Yangzijiang Financial shares a ‘bargain:’ L&T Securities

Singapore one-dollar bill, showing Chinese junk boatsSingapore one-dollar bill, showing Chinese junk boats

Shares of Yangzijiang Financial Holdings (YZJFH) are a bargain at the current valuations, Lim & Tan Securities said in a note Wednesday.

Since being spun off from Yangzijiang Shipbuilding (Holdings) into its own SGX listing in late April, YZJFH’s shares have tumbled as low as S$0.39 from S$0.69 and has recovered to S$0.525, Lim & Tan Securities noted.

The brokerage pointed to two potential reasons for the underperformance as likely due to shareholders exiting YZJFH’s shares after receiving them as a dividend-in-specie due to only wanting to hold the shipbuilding business; and YZJFH’s removal from the Straits Times Index (STI) causing a decline in interest.

But with YZJFH trading at a price-to-earnings ration of the mid-single digits and at a low price-to-book ratio, and with its dividend payout ratio revised upward to 40 percent from 30 percent for 2022 to 2024, investors are likely to be given a “rather decent yield” of around 5 percent as the company shifts from a debt investment business to an investment management and fund management play, the note said.

“We believe that there is still more value to be uncovered/discovered,” Lim & Tan Securities said.

It noted the stock is trading at 6.3 times 2021 price-to-earnings, compared with peers at an average 10.7 times, and the shares were at 0.49 times price-to-book.

YZJFH’s recent approval of a share buyback mandate is likely to act as a near-term price support, the note said.

“Medium term, if YZJFH can potentially trade at 30 percent discount to its peer group average discount at 0.70 times price to book, the stock can potentially trade up to about 76 (Singapore) cents. Longer term, if YZJFH can successfully transform into an asset-light and fee-based investment manager with ROEs in excess of 10 percent, the company can potentially close its valuation gap with its net asset value (NAV) of S$1.08/share,” the note said.