CGS-CIMB Research analysts Lim Siew Khee and Isabella Tan have kept “add” on Yangzijiang Shipbuilding (YZJ) with a higher target price of $2.41 from $1.78 previously as the wait for the listing of YZJ’s spin-off group is over.
The extraordinary general meeting (EGM) for the approval of the spin-off, named YZJ Financial Holdings (YZJFH), will be held at 4pm on April 18.
In their report dated April 5, Lim and Tan say they expect the spin-off to be listed by the end of April.
“Our sum of the parts (SOP) valuations are based on pro-forma 9x P/E FY2023 shipbuilding/shipping profit, based on 1 standard deviation of core shipbuilding historical valuations, assuming order momentum tapers relative to 2021,” the analysts write in their April 5 report.
“For YZJFH, we peg it at 8x P/E of FY2023 profit, discounted to larger fund management peers,” they add.
Catalysts to YZJ’s share price include the successful listing of YZJFH, as well as the successful negotiations for the six fund management projects. However, investors should be wary of any potential tightened regulations in China and Singapore, which could pose as a key risk to the counter’s share price performance.
On April 1, YZJ’s directors have implied that they are in favour of the proposed spin-off of the Mainboard-listed group’s investment segment.
The proposed move is deemed to be in the company’s best interests, said the shipbuilder in a regulatory filing on April 1.
Following the restructuring, YZJFH will comprise two segments: investment management (IM) and debt investment (DI).
YZJFH had previously stated that it intends to pare down its DI business and grow its IM business by entering the fund and wealth management business, note Lim and Tan.
The $1 billion in the company will be used equally for the IM business and fund and wealth management business.
“YZJFH will focus on pre-IPO, clean/new energy, strategic investments in shipping industry, new economy, student housing, data-centre, SPAC pipe,” the analysts say.
The company will be helmed by industry veteran Toe Teow Heng, who was appointed as its executive director, CEO and CIO in Singapore.
Toe is currently an independent non-executive director of YZJ.
Peng Xingkui will assume the CIO role in China. Peng currently heads the investment management department in Jiangsu Yangzijiang Shipbuilding. He was previously the director of the president’s office and investment director of investment management in the same company.
Liu Hua will take on the roles of CFO and COO at YZJFH, while Ding Jianwen, the current deputy general manager of YZJ will take on the additional role of CFO at YZJFH.
As at 10.07am, shares in YZJ are trading flat at $1.58, or an FY2022 P/B of 0.73x and dividend yield of 3.28%.
