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Yangzijiang Financial on track to hit AUM target, CGS-CIMB keeps 'add'

Khairani Afifi Noordin
Khairani Afifi Noordin8/19/2022 01:34 PM GMT+08  • 2 min read
Yangzijiang Financial on track to hit AUM target, CGS-CIMB keeps 'add'
The analysts include faster-than-expected AUM growth as one of the key catalysts. Photo: Albert Chua/The Edge Singapore
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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.

See also: Broker's Digest: Thai Beverage, China Sunsine, Far East Hospitality Trust

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.

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