Yangzijiang Financial up 9% after share buyback proposal

Shares of Yangzijiang Financial Holding jumped by more than 9 per cent yesterday after the company on Monday called for an extraordinary general meeting (EGM) seeking shareholders' approval to adopt a share buyback mandate.

The EGM, which will be held on June 8, comes shortly after Yangzijiang Financial was listed on the Singapore Exchange (SGX) on April 8 at 69 cents a share. However, the shares tumbled in value, reaching a low of 39 cents last Thursday.

The company's shares closed at 47.5 cents yesterday, rising by four cents, or 9.2 per cent.

When it listed, chairman Ren Yuanlin told The Straits Times that the company would be prepared to buy back its shares should the market fail to value the business correctly.

Analysts at OCBC Securities said in a May 4 note to shareholders that one reason for the persistent selling of the stock since it went public is that the company appears to be significantly overvalued.

Yangzijiang Financial is a spin-off from Yangzijiang Shipbuilding, which has been trading on the SGX mainboard since 2007 and is a component stock of the Singapore Straits Times Index.

The separate listing of Yangzijiang Financial, which earns income from bond and private equity returns as well as fees from funding small companies in China, was to allow investors to enjoy fairer valuations for each business.

The company is now seeking to buy back up to 10 per cent of its issued shares, with the objective of increasing shareholder value and improving its return on equity.

"A share buyback made at an appropriate price level is one of the ways through which the return on equity of the group may be enhanced," Yangzijiang Financial said in its circular on Monday.

According to the circular, the purchase price to be paid for a share must not exceed 105 per cent of the average closing market price of the shares.

Should the shares be purchased under an off-market arrangement, the purchase price must not exceed 120 per cent of the average closing market price of the shares.

Yangzijiang Financial added that adopting the mandate will give its directors the flexibility to undertake share buybacks at any time.

Mr Ren, who founded Yangzijiang Shipbuilding, currently holds a 26.1 per cent stake in Yangzijiang Financial. Yangzijiang Shipbuilding is now being run by Mr Ren's son Ren Letian.

If approved, the mandate will begin from the day of the vote and be in force till the date of the next annual general meeting, when the share buybacks are carried out to the full extent mandated, or when the mandate is revoked by shareholders in a general meeting.