Yangzijiang Financial Holding

[CY09]

Hi Squirrel,

Thank you for the comments. However, i note in the past few days, despite the share prices being low and are now in the range of 0.38. YZJFH has slowed its share buyback rate. As compared to the last 2 weeks, the share prices have not increased, but the rate of buyback is on a declining trend

Have you enquired with the IR team on why have they slowed the rate of share buyback? They have a sufficient cash buffer to execute the $200 million share buyback as it is idle cash in Singapore bank accounts

[Yoyo]

It is obvious that YZJFH is in no hurry to SSB, afterall it is not their intention to give a immediate boost to the share price. More important is that they do max out on their SSB, even better if there is another round next year.
This is a case of 细水长流
https://www.youtube.com/watch?v=c0clcDm-2bM
Enjoy
Vested at ave 0.40 (partially divest from Samudera)
PS: Thanks to Squirrel for alerting YZJFH and Samudera. I am still evaluating ISDN, held back by China covid.

[setan]

I had extracted from SGX website that the stake for T. Rowe Price Associates, Inc. is 4.9289% as of 21st July 2022 and they had reduced their stake by 74,562,200 shares.

YZJ Fin Hldg - Singapore Exchange (SGX)

Does anyone know how frequent SGX update this information? Does T. Rowe Price have the obligation to continue to declare their stake if it is below 5%?

[CY09]

T Rowe is not required to report as they are now below 5%. You will only know their remaining stake in the next annual report.

Major shareholders are only required to report a sale if their stake causes them to move up or down to the next percentage (e.g. 4.2% to 5.0% need to report, but 4.2% to 4.9% do not need to report)

[weijian]

Have you enquired with the IR team on why have they slowed the rate of share buyback? They have a sufficient cash buffer to execute the $200 million share buyback as it is idle cash in Singapore bank accounts

I think if we start to ask questions like this. As OPMIs, we are starting to focus on the price of a security, more than the fundamentals of the business.

I do agree with yoyo that there is no hurry. The money in the Spore bank accounts are useful for share-buyback but it is more useful if it is used as seed money to start the various funds that they want to venture in. Not to say that the former is not important as it is an asset allocation exercise, but the latter is really what (OPMIs think) will transform the business as it moves from China-based to Spore-based.

As Karlmarx has astutely pointed out, Mr Market is pretty efficient here, discounting itself based on the uncertainties presented. It remains to be seen whether the margin of safety is good enough (this question will only be answered adequately in the future as Squirrel pointed out) and whether there is truly an uncertainty premium here.

IMHO, various principles of value investing are been tested and practiced here in real time. Will be interesting to see how this pans out!

P.S. A market is only produced when there are buyers and sellers thinking differently coming to different conclusions. And if they are generally independent, then the market is "sufficiently efficient". If everyone thinks the same, then there would be no "sufficiently efficient" Market.

[gzbkel]

In latest report, "Debt investments at amortised cost" is reduced by 881m, and most of it has been moved to "Trade and other receivables" (around ~600m) instead of cash. I assume this is because the sum is now due but not collected. I wonder if this in the norm or does it suggest any difficulty in collection... Anyone with accounting knowledge can comment?

hi gzbkel,

Under pg23 of 1H22 report, it describes the receivables as below:

Our trade and other receivables increased by approximately S$674.3 million from approximately S$25.0 million as at 31 December 2021 to approximately S$699.3 million as at 30 June 2022, representing 19.3% of our current assets. The increase is mainly due to increase of prepayment of approximately S$677 million for potential investments.

1H22 report: https://links.sgx.com/FileOpen/YZJFH%20A...eID=728099

So this is not the typical "receivables" per say that one receives from a customer, but more of "pre-paid money" to buy an asset.

As for what potential investments these are, I do not remember seeing Mgt elaborate more in the reporting.

Thank you Weijian for pointing this out. I didn't notice.

Looking more closely at page 13 of 1H22 report, I noticed the following:
- Addition to debt instruments: 914,656
- Redemption of debt instruments: 1,187,773
- Investments transfer to YZJ Group before spin-off: (536,377)

So the 881m drop in debt instruments is mostly due to transfer of 536m to YZJSB, with the rest being redemption (after netting off from addition) and some currency loss.

