Yangzijiang Financial Holding

[touzi]

On a side note, I thought Chairman Ren, been a Singaporean, would have chosen to be safely anchored in Singapore in the last 3 years. But it seems like he prefers to be on ground zero.

Has he taken up citizenship? Is that recent? He would not have passed a mandatory English proficiency test  .

[Squirrel]

thanks squirrel,

i largely agree with the post. two quick points for me, first is the SBB 10% per year assumption i think is aggressive. doing that for one year is surprising already (what other company on sgx has done so?), so i cant imagine for three. fantastic if they do, i wouldnt use it for calculations.

second is the key risk to get comfortable with is the "everything is fine until it isn't" risk which is captured in the table you displayed under the "Recovery in China Property Sector". in one year, 86% performing debt fell to 53%. thats the main thing i need to convince myself before investing, which comes down to personal assessment regarding trust in mgt, or conservatism in assumptions and in deploying capital etc.

weijian -
the projected div yields you mentioned are calculated by
ROE * equity * payout ratio / number of shares / share price

if i use the first iteration:
0.08 * 3923M * 0.4 / 3306M / 0.37 = ~10.1%

Hi BRT

Thanks for clarifying on the figures. 

To all readers, I know the assumptions are simplistic but this is not meant to be a full blown DCF model that values what the company is worth. There are other factors that are not taken into account such as the AUM growth from fund management etc. it’s a quick mental exercise to see what’s the comfort in holding this company’s shares even if share price stays under appreciated.

Lastly I don’t really agree that 10% is too aggressive. The share volume seems to be able to support it as long as the company is more consistent with buying back shares. Due to the reduced share base, it also mean the proceeds required per year reduces to buy back 10%. The amount assumed to be spent is not far from what has already been spent so far between May 2022 to Mar 2023. And yes, you can tweak the assumptions for both ROE and SBB percentages to arrive at your own outcomes. Everyone has differing views and I respect that. That’s what makes a market!

[Squirrel]

On a side note, I thought Chairman Ren, been a Singaporean, would have chosen to be safely anchored in Singapore in the last 3 years. But it seems like he prefers to be on ground zero.

Has he taken up citizenship? Is that recent? He would not have passed a mandatory English proficiency test  .

The shipbuilding company has just bought a $399m office building! I don’t think an English proficiency test is going to matter much. 

https://links.sgx.com/FileOpen/20230329_...eID=751611

[Squirrel]

thanks squirrel,

i largely agree with the post. two quick points for me, first is the SBB 10% per year assumption i think is aggressive. doing that for one year is surprising already (what other company on sgx has done so?), so i cant imagine for three. fantastic if they do, i wouldnt use it for calculations.

second is the key risk to get comfortable with is the "everything is fine until it isn't" risk which is captured in the table you displayed under the "Recovery in China Property Sector". in one year, 86% performing debt fell to 53%. thats the main thing i need to convince myself before investing, which comes down to personal assessment regarding trust in mgt, or conservatism in assumptions and in deploying capital etc.

weijian -
the projected div yields you mentioned are calculated by
ROE * equity * payout ratio / number of shares / share price

if i use the first iteration:
0.08 * 3923M * 0.4 / 3306M / 0.37 = ~10.1%

Sorry to break up the responses into different pieces.

Regarding the risk of “everything is fine until it isn’t”, I choose to take comfort in 1) their historical recovery on defaulted loans and 2) the view that China is on a path for recovery and further provisions is unlikely to be required. So that’s the comfort of what happens when everything isn’t fine.

[jin]

AGM coming,

under special business 10,
"where shareholders of the Company are not given the opportunity to participate in the same on a pro-rata basis, then the Shares to be issued under such circumstances (including the Shares to be issued in pursuance of
Instruments made or granted pursuant to such authority) shall not exceed 20% of the total
number of issued Shares"

i don't get why they would issue shares where shareholders are not given the opportunity to participate.
don't understand why they would want to issue any shares at all when under special business 11, they intend to do a share buyback. so are they intending to buy or sell shares?

[weijian]

AGM coming,

under special business 10,
"where shareholders of the Company are not given the opportunity to participate in the same on a pro-rata basis, then the Shares to be issued under such circumstances (including the Shares to be issued in pursuance of
Instruments made or granted pursuant to such authority) shall not exceed 20% of the total
number of issued Shares"

i don't get why they would issue shares where shareholders are not given the opportunity to participate.
don't understand why they would want to issue any shares at all when under special business 11, they intend to do a share buyback. so are they intending to buy or sell shares?

hi jin,

On the local market, REITs frequently do acquisitions to increase their AUM. There is more flexibility and certainty for a private placement of share units compared to a public rights issuance. So if the issuance is not too large for the placement banks and occurs "frequently", a lot of listed companies go the private placement way. For example, MLT (Maple Logistics Trust) just did a placement ~1 week ago and if one traces back, the previous one was just ~15months ago.

