Yield play
- This is YZJFH’s first results announcement since its listing on 28 Apr 22.
- Including debt investments maturing by end-FY22F, we estimate that its cash balance of c.S$1.97bn could exceed its current market cap.
- As of 1H22, YZJFH has an AUM of S$4.6bn and S$480m of assets in Singapore. We think it is on track to hit its S$7bn AUM target in 3-5 years.
- We continue to like YZJFH as a yield stock, with a yield upside of 8.64% by FY23F. Maintain Add with a TP of S$0.74.
Interest income could soften in 2H22F vs 1H22
1H22 revenue of S$173.8m (-27% yoy) came in above expectations at 68% of our FY22F. The beat was due to higher-than-expected interest income of S$184.9m (-3% yoy), which resulted from higher-than-expected cash deployed. We estimate that YZJFH deployed c.60% (c.S$767m) of total cash into public and private equity investments. Although 1H22 revenue of S$173.8m and net profit of S$136.4m made up 68%/62% of our FY22F estimates, we expect interest income to decline in 2H22F from 1H22, since (1) 92% (c.S$2.3bn) of its debt investments mature within the next 12 months, and (2) the management remains cautious in deploying funds amidst challenging market conditions.
Cash at end-FY22F could exceed market cap; attractive yield
We estimate that 28% or (c.S$0.7bn) of its c.S$2.5bn debt investments will mature by end-FY22F. This brings its cash balance to c.S$1.97bn (S$0.50/share), which exceeds its current market cap of c.S$1.53bn. We continue to like the stock as the only Singapore mid-size cap proxy to fund management with yield upside of 8.64% by FY23F.
On track to hit S$7bn AUM target in 3-5 years
Of its S$4.6bn AUM as of 1H22, c.55% (c.S$2.53bn) relates to debt investments,13.8% (c.S$0.63bn) in public and private equity, 3.5% (S$0.16bn) managed through GEM Asset Management, and the remaining 27.8% (S$1.3bn) in cash. Management guided that S$480m (c.10.8%) of AUM have been transferred to Singapore as of 1H22. It intends to transfer 22% of AUM to Singapore by end-FY22F, towards its long-term target of 50%.
Reducing real estate exposure in China; NPL ratio down to 2%
Real estate made up the largest share of borrowers in its debt investment portfolio at 32% as of 1H22. However, management reinforced its stance to reduce exposure to the sector, save for those that are in collaboration with the Chinese government. Its NPL ratio fell from an average of 16% for FY19-21 to 2% in 1H22.
Maintain Add; unchanged TP of S$0.74
No interim dividends were declared, although its 40% payout policy still holds. Our TP is based on 0.6x CY23F P/BV (comparable to Chinese banks) and 9x CY23F P/E (peer average). Key catalysts: faster-than-expected AUM growth. Downside risks: exchange rate fluctuations negatively impacting its assets in Singapore denominated in the USD.
