The directors of Yangzijiang Shipbuilding are seemingly in favour of the proposed spin-off of the group’s investment segment for a separate listing on the mainboard of the Singapore Exchange (SGX).
The proposed move is “in the best interests of the company,” the shipbuilder noted in a regulatory filing on Apr 1.
It added that the “directors recommend that shareholders vote in favour of the ordinary resolutions relating to the proposed spin-off” at the extraordinary general meeting on Apr 18.
The spin-off is considered favourable to Yangzijiang as it is expected to provide “tangible economic benefits to the shareholders that are substantial, quantifiable and clearly achievable”.
So far, the group’s shipbuilding business has been the key driver of its growth, since its listing. The move will thus allow for the value of the separate businesses and assets to be better reflected, thereby reducing any possible conglomerate discount.
Other benefits include enabling the management to focus on the group’s core businesses and allowing Yangzijiang Financial Holding to have direct access to the capital markets.
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Yangzijiang’s core business lies in shipbuilding or the building and sale of completed vessels, offshore marine equipment and ship design. It is also in the shipping business through leasing and chartering vessels and has an investment arm.
After the spin-off, the group will continue to be engaged in its shipbuilding and shipping businesses and the sale of goods like steel. The spin-off group or Yangzijiang Financial Holding will continue to be engaged in the investment business.
At present, the group bears any funding required by the investment arm by diverting excess capital resources from the shipbuilding business to fund the development and expansion needs of the investment segment.
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As such, the spin-off will allow for the two proposed entities to be analysed and valued on their own respective merits, risks and strategies, the group says.
Moreover, the proposed move is expected to grant the two entities greater autonomy to better focus their attention and resources on their respective core businesses and oversee the strategies, growth opportunities and operations of each group more effectively, without the constraints of a conglomerate structure.
"This will also enable both groups to react to market demands faster and more effectively, through a more efficient allocation of capital and resources," the group explained.
Yangzijiang also released the pro forma financial effects of the proposed spin-off, based on its results for FY2021 ended Dec 31 2021.
After the distribution, the counter's net tangible assets per share would drop from RMB 9.08 yuan ($1.96) to RMB 3.98. Similarly, its net asset value per share would fall from RMB 9.16 to RMB 4.06. Earnings per share would also drop from RMB 0.96 to RMB 0.50.
The move is not expected to have an impact on profit or loss from an accounting perspective, since it is being considered a distribution rather than a disposal, the group notes.
It adds that the shares will be distributed to the entitled shareholders in proportion to their shareholding in the company as at the books closure date, it pointed out.
Shares of Yangzijiang Shipbuilding closed up a cent or 0.7% $1.54 before the announcement on Apr 1.
Cover image: Yangzijiang Shipbuilding
