Yangzijiang Financial Holding

[CY09]

Singapore auditors are neither truly independent in their work nor that know-all (lest not forget KPMG Singapore has to rely on KPMG China for its audit work on YZJFH)

During Chairman Ren time, it is *likely* the moment KPMG mentioned about the downturn in real estate affected the loan, they felt some form of pressure, hence the impairment taken was low. As alluded by someone else here, it is only after a change of management was achieved that a more grounded impairments resulted.

This is evident in almost many places, where a Charismatic/loud individual can greatly influence by making the noise and others relent. This is the reality of Singapore's work place and we investors could learn and observe. Fortunately, this should be majority of the impairments, but likely another round of impairment will happen this financial year too

[CY09]

https://links.sgx.com/FileOpen/YZJFH%20A...eID=900534

Powerpoint: https://links.sgx.com/FileOpen/YZJFH%201...eID=900536

While YZJFH has recovered some principal from its NPL (Powerpoint Page 8), a new project has fallen into the NPL category with 29% ECL.

What's remarkable is some performing loans have moved to underperforming loans and YZJ has recycled a significant portion of its cash received back to China debt instruments (classifying it as performing loan) with a 6.2% expected credit loss. With the DI generating $31 million is interest on a back of $1,323 million, its a paltry 4-5% returns while exposing yourself to credit loss of 6%, not sure why they wanted to recycle capital back to debt investments.

Based on the cash used to buy equity were in the China market and I am surprised YZJFH has moved relatively little money into Singapore despite being able to do so.

[weijian]

https://links.sgx.com/FileOpen/YZJFH%20A...eID=900534

Powerpoint: https://links.sgx.com/FileOpen/YZJFH%201...eID=900536

While YZJFH has recovered some principal from its NPL (Powerpoint Page 8), a new project has fallen into the NPL category with 29% ECL.

What's remarkable is some performing loans have moved to underperforming loans and YZJ has recycled a significant portion of its cash received back to China debt instruments (classifying it as performing loan) with a 6.2% expected credit loss. With the DI generating $31 million is interest on a back of $1,323 million, its a paltry 4-5% returns while exposing yourself to credit loss of 6%, not sure why they wanted to recycle capital back to debt investments.

Based on the cash used to buy equity were in the China market and I am surprised YZJFH has moved relatively little money into Singapore despite being able to do so.

Hi CY09, a couple of notes:

(1) NPL generates no interest. Hence the gross amount of 1.323bil should not be used as the denominator to calculate the interest rate. Instead, we should use only performing + underperforming gross amounts. Since balance sheet items are just snap shots, I have used the starting/closing balances to do a rough calculation of the denominator and interest rates:

1H25 interest rate = (50.5/(avg of 1H25 and end FY24))*2 = (50.5/777)*2 ~ 13%
1H26 interest rate = (31.2/(avg of 1H26 and end FY25))*2 = (31.2/665)*2 ~ 9.5%

So while avg DI balances have dropped as Mgt explained, avg interest rate seems to have dropped too. The drop does align with the general interest rate drop in China, although it may still not commensurate with the underlying default risk.

(2) I don't think there is a new project added to NPL. Rather, FY25 ppt probably had a typo - 1H26 ppt (pg8)'s Project J (New project in 4Q25) is the same project as FY25 ppt (pg9)'s Project G (New project in 4Q25). Both 1H26 and FY25 each shows the same number of a total of 10 NPL projects. Each project's value for 1H26 is slightly higher than FY25 due to translation differences as RMB (functional currency) appreciated against SGD (presentation currency)

(3) 1H26's performing DI and underperforming DI are at 466mil (end FY25:459mil) and 189mil (end FY25:216mil) respectively. So after accounting for 90mil net DI outflows (before currency translation gains), it doesn't suggest there is any significant transfer from performing DI to underperforming. And looking at how performing DI remains relatively unchanged, the net outflow of 90mil is mainly contributed by some NPL resolution (documented in ppt's slide8) and underperforming loan reduction.

