Yangzijiang Financial Holding

See my post on 2 Oct 2013...wow how time flies... but Chairman Ren is indeed savvy
https://www.valuebuddies.com/thread-588-...#pid165284

But holding ships in inventory is nothing new. Most savvy I think was Jaya Holdings. That's what some of our shipping companies tried to do in the past before a sharp shipping correction undo some of them

https://links.sgx.com/FileOpen/YZJFH_Pot...eID=842890

Another spin off, this time it will be the asset heavy maritime where the company trades ships and/or finances ship purchases and does leasing business.

How much will the company spin it off? My view, it should be spun off at 1 times book value. The price in which YZJFH paid for the ships (remember Chairman Ren says his business does not use loan). Of course, this is unknown, but anything less than 1 times book value is rip off on current shareholders because they are giving their business away at discount

(27-04-2025, 08:48 PM)CY09 Wrote: How much will the company spin it off? My view, it should be spun off at 1 times book value. The price in which YZJFH paid for the ships (remember Chairman Ren says his business does not use loan). Of course, this is unknown, but anything less than 1 times book value is rip off on current shareholders because they are giving their business away at discount

Hi CY09,
The spin-off process is not finalized but from the initial statements, it suggest that this is a complete break (like Finance breaking off from Shipping previously) and the listing is by way of an introduction.

"By way of an introduction" means that no new proceeds will be raised. Therefore, the spin off price/valuation does not matter at all.

The company has been a "finance company" for close to 3 years now. So there is probably enough experience which has accumulated into this break-up decision. It may probably make more money for everyone (as per Chairman Ren's parlance that he is "very good at making money"  ) 

In general, I have observed a complete spin-off has the best gain probability for OPMIs (The anti-thesis of that would be what BSL did with BP). My biggest time-adjusted gains came from complete spin-offs. In summary, I like such complete spin offs.

wow this spin off is indeed unique... with 2 separate entities isn't it more difficult for ships that was built but not delivered to be injected into this entity?

and without raising capital... interesting that he is still savvy

(17-04-2025, 04:24 PM)specuvestor Wrote: See my post on 2 Oct 2013...wow how time flies... but Chairman Ren is indeed savvy
https://www.valuebuddies.com/thread-588-...#pid165284

But holding ships in inventory is nothing new. Most savvy I think was Jaya Holdings. That's what some of our shipping companies tried to do in the past before a sharp shipping correction undo some of them

YZJFH is cash rich, with 75% of its maritime fund funded by its large cash hoard at SGD$1.5billion. Chairman Ren has been ordering many ships and either flip it before receving delivery or upon delivery been paying in full the amount.

This is how YZJFH has a fleet of ships that it is putting out for lease. If i recall, it will have about 70+ ships in its fleet, far larger than many shipping trusts we have seen which has gone under. Seen in another light, these are the ships Chairman Ren was unable to flip out and is now running.

He does not need to raise capital because YZJFH is extremely cash rich and it is slowly redeeming its debt investments when it made a mistake of going into China Real Estate. The question is that if there is a shipping downturn, how much impairment will ships take, I will not forget how much losses investors racked up in maritime assets as the shipping cycle made many ships unemployed. Of course chairman Ren is optimistic all his ships will continue to be chartered out because he has a few decades of experience in the shipping sector. So let's see how much will Mr Market value his spun off maritime company. Anything close to 0.95-1.00 times book value will see me selling off the stake.

I am still a holder of YZJFH and is more interested in the story of it being valued to close to price book

(28-04-2025, 09:56 PM)CY09 Wrote: I am still a holder of YZJFH and is more interested in the story of it being valued to close to price book

By rule, a closed end fund will never trade at NAV due to liquidation costs and also a discount will be required for lack of control. Many years back, icapital.biz Bhd (listed on Bursa) used to trade >NAV after IPO but that was more of a market inefficiency coming from halo effects of the Founder. The anomaly didn't last too long after IPO.

So what are the exceptions? I can think of two:

(1) Book is undervalued due to conservative accounting principles: The only assets that may be undervalued on YZJFH's book are the vessels themselves. Under PPE (or associate/JV), they are depreciated based on a 25 year life time. In practice, a ship may last longer than that. So unless the replacement value of these vessels reduce in the future due to the simple fact that they were too expensively bought in the 1st place, the book is generally undervalued. In addition, if the replacement value of these vessels increase due to inflation, the book will be undervalued. If the IRR of these vessels increase due to higher freight/bulk rates, then the 2nd hand value increase and the book will also be undervalued.

(2) Book is able to generate persistent high ROE. If the book persistently generates returns (even after retaining capital) at levels that are much higher than cost of capital, more often than not Mr Market will also efficiently price it above book value. There will not just be a re-rating but a change in valuation method from "book value multiple" to "earnings multiple". There are many ways to juice up ROE - leveraging up, attracting large amounts of 3rd party capital (LPs) and earning sticky/recurring fees on top of the asset itself, or simply have Buffett's touch in asset allocation.

Hi Weijian,

(1) is something I am seeing in YZJFH. YZJFH holds a China Debt Investment with a significant credit allowance. The company has $229 million in credit allowance of which it has used less than 5% as it has redeemed debts. This is why as the DI has grown smaller, YZJFH reversed its allowance in its P&L and tried to do "magic" by being more conservative via giving more allowance to its DI.

My view is that if all DIs are redeemed, $200 million will be added back to the balance sheet. That should increase book value by 5.4 SG cents (1.15 to 1.20 book value per share).