Yangzijiang Financial Holding has reported a better 1HFY2023, partly led by fair value gains.
For the six months ended June, the investment and finance company recorded earnings of $162.5 million, up 19.2% y-o-y.
Total income in the same period was up 14.2% y-o-y to $198.4 million, boosted by a net gain of $34.5 million in fair value of financial assets in 1HFY2023, versus a $19 million fair value loss booked in 1HFY2022.
Out of this $34.5 million in total net fair value gains, some $12.8 million can be attributable to fair value gain of its offshore fund investments, while another $14.2 million gain was a result of fair value gain from China-listed shares, and the remaining $7.5 million from unlisted investments within the private equity funds YHF has invested in China.
Via a series of share buybacks, which reduced its share base by 6.2% y-o-y to 3.65 billion shares, YFH's NAV has edged up slightly to $1.052 per share as at June 30, from $1.0495 as at Dec 31 2022.
The reduced share base, coupled with earnings growth, has the effect of helping to increase YFH's EPS for 1HFY2023 to 4.39 cents, up 27.2% y-o-y. For whole of FY2022, the company's EPS was 4.22 cents.
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YFH says that with ongoing "recovery efforts", it has been making "good process" tackling the NPLs in its debt investment portfolio in China.
Even with ongoing stress in China's property market, its NPL ratio has been reduced to 37% as at June 30 from 41% as at Dec 31 2022.
YFH says is "cautiously optimistic" about the recovery prospects of its remaining NPLs, it will continue to diligently monitor and pro-actively manage its loan book, which has been largely made up of short-term loans to local Chinese companies.
Meanwhile, YFH remains focused on diversifying its AUM by gradually increasing its investments outside China over the next five years.
As communicated when it was spun off from its own listing from Yangzijiang Shipbuilding back in April 2022, YFH plans to allocate 50% of its funds to investments beyond China over the long term.
Using Singapore as a base, it targets to deploy around $1 billion of its own capital in investments outside China by end of this year.
As at 30 June 2023, YFH's ex-China or international investments were valued at $574.4 million, accounting for 14.5% of its total investment portfolio, up 7.6% from $534 million, or 12.9% of the total portfolio as at December 31 2022.
Key components of the ex-China portfolio includes the Yangzijiang Maritime Private Equity Fund #2, which has generated an ROE of 17.7% and IRR of 16.4% since inception.
“The group's international portfolio has gotten off to a good start and we are currently generating good returns from our investments," says YFH's CEO Vincent Toe.
"Our diversified set-up for this portfolio, currently spanning across 4 different asset types, aims to reduce portfolio volatility while yet concurrently achieving strong returns for all our stakeholders in the long-run," he adds.
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Given the bright prospects of the industry, YFH plans to increase its exposure by increasing the size of the maritime fund from the original US$500 million, which has already been earmarked for various investments, to US$600 million.
Ren Yuanlin (picture), YFH's executive chairman says the "robust" 1HFY2023 performance can be attributed to the "meaningful headway" the firm has made in reducing its NPLs as well its diversification strategy.
"Our Singapore investments have started to contribute positively to the group’s bottom line in this financial period and we expect contributions from this segment to continue growing in the foreseeable future," says Ren.
“We believe that with challenges, come opportunities. Given our strong financial position in a volatile market, we are ready to capitalise on suitable investment opportunities as and when they arise, both within as well as beyond China," says Ren.
The company did not declare an interim dividend, as its current policy is to do so at the end of each financial year.
YFH shares closed at 36 cents on Aug 11, unchanged for the day and similarly so year to date.
