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<News Analysis> Proposes IPO of Investment segment

  • Yangzijiang proposes spin-off and listing of its Investment segment
  • Plan to transform current China Debt Investment dominant business into a leading Asia Investment Manager 
  • The move shall unlock value for shareholders; more details in the coming weeks
  • Recent pullback a buying opportunity! Reiterate BUY on Yangzijiang; TP S$1.95
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Following the launch of strategic review of its Investment business in early Aug-2021, Yangzijiang proposes spin-off and listing of its Investment segment. 

Key pointers and our thoughts:

  1. Create two separate listed companies: Shipbuilding and Investment. Yangzijiang will focus on building the world’s leading ESG shipbuilding company and spin off Investment segment completely. We believe one feasible way is to dividend-in-specie the shares in Investment IPO to existing Yangzijiang shareholders.
  2. Transform into Asia Investment Manager. Currently, Yangzjiang’s Investment segment focuses on debt investment in China. It intends to realign current portfolio towards more growth-oriented investmentsexpanding global footprint particularly in Asia and growing fee-income business
  3. Target completion in 6-12 months. The proposal is at a preliminary stage, and Yangzijiang has yet to formally consult SGX on this. However, it targets to complete the proposed IPO in 6-12 months. It appears that the Group has made significant progress in its strategic review over the past 4-months in terms of direction and strategy of the Investment IPO.
  4. More details in the coming weeks. Management shall provide more details such as Financial Advisers, Listing Destination, new Business Model, transformation strategies. 
  5. Listing Investment in Singapore? We opine that Yangzijiang has  a natural advantage to list its Investment arm in Singapore, given the portfolio size, investment related peers listed on SGX,  and investors’ familiarity with Yangzijiang. 
  6. Valuation? One main setback or concern of investors is the valuation of Yangzijiang’s investment arm. Despite the shipbuilding supercycle, the group is trading at a low valuation of 0.7x PB. Debt investment is perceived to be of higher risks even though it is well managed with collaterals and low default rate historically. The plan to change its portfolio and business model is a key to fetch higher valuation for the listing, with more details in due course.  
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We reiterate our conviction BUY on Yangzijiang. The progress of Investment listing is a major catalyst to  drive share price closer to our TP of S$1.95.