Felicia Tan Tue, Jun 07, 2022
CGS-CIMB Research has initiated coverage on Yangzijiang Financial Holding (YZJFH) with an “add” call and a target price of 74 cents.
YZJFH is the carved-out and spun-off debt investment and investment management division of Mainboard-listed Yangzijiang Shipbuilding.
The target price is based on a CY2023 P/BV of 0.6x, which is comparable to Chinese banks, and a CY2023 P/E of 9x, which is at the peer average, say analysts Lim Siew Khee and Izabella Tan.
The 0.6x P/BV valuation has been given a 70% weightage since 70% of YZJFH’s net tangible assets (NTA) is currently in its debt investment business, while its 9x P/E valuation has been given a 30% weightage for its remaining 30% NTA, they add.
To them, their valuations are “conservatively discounted against [YZJFH’s] peers.”
YZJFH’s proposal to conduct a share buyback of up to 10% of its outstanding shares, has not been factored into the analysts’ assumptions.
In their report dated June 6, the analysts say they like the stock as it is the only Singapore listed mid-size cap proxy to fund management and private equity.
The analysts also like the counter’s “generous” dividend payout of 40% and yield of 4.1% to 6.24% in the FY2022 to FY2023 with a consistent return of funds of around 11%.
Further to their report, Lim and Tan called YZJFH a “force to be reckoned with”.
They add that the group’s asset under management (AUM) growth, as well as the long-standing relationship between chairman Ren Yuan Lin and CEO Vincent Toe, are positive factors.
In addition, YZJFH’s strong track record in China and the performance of GEM Asia Growth Fund, YZJFH’s wholly-owned subsidiary, are also merits to the investment.
As at end-April, YZJFH had a net book value of $4.2 billion, which it also considers as its as its AUM.
The group’s current AUM, according to Lim and Tan, is now around $4.76 billion. The sum includes YZJFH’s AUM via engagement for investment advisory services (at around $500 million) and the establishment of GEM Asia Growth Fund (at around $60 million, $140 million pending).
According to YZJFH’s management, the group aims to grow its total AUM to $7 billion in three to five years.
“We believe the AUM growth to $7 billion within three to five years will underpin earnings growth and dividend payout. YZJFH is currently trading at 0.49x CY2022F P/BV, below its peers who trade at an average of 1.85x CY2022 P/BV,” the analysts say.
By the end of FY2022, YZJFH is also expected to have $0.76 million in additional cash from its maturing investments, which will increase its pool of investable funds to $1.81 billion, which is around 85% of its current market cap.
