Jan to Nov 2024 5. Signs of green shoots for Chinese Economy: - Smart money going long on China equities: Eleven funds have been launched under the Qualified Domestic Limited Partner (QDLP) program this year, which is already higher than any previous year. Fund management heavyweights including Blackstone, Bridgewater Associates, and Oaktree Capital have opened funds in the country this year. Fund managers with a good track record of seeing ahead of the crowd (David Tepper, Michael Burry ) have been buying China equities for the past few quarters. During a BloombergTV interview in Nov24, prominent investor Howard Marks said, " ....comments about China being uninvestable are &ldquo music to my ears,,,, &rdquo - sentiment on Chinese equities is at one of the lowest points in history and equity prices have significantly hit since 2021 These are typical bullish contrarian signs. - The Chinese government has introduced various monetary and fiscal stimulus policies to boost the economy Valuation As YZJF is very similar to a fund, it should trade near its NAV of $1.11 which generates a current annualized EPS of $0.06 and DPS of $0.022. The EPS is likely to increase once it starts deploying more cash (40+% of AUM ) into higher yielding investments which would also contribute positively to its DPS and NAV growth. The discount to NAV would reduce when the current negative sentiment starts improving. Conservative Valuation: assuming 50% of all non cash equivalent investments are wiped out (highly unlikely given its NAV has already provided for losses + its strong historical track record + 50% LTV on debt investments) = Cash & Yield enhancement products + 1/2 the value of all other investments - Total Liabilities = $0.49 + 0.5 ( $0.68) - $0.06 = $0.77 Hence a reasonable short term Target Price is $0.77 to $1.11. Investing at Current Share price of $0.45 would imply a potential 71- 147% upside and collecting 5 % in annual dividends + 3% returns from Share BuyBacks. This excludes any future improvement on its investment returns and incremental fee income from its fund management business !!! Potential Catalysts 1. Improvement in its Investment performance and its investment management business 2. More market participants start to realize this irrational discount + the upside potential of the business. Info would spread exponentially resulting in rapid rise in share price 3. Privatization by its mother company YZJS. Buying YZJF at current price while getting cash and securities at NAV implies a 170% return on investment, a very attractive ROI for any fund manager. Risks Its current investments and future investments will suffer a loss greater than the current discount to its NAV. A highly unlikely scenario as all its current investments would have to drop to zero plus it has to lose more than 4 cents per share out of the 49 cents per share it currently has. |
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