(4) From the AGM in late April2026, Mgt has indicated that they see compelling opportunities in China, which is their home ground. So even though they have hired an investment mgr for Spore, it isn't a surprise (to me at least) that little assets left China as end 30th June 2026.

[weijian]

As OPMI, the entire DI is to me, a black box since day 1. It still is. However, sometimes a black box where we have no knowledge of the number of apples and lemons inside, may still offer clues every now and then.

The first major clue came when YZJSB disposed of the legacy NPL debt at ECL=45% based its 1H23 reporting. The 2nd clue revealed itself over the next 2 years as gross DI reduced by ~45% by end FY24. Now, I would say the 3rd clue has been revealed, ie. the NPL ECL ratio increasing to 63% for end FY25. This 3rd clue is in the context of gross DI staying relatively constant YoY and the knowledge that many apples were removed from the black box in the last 2 years. So, common deduction will conclude there are more lemons relative to apples now (when it is trading at 0.5x NAV) compared to a few years ago (when it was 0.3x NAV).

Post AGM in April 2026, I made a note that 1H26 results' NPL evolution would be the next data point for my own portfolio allocation decision on YZJFH. So below are my observations:

(1) There has been some NPL recoveries which were at ~16% of net book value, and it aligned with Mgt's talk at AGM.

(2) The NPL recovery was on 2 NPL projects and the weighted ECL (expected credit loss) for the 2 of them as end FY25 was 52.6% (one was 100% impaired and the other was 18.2%). The weighted actual credit loss implied by the recovery as 1H26 was 40.9%, indicating a ~11.7% outperformance. So out of the total 10 NPL projects, the 2 recovered NPLs seem to suggest that end FY25 ECL estimates look relatively robust thus far, or might actually err on the "conservative side.

(3) The 11.7% outperformance in expected recovery translated to just under 10mil sgd. Interestingly, it paid a 1-time performance bonus of ~1.4mil which I suppose was probably relating to this 2 NPL recoveries.

[weijian]

If their hurdle rate for listed equities is 4.5%, simply repurchasing their own shares would easily clear that hurdle at current valuations. 

To be fair, they might want >4.5% total return AND diversification. But still, you need to be really into diversification to justify this capital allocation decision.

Hi Corgitator,

While (ex) Chairman Ren has left the show (and unfortunately did not turn up at the AGM), but CFO Liu Hua was part of the executive team that started the 200mil sharebuyback program few years ago. To recap over a period of 3 years (2022-2024), ~165mil sgd (or ~4% of equity) was spent to buy back ~11.9% of outstanding shares. Therefore, I do not think that the current Mgt team does not understand the merits of SBB.

From the AGM, the key word I got was optionality. That's a nice term but I suppose is also vague in many ways. (New) Chairwoman Liu Hua has explained that the current balance sheet has been cut by half due to the Maritime spin off and therefore not too comparable with 2-3years ago. They also believe there are potential good onshore opportunities where they can have "meaningful management control" (M&A and restructuring) and so I think I can appreciate that, especially I do not have the ability to see what they (believe) they are seeing. So the key questions are really if this new team have good vision? And then if their vision is right, are they able to capitalize on that?

On another note, the avg price/share paid by the FY22-24 SBB was 165mil/470mil shares ~ 35cents. In the spin-off, YZJFH took 47% of equity and so adjusting for the spin-off, we are talking about split adjusted price of 0.47*35cents ~ 16.5cents. So I suppose if I were them, I would think that history has not repeated itself sufficiently for SBB to get compelling.

Since early Sept, YZJFH started its first SBB post demerger and month-to-date, has spent ~800k sgd to mop up ~4mil shares. The SBB prices are at ~20cents (and less) and translates to just slightly more than a 60% discount to its 1H26's NAV of 53cents.

