Yangzijiang

Yangzijiang: OCBC downgrades to Hold , with TP of $1.24 (from $1.21) . Cautions that YZJ remains exposed to risks from its financing business. YZJ has held-to-maturity (HTM) assets of Rmb13b , with a signficant portion comprising entrusted loans, in which an agent bank (trustee) arranges a loan between two commercial enterprises. In addition to allowing companies with idle funds to earn higher rates of interest, it may also allow stronger borrowers to borrow from banks at lower rates and lend out to weaker companies at higher rates, thereby pocketing a spread. For YZJ, 38% of borrowers in its HTM assets were in real estate, 30% were in manufacturing, and 25% in "others". It is hard to determine how deep an understanding YZJ, a shipbuilder, has in real estate and other unrelated industries.