Ideas Elsewhere: Yangzijiang Financial Holding (YF8:SI)

Discount To NAV

Myles from the Value Zoomer blog has recently covered Yangzijiang Financial Holding, a Singapore-listed investment manager that trades at a wide c. 70% discount to its NAV. YF8’s NAV is primarily comprised of debt in Chinese companies (44% of NAV) and Singapore-/China-based cash products (42%). While the value of Chinese debt is likely significantly overstated given the ongoing real estate downturn (51% of YF8’s Chinese loans are under/non-performing), the value of YF8’s ‘safe’ assets (i.e. cash products) more than covers the company’s current market cap, leaving the remaining ‘risky’ assets as a free option for investors. Valuation using conservative assumptions, including applying a 50% haircut to Chinese debt, would imply a book value target 80% above the current share price levels. The wide discount to NAV might admittedly be warranted given that the company is a cash-heavy HoldCo controlled by Chinese management (owns 29%). However, YF8’s management has displayed solid capital allocation since the company was spun off in 2022, with extensive share buybacks (9% of outstanding shares repurchased) and a sizable dividend paid out last year. Moreover, management has been actively diversifying company’s portfolio away from China, with Chinese exposure decreasing from 100% to 69% as of Dec’23.

Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring the attention of SSI subscribers. I might not actively follow the developments of these ideas, so there might be limited updates or follow-ups in the comments section.