I am curious why would they want to add 914m of debt instruments at this stage. Isn't their long term plan to reduce exposure to China debt instruments, and move more into equities?

[Squirrel]

Hi Squirrel,

Thank you for the comments. However, i note in the past few days, despite the share prices being low and are now in the range of 0.38. YZJFH has slowed its share buyback rate. As compared to the last 2 weeks, the share prices have not increased, but the rate of buyback is on a declining trend

Have you enquired with the IR team on why have they slowed the rate of share buyback? They have a sufficient cash buffer to execute the $200 million share buyback as it is idle cash in Singapore bank accounts

Hi CY09,

I have not enquired with the IR team. I do think 80m shares out of 395m shares done in share buybacks is acceptable.

As a rule of thumb, to not significantly move share prices, I believe one should not exceed 20% of market volume in order not to move share prices. Their buy back volumes seem to have stuck to that mantra.

Without knowing their exact reasoning for the rate of buybacks, I am happy with what they are doing at the moment. This is sustainable value enhancement, not temporal value uplift from flooding the market with buy orders. If I were a really large investor looking to build a position, I would do the same. This is 10% of outstanding shares we are talking about, no small feat to get it all done at a good price.

[ghchua]

T Rowe is not required to report as they are now below 5%. You will only know their remaining stake in the next annual report.

Unless they own those shares under their own name (which is very unlikely for a fund management company, which manages various funds) you will not be able to see it if they use various nominee accounts to hold those shares. As they no longer own more than 5%, they are not considered a substantial shareholder of the company and therefore do not need to be disclosed as one with their corresponding stake in the annual report.

[specuvestor]

You can think of them as short term funding which is not a bad strategy in a highly volatile environment. So every year the maturity will trigger them to reassess the counterparty risk , collateral etc so I guess many are rollover loans. But it makes their aggregate loan book dynamic unlike a bank.

In latest report, "Debt investments at amortised cost" is reduced by 881m, and most of it has been moved to "Trade and other receivables" (around ~600m) instead of cash. I assume this is because the sum is now due but not collected. I wonder if this in the norm or does it suggest any difficulty in collection... Anyone with accounting knowledge can comment?

hi gzbkel,

Under pg23 of 1H22 report, it describes the receivables as below:

Our trade and other receivables increased by approximately S$674.3 million from approximately S$25.0 million as at 31 December 2021 to approximately S$699.3 million as at 30 June 2022, representing 19.3% of our current assets. The increase is mainly due to increase of prepayment of approximately S$677 million for potential investments.

1H22 report: https://links.sgx.com/FileOpen/YZJFH%20A...eID=728099

So this is not the typical "receivables" per say that one receives from a customer, but more of "pre-paid money" to buy an asset.

As for what potential investments these are, I do not remember seeing Mgt elaborate more in the reporting.

Thank you Weijian for pointing this out. I didn't notice.

Looking more closely at page 13 of 1H22 report, I noticed the following:
- Addition to debt instruments: 914,656
- Redemption of debt instruments: 1,187,773
- Investments transfer to YZJ Group before spin-off: (536,377)

So the 881m drop in debt instruments is mostly due to transfer of 536m to YZJSB, with the rest being redemption (after netting off from addition) and some currency loss.

I am curious why would they want to add 914m of debt instruments at this stage. Isn't their long term plan to reduce exposure to China debt instruments, and move more into equities?

[CY09]

Yes agree. Given the short tenure of their debt instruments, they are able to redeem to deploy for other uses nimbly

Its current share price of 38.5 cents prices it at 35% of its equity. As long as YZJFH (i) commits to its short term target of s$1 billion in Singapore as investment, (ii) sets aside about s$150-200 million annually for share buyback to purchase 10% of shares and (iii) sets aside s$100 million annually as 2.5-3 cents annual dividend based on its estimated earnings per share and declared dividend policy. I will be happy

Based on this trajectory, it is definite YZJFH has to somehow redeem s$1 billion of China investments and send it to Singapore by next year sometime in March 2023 to fund the above 3. As long as it is executed, OPMI will be happy. The next milestone will be when YZJFH executes its 50% allocation to Singapore which will see s$1 billion investment grow to s$2 billion. It can be completed by end Year 2023. But i doubt it will because redeeming too much investments from China and deploying it to Singapore may eat into its political goodwill