Other than the listing of Nio, SGX has added another company called Yangzijiang Financial Holdings. The company belongs to the former financial arm of Yangzijiang Shipbuilding, which is currently an STI blue chip stocks. The latter had spun off its financial arm to realize its value.
However, the market has sold down the stock continuously and in my view, the company is now in a value range to buy and accumulate. My view is that the company is worth 72 cents per share.
Balance Sheet of YZJFH
YZJFH holds no debts, its assets are mainly made up of debt instruments in China, equity funds and cash. It is an investment company.
Based on Yangzijiang shipbuilding's circular, YZJFH has a net asset value of RMB 20 billion ( approx SGD$4.14 billion). This is the first indicator of it being undervalued. At current market value of SGD$1.7 billion, the company is only worth 0.41 times of its book value.
However assets is worth nothing if it is unable to generate profits. Fortunately for YZJFH, it generated RMB 1.75 billlion (approx SGD$363 million). This means the company's price earnings is now 5 times which is pretty low
Future Prospects and Dividends
YZJFH is now venturing into Singapore and has set up an investment arm here. Given the continuous inflow of rich Chinese nationals here, it is probable that the Singapore's arm will start to reap profits as there is an opportunity to manage such rich families assets. It plans to set up a $1 billion fund here.
YZJFH has a dividend policy of distributing 30-40% of its earnings as dividends. Given its high earnings, I am expecting a forward dividend of 2.5-3 cents per share each year.
At current share price of 43 cents, the projected yield is 6-7%.
What I am Doing
Given that its debt free and is offering 6-7% yield, I will be selling some of my holdings in SIIC in favor for YZJFH. This is because I have limited cash in buying new stocks. While, SIIC is offering 7% yield, it is highly leveraged at 2 times debt to equity and has the same exposure to China. The perceived lower risk of YZJFH because it is debt free and has investments in multiple china industries, it is a better investment.
My fair value for YZJFH is as a 3.5% dividend yielding, valuing its fair value at 72 cents.
The management has started a share buyback program of $200 million to buy back 395,058,922 shares. This indicates, to them, any value approximately below 51 cents is undervalued and will likely be purchased by the company. This points to a short term target price of 51 cents.
Hence at 43 cents, I do feel the company has lots of value. I will commence my accumulation of the YZJFH shares next week to make it one of my core holdings as replacement to SIIC.