Yangzijiang Financial Unlocks Value by Divesting Treasury Shares, OKP Holdings Poised to Capitalize on Singapore’s Construction Boom

Lim & Tan Securities | 01 April 2025

Yangzijiang Financial: Unlocking Value through Strategic Divestment

Yangzijiang Financial has announced that it has entered into two separate share sale and purchase agreements to divest its entire treasury shareholding of 193,527,600 ordinary shares at S$0.72 per share, amounting to total gross proceeds of S$139.3 million. The company originally repurchased these shares at an average cost of approximately S$0.34 per share, effectively realizing more than double the historical acquisition cost and unlocking over S$70 million in value.
The Proposed Sale reflects a strong endorsement of Yangzijiang Financial’s strategic direction and long-term value creation in maritime-related investments. The participation of two separate entities, each involving a different group of one investor and three senior executives of the Group, underscores the confidence in the company’s growth potential.
The Group intends to deploy the net proceeds towards its core maritime investments, capitalizing on industry tailwinds driven by increasing decarbonization. In the interim, the proceeds may be temporarily allocated to bank deposits or cash management activities for capital appreciation, aligning with the Group’s prudent capital management approach.
Despite the company’s impressive 51% jump in profit to $305 million in FY2024, which was aided by the high interest rate environment and reversal of bad debt provisions, the management acknowledges that the current US and global economic environment poses challenges. Factors such as President Trump’s trade tensions, slowing US consumer spending, and recessionary/stagflationary fears could potentially reverse some of the positive levers that have benefited Yangzijiang Financial in the past.
As a result, the research team has decided to downgrade the stock from a “Buy” to a “Hold” recommendation, with valuations now appearing fair at 0.7x book, 9.2x PE, and a 4.3% yield. The Bloomberg consensus 1-year target price of 66 cents also suggests limited upside potential, as the market expects FY2025 net profit to decline 9.2% to $277 million.

OKP Holdings: Capitalizing on Singapore’s Construction Boom

OKP Holdings, with its holistic range of construction services, stands out as a prime candidate to capitalize on Singapore’s construction boom. The company’s robust order book of S$600.7 million and solid net cash position (c.63% of market cap) as of FY24 make it a compelling investment opportunity.
The research team initiates a “Buy” recommendation on OKP Holdings with a target price of S$0.93, based on a forward P/E of 8x, in line with its peers’ average. This target price represents a 21% discount to OKP’s trough P/E of 10.1x in 2016, when its previous peak earnings came in at S$14.5 million.
Key highlights:
Singapore’s construction demand in FY24 reached a record high of S$44.2 billion, and BCA has projected an even stronger year for the construction sector in FY25.
The consolidation of construction players since 2014 has left OKP as one of the surviving players with a larger share of the growing market.
OKP’s A1 construction capabilities, experience in national projects, and in-house project management expertise make it a prime candidate for ongoing and future tenders.
With a net cash position representing c.62% of its market cap, OKP is well-positioned to capitalize on the current construction upturn and secure further contracts.
Undemanding valuations, with an FY25F PE of 4.8x (FY24 ex-cash PE of 1.9x), provide a strong margin of safety.
The research team believes OKP is well-positioned to capitalize on the current construction boom and deliver record profits and potentially higher dividends in FY25.

Macro Outlook: Improving Sentiment Towards China, but Caution Remains

Global investors are seeing signs of improving sentiment towards China, though it will take more conviction for big, long-only funds to return. Factors such as the government’s measures to support the ailing property market, boost consumption, and aid private enterprises have contributed to this warming sentiment.
However, while the Hang Seng Index in Hong Kong has rebounded nearly 18% this year, investors are still looking for more evidence that this rally is not just another false start. China’s domestic stock index, the SHCOMP, has been little changed, and big pensions and long-only funds remain on the sidelines.
The integration of the Greater Bay Area, which includes the nearby Chinese mega cities of Shenzhen and Guangzhou, is expected to eventually benefit Hong Kong, as increased labor mobility and economic integration among the finance, tech, and manufacturing hubs create a combined economy worth US$2 trillion.
Overall, the macro environment remains cautious, with the US small business optimism index declining and signaling a stagflationary environment, as activity measures decline while price pressures tick up. Investors are advised to maintain a defensive asset allocation stance, as equities and credit are not priced for a higher volatility environment.