While Chairwoman Liu and her team had resisted SBB in April's AGM but it does seem that at prices that are ~15-20% lower than the AGM period, it becomes compelling enough.

When the facts change, she changes her mind I suppose!

Latest SBB on 11th Sept: https://links.sgx.com/1.0.0/corporate-an...4c32758545

[CY09]

Interestingly while share prices have remained at the prices the company did its buy backs, YZJFH has paused its SBB for a few market days.

Today, share prices of the company saw a sell down of a few million of shares bringing prices down by a few bid. It will be intersting to see how many SBB YZJFH does. Even if the company does a buyback of 2 million shares, there is adequate sell volume to barely move the needle up.

[Big Toe]

The SBB margin of safety currently is lower than before the split. Even though most of the writedowns have been done on the debt investment portfolio, these are tier 2-3 cities we are talking about(mostly concentrated on tier 3 or lower). Recovery is not in sight for these cities yet. Until I can somewhat sense that prices of these cities are stable, it is difficult to see how its business will be able to recover meaningfully.

The share price currently is undervalued for sure. But for me personally, not undervalued enough.

[CY09]

No sharebuyback today. I am surprised, with the share price at 52 week low, I would have used this opportunity to send a message to the market that mgmt thinks it is undervalued.

What's interesting as well (from Big Toe's comment) is that the impairment % set by YZJFH has been increasing every year. This results in the credit allowance growing for the debt investments.

[weijian]

A few thoughts on the current SBB that started in early Sept2026:

No more ex-Chairman Ren style of loud blazing Compared to the previous SBB where ex-Chairman Ren came up with press releases and a warchest number to be spent, Chairwoman Liu is considerably low-key. The same style of loud blazing is now happening at sister company YZJMH instead...and that's just Chairman Ren over there. Personally, my preference for Mgt's SBB style is to be low key - no press releases, no warchest targets and use no fancy words like "value realization". The goal is to buy as cheap as possible and much more when markets turn volatile, with Trump's 2025 Liberation Day the most recent example - and a low key style aids these goals as much as possible.

Compared to previous SBB in terms of "value" (purely based on share price alone and ignoring fundamentals) The avg SBB price was ~35cents and adjusted for the split, the equivalent avg price is ~16.5cents. The previous SBB happened between a period of 2022-2024 with much front loaded in FY22 (~60%). IIRC, the range of SBB share prices were between ~30-50cents or 35 +15 /-5 cents. Adjusting for the split, it would be 16.5 +7 /-2.5cents  --> 14cents to 23.5cents if we are expecting some sort of de ja vu.

The trend of the current SBB Since balance sheet is now much smaller due to the split + NPL impairments, we can expect that the pace of SBB is going to be more measured and less frequent than the previous SBB. I am less inclined to think that SBB should be used as a signaling to markets that share price is undervalued. To me, SBB is equivalent to buying a piece of one's own business/assets and so has the effect of allowing the company to "enjoy" the earnings/FCF that comes with it. The resultant effect is that future EPS will increase. If business earnings improves in future, the past SBB will eventually be seen as a great value buy and become a strong ballast for a future re-rating. But unfortunately, this may not be very applicable for YZJFH as Mr Market seldom value it via earnings. But nobody knows anything, isn't it? (especially about the future)

[CY09]

While the balance sheet has become smaller, the company still maintains a substantial cash position. My concern is how this cash is being deployed. A significant portion appears to be retained as RMB cash or allocated to debt investments, where the credit allowance as a percentage of performing DI has been increasing [SG$187 million in cash were deployed to DI]

I would be more supportive if the excess cash were deployed into Chinese equities or dividend-paying investments with attractive risk-adjusted returns. However, given the current valuation, I believe one of the most effective uses of the company’s cash would be to repurchase its own deeply discounted shares. This could provide immediate value to shareholders while reducing the share count and improving per-share metric

*hope YZJFH continues its daily purchase of 1 million shares buyback non stop