- BUY Entry – 0.475 Target – 0.550 Stop Loss – 0.450
- Yangzijiang Financial is a spin-off from Yangzijiang Shipbuilding, and is focused on investment management business, which seeks capital appreciation and investment income and debt investment business, which is primarily made up of debt investments. The firm also intends to enter into the fund/wealth management business to generate recurring fee-based income.
- Proposed 10% buyback mandate. YZJ Financial is proposing a share buyback mandate that will allow it to repurchase 10% of its outstanding 3.95bn shares at 105%/120% of on/off market purchases. YZJ Financial believes that the resolution, if passed, will give its directors flexibility to undertake share buybacks when circumstances permit. In terms of signalling, the mandate provides investors with some assurance that management could place a floor on share price, especially since the stock has come off 23.4% since its opening debut close of S$0.62.
- Investment management services gaining traction. Recently, YZJ Financial announced that GEM Asset Management had engaged it to provide investment advisory services for AUM of about S$500m. The firm is currently in discussions with various parties to set up family office and asset management funds in Singapore. This will help the firm consistently grow its AUM.
- Trading at a tight range. There is currently no coverage on the stock. Nonetheless, we believe that YZJ Financial will trade at a similar range as its peers listed in China, which currently trade at about 0.4x-0.7x P/B. We expect YZJ Finance to recover from its lacklustre performance post listing, to trade at about 0.67x P/B, with a target of S$0.55, implying a 15.8% gain from last close of S$0.475.
(Source: Bloomberg)