A force to be reckoned with
? We like YZJFH for its generous 40% dividend payout and yield of 4.1%-
6.24% in FY22F-FY23F with consistent returns of funds of c.11%.
? If we include its debt investments that are maturing by end-2022F as cash, its
cash balance could amount to c.S$1.8bn or c.85% of its current market cap.
? We initiate coverage with an Add rating and TP of S$0.74, based on blended
valuations of 0.6x CY23F P/BV (70%) and 9x CY23F P/E (30%).
Targets to double AUM to S$7bn in 3-5 years
YZJFH is the carved-out and spun-off debt investment and investment management
division of YZJ Shipbuilding (Add, TP: S$1.63, CP: S$1.00). It had S$4.2bn in net book
value as of Apr-22, which it also considers as its asset under management (AUM). Together
with AUM via engagement for investment advisory services (c.S$500m) and the
establishment of GEM Asia Growth Fund (c.S$60m, S$140m pending), YZJFH’s current
AUM is S$4.76bn, in our estimate. YZJFH aims to grow its total AUM to S$7bn in 3-5 years,
according to management.
Invested 75% of S$4.2bn portfolio; trading close to cash value
We understand from the management that 75% of its S$4.2bn asset portfolio or c.S$3.15bn
has been invested – c.S$2.52bn (60%) in debt investments, and c.S$0.63bn (15%) in
private equity funds, as at May-22. Of the balance, c.S$0.42bn (10%) will be gradually
invested into Singapore funds, and c.S$0.63bn (15%) will be conserved. YZJFH’s current
market cap of S$2.1bn is slightly above its c.S$1.8bn of cash by end-FY22 (S$0.46/share).
We believe this has not priced in upside potential for AUM and fee income growth.
50% cash has been moved to Singapore; ready for offshore funds
YZJFH has established itself in debt investment and the private lending market in China.
We believe YZJFH can utilise its strong Chinese network to capture China’s growing wealth
management market. Together with the newly acquired asset management firm, GEM
Asset Management (GEM), we think the group can replicate its success outside China with
existing ammunition and by leveraging third-party money to grow its AUM. YZJFH intends
to deploy c.S$1bn cash into Singapore mainly via Qualified Domestic Limited Partnership
(QDLP) and liquidity pool. Key re-rating catalysts: faster-than-expected AUM growth. Key
downside risks: interest/exchange rate fluctuations.
Initiate coverage with S$0.74 TP; 40% div payout, 4.15% yield
We based our TP on 0.6x CY23F P/BV (comparable to Chinese banks) and 9x CY23F P/E
(peer average). We like the stock as it is the only Singapore mid-size cap proxy to fund
management with yield upside of 6.24% by FY23F. Valuations are conservatively
discounted against peers. We are confident in the success of fund management, as: (1) it
added S$560m AUM within a month of listing; (2) long-standing relationship among the
management; and (3) consistent annual return (of funds) of 11%, prior to spin-off, a
testament of its track record in China.