In general, companies may obtain both share issue and share buyback mandate at the same time during the AGM. Getting the mandate/s does not necessarily mean that they intend to carry out the intent/s. From what I have observed over the years:

(1) A lot of things can change in a year. So it is good to have flexibility to be able to issue or buyback shares at the same time.

(2) Shares may be used in a take-over situation. So if there is a valid mandate for share issue, then takeover deal can close readily, else the BOD would have to call for a hasty EGM.

(3) Employee stock compensation scheme. If the stock compensation is huge, there may be an incentive by the management to do a share buyback to maintain their EPS, share price or their own stake in the business.

[jin]

AGM coming,

under special business 10,
"where shareholders of the Company are not given the opportunity to participate in the same on a pro-rata basis, then the Shares to be issued under such circumstances (including the Shares to be issued in pursuance of
Instruments made or granted pursuant to such authority) shall not exceed 20% of the total
number of issued Shares"

i don't get why they would issue shares where shareholders are not given the opportunity to participate.
don't understand why they would want to issue any shares at all when under special business 11, they intend to do a share buyback. so are they intending to buy or sell shares?

hi jin,

On the local market, REITs frequently do acquisitions to increase their AUM. There is more flexibility and certainty for a private placement of share units compared to a public rights issuance. So if the issuance is not too large for the placement banks and occurs "frequently", a lot of listed companies go the private placement way. For example, MLT (Maple Logistics Trust) just did a placement ~1 week ago and if one traces back, the previous one was just ~15months ago.

In general, companies may obtain both share issue and share buyback mandate at the same time during the AGM. Getting the mandate/s does not necessarily mean that they intend to carry out the intent/s. From what I have observed over the years:

(1) A lot of things can change in a year. So it is good to have flexibility to be able to issue or buyback shares at the same time.

(2) Shares may be used in a take-over situation. So if there is a valid mandate for share issue, then takeover deal can close readily, else the BOD would have to call for a hasty EGM.

(3) Employee stock compensation scheme. If the stock compensation is huge, there may be an incentive by the management to do a share buyback to maintain their EPS, share price or their own stake in the business.

hi weijian,

thanks for sharing, are you aware if there is anything to stop a company from just issuing more stocks and sell them privately at a low price when the market is depressed?

[weijian]

hi weijian,

thanks for sharing, are you aware if there is anything to stop a company from just issuing more stocks and sell them privately at a low price when the market is depressed?

hi jin,
I do not think there is any "legal" safeguards in the Company Act. As for the Listing Act, this resolution up for approval that you see in the AGM is probably the "legal" safeguard with regards to the price and quantum that is embedded in the resolution.

In general, Management who are also the controlling (and probably founding) shareholders, seldom do private issues in which they are not involved. This is because such private issue will dilute their % holding. Hence, they are more inclined towards rights' issue in which they (and hence all shareholders) can also participate in.

So rather than checking whether there is anything to "stop a company", the better way is to understand the incentive structure and also the historical track record of those decision makers. This trumps all rules and regulations because humans have a track record of finding ways around them.

[jin]

hi weijian,

thanks for sharing, are you aware if there is anything to stop a company from just issuing more stocks and sell them privately at a low price when the market is depressed?

hi jin,
I do not think there is any "legal" safeguards in the Company Act. As for the Listing Act, this resolution up for approval that you see in the AGM is probably the "legal" safeguard with regards to the price and quantum that is embedded in the resolution.

In general, Management who are also the controlling (and probably founding) shareholders, seldom do private issues in which they are not involved. This is because such private issue will dilute their % holding. Hence, they are more inclined towards rights' issue in which they (and hence all shareholders) can also participate in.

So rather than checking whether there is anything to "stop a company", the better way is to understand the incentive structure and also the historical track record of those decision makers. This trumps all rules and regulations because humans have a track record of finding ways around them.

i will have to look deeper into this, "understand the incentive structure and also the historical track record of those decision makers"
Thanks for your input!

[touzi]

The online agm is this afternoon. Has anyone receive the confirmation email? I have not received mine.