CGS-CIMB analysts Andrea Choong and Lim Siew Khee have reiterated “add” on Yangzijiang Financial with an unchanged target price of 55 cents as they look forward to improving macroeconomic conditions, which should support a stronger investment landscape as well as non-performing loan recoveries.
At a business update briefing on Nov 24, the company notes that operating conditions in China are improving as the government, banks and insurers are working together to solve outstanding issues with property developers.
The analysts point out that Yangzijiang Financial remains proactive in freezing the land assets by developers as collateral to safeguard its cash flows, and will work towards restructuring these exposures in the case of repayment difficulties.
The company also noted that its debt investments in China were pared down to 50% of its total RMB4.1 billion ($768 million) assets under management (AUM) in 3QFY2023 from 59% in 2QFY2023.
In tandem, Yangzijiang Financial’s total investments outside China had risen to 27% of total AUM in 3QFY2023 from 15% in 2QFY2023. Choong and Lim highlight that this was quicker-than-expected and in line with its long-term target of 50%.
Moving forward, Yangzijiang Financial’s management team would remain intact. Executive chairman Ren Yuanlin is set to step in as CEO effective April 2024 to replace outgoing Vincent Toe, ensuring business continuity.
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As at 3.26pm, shares in Yangzijiang Financial are trading 0.5 cent lower or 1.56% down at 31.5 cents.
