CGS-CIMB Research analysts Lim Siew Khee and Izabella Tan have kept their “add” call on Yangzijiang Financial Holding (YZJFH) with a target price of 74 cents following the company’s first results announcement since its listing.
In their Aug 12 report, the analysts include faster-than-expected assets under management (AUM) growth as one of the key catalysts, highlighting that it is on track to hit the $7 billion AUM target in three to five years.
“Of its $4.6 billion AUM as of 1HFY2022, about 55% relates to debt investments,13.8% in public and private equity, 3.5% managed through GEM Asset Management and the remaining 27.8% in cash.
“Management guided that $480 million of AUM have been transferred to Singapore as of 1HFY2022. It intends to transfer 22% of AUM to Singapore by end-FY22F, towards its long-term target of 50%,” they add.
YZJFH’s 1HFY2022 revenue of $173.8 million came in above expectations at 68% of CGS-CIMB’s FY2022 estimates. This was due to higher-than-expected interest income at $184.9 million, which resulted from higher-than-expected cash deployed. CGS-CIMB estimates that YZJFH deployed about 60% of total cash into public and private equity investments.
The analysts expect interest income to decline in 2HFY2022 from 1HFY2022, since 92% of its debt investments mature within the next 12 months and YZJFH remains cautious in deploying funds amidst challenging market conditions.
Real estate made up the largest share of borrowers in YZJFH’s debt investment portfolio at 32% as of 1HFY2022, the analysts point out. “However, the company reinforced its stance to reduce exposure to the sector, save for those that are in collaboration with the Chinese government. Its non-performing loan ratio fell from an average of 16% for FY2019-FY2021 to 2% in 1HFY2022.”
CGS-CIMB estimates that 28% of YZJFH’s $2.5 billion debt investments will mature by end-FY2022. This brings its cash balance to $1.97 billion (at 50 cents per share), which exceeds its current market capitalisation of $1.53 billion.
“We continue to like the stock as the only Singapore mid-size cap proxy to fund management with yield upside of 8.64% by FY2023,” the analysts say.
As at 1.28pm, shares in YZJFH are trading 0.5 cents higher or 1.38% up at 36.5 cents.
