Yangzijiang Shipbuilding (Holdings) Ltd (YSL) will spin-off its investment arm, Yangzijiang Financial Holding (YZJFH), on the mainboard of the Singapore Exchange under the ticker symbol “YF8”. It will begin trading on 28 April 2022.
The spin-off was to unlock shareholders’ value and to strengthen the corporate governance within the group. This move is expected to reduce any possible conglomerate discount. Furthermore, it will allow its investment arm, YZJFH, to focus on expanding its fund and wealth management businesses as well as geographical expansion in the Greater China and Southeast Asia region.
Here are 6 things you need to know about Yangzijiang Financial Holdings (SGX:YF8).
#1 Yangzijiang Financial Holdings Will Be Helmed By Ren Yuanlin
Yangzijiang Financial Holdings (YZJFH) will be led by a separate board of directors to achieve strong governance, transparency, and independence.
Yangzijiang Shipbuilding (holdings) Limited’s (YSL) founder and current honorary chairman, Ren Yuanlin, aged 68, will lead YZJFH. He served as the executive chairman of Yangzijiang from 2006 to 2020, before handing the reins to his son, Ren Letian, who serves as its current executive chairman.
Ren Yuanlin will be joined by a leadership team that has an average experience of 17 years, including directors who have served in senior management roles in MAS and SGX.
#2 Strategic Investors, EDB Investments And Alexandrian Worldwide Will Hold 0.9% Stake In YZJFH
YSL entered into two separate bond subscription agreements, amounting to $25 million in convertible bonds each, with EDB Investments and Alexandrian Worldwide. These bonds can be converted into listed shares in YSL and, therefore, in YZJFH as well. The estimated shareholding interest in YZJFH from the bond holdings is around 0.9% as at the listing date. The strategic investors will moratorise their allocated shares in YZJFH for six months to provide confidence and stability to its share price post listing.
YZJFH plans to collaborate with EDBI on launching an Advanced Maritime Fund focusing on sustainability-related investments. Through this fund, it seeks to plug the local funding gap of supporting enterprises to translate their R&D results into commercialisation. The fund also aims to boost Singapore’s de-carbonization efforts and intends to accelerate the growth of local maritime SMEs and startups.
#3 YZJFH’s Debt Investment Business Will Taper by End 2023
Prior to YZJFH’s restructuring, its debt investment business was made up of debt investments (at amortised costs) and its microfinancing loan business in Jiangsu Province. The main objective of the debt investment business is to generate predictable income through the interest generated.
Following the restructuring exercise, YZJFH will gradually taper its existing debt investment business to focus on its fund investments with a aim of generating sustainable long-term returns.
YZJFH notes that the bulk of its debt investments (at amortised costs) are expected to mature by 31 December 2023. However, YZJFH expects that the reduced income from the debt investment business will be offset by an increase in dividend income from the fund investments.
YZJFH customers for its debt investment business comprise SMEs, micro-enterprises, and individual proprietors. The below pie chart gives a breakdown of its borrowers in the various sectors as of 31 December 2021. The bulk of its borrowers are in the manufacturing sector, accounting for 37%, followed by real estate at 24% and the services sector, at 15%.
According to the Introductory Document, YZJFH had no customers in its debt investment business for FY2021 that accounted for 5.0% or more of the group’s revenue.
#4 YZJFH’s Singapore Investment Management Business Will be Ramped Up With A Singapore Office
The second principal business of YZJFH comprises its investment management business, with the aim of achieving both capital appreciation and investment income. The group invests directly in both public and private companies and funds, as well as deploys funds into various situations.
YZJFH seeks to invest across a broad spectrum of funds, focusing on growth equity and debt, mezzanine financing, PIPE, special situations, real estate, and other PE Funds, diversified by geography (Singapore and PRC core markets, Asia Pacific emerging markets, and global developed markets) via other prominent investment management companies either as Limited Partners (LP) or co-General Partners (GP).
YZJFH intends to establish a global corporate headquarters in Singapore in addition to its Jiangsu office to run its investment management business. It plans to deploy a portion of the recycled capital from its debt investment business into this newly established offshore investment management business in Singapore. It will undertake investments with a longer investment horizon, such as private debt and mezzanine funds. Over time, the group expects its Fund investments to shift from the being primarily PRC-based to a more balanced 50:50 mix of PRC and Singapore investments.
#5 YZJFH’s Acquisition Of GEM Will Provide New Fund/Wealth Management Capabilities To Distribute Investment Products
After the restructuring, YZJFH intends to enter into a third business, which is the Fund/Wealth Management business, to generate a recurring fee-based income. It will do so by acquiring a CMS-licensed fund management company upon its listing.
In particular, YZJFH intends to acquire GEM, a fund management company with a CMS licence that was founded and headquartered in Singapore. It provides asset management and family incubation services, including providing and managing an efficient and private investment platform for investors. GEM manages three funds, namely: ICH Gemini Asia Growth Fund, GEM Tech Dev Holdings, and Golden Ox Medical Fund. Its total funds under management (FUM) is approximately $58 million as at 31 December 2021.
Upon YZJFH’s listing, it intends to launch its own General Partners (GP) funds managed by GEM in FY2022. YZJFH will use a total of RMB 2.5 billion of proprietary capital as its GP capital. Furthermore, YZJFH intends to leverage on with GEM (Chongqing) for cross-border investment opportunities in China. GEM has secured a QDLP allocation of US$300 million quota under the Chongqing qualified domestic limited partnership (QDLP) scheme.
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#6 Dividend Policy To Distribute At Least 30% Net Profit For Next 3 Financial Years
Shareholders could expect to receive dividends from YZJFH upon its Introduction for the next three financial years. YZJFH’s directors intend to distribute dividends either as an annual or an interim dividend of not less than 30% of the group’s net profit from FY2022 to FY2024.
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