YANGZIJIANG Shipbuilding's directors have endorsed the proposed spin-off of the group's investment segment for a separate listing on the Singapore Exchange's mainboard.

In a bourse filing on Friday (Apr 1), the company stated that the directors are of the opinion that the spin-off is in the group's "best interest", and have recommended that shareholders vote in favour of it at an upcoming extraordinary general meeting on April 18.

The directors had considered the terms and the rationale for the proposed spin-off, and concluded that its tangible economic benefits to shareholders are "substantial, quantifiable and clearly achievable".

As its shipbuilding business has driven most of the growth of the group since the company's listing, the move will allow for the value of the separate businesses and assets to be "better reflected" and "unlocked", thereby reducing any possible conglomerate discount, it noted.

The board also believes that maintaining the current listing structure would be "detrimental" to shareholders, as the group's business is capital-intensive in nature and its ability to grow and develop depends largely on capital spending.

Currently, any funding required of the investment arm is borne by the group, so the group has to divert excess capital resources from the shipbuilding business to fund the development and expansion needs of the investment segment, it said.

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The spin-off will make it possible for the 2 proposed entities to be analysed and valued on their own respective merits, risks and strategies, it added.

Furthermore, a proposed spin-off would grant the 2 entities greater autonomy to better focus their attention and resources on their respective core businesses and oversee the strategies, growth opportunities and operations of each group more effectively, without the constraints of a conglomerate structure, it said.

"This will also enable both groups to react to market demands faster and more effectively, through a more efficient allocation of capital and resources," it added.

The company, meanwhile, released a pro forma evaluation of the financial effects of the proposed spin-off, which would constitute a major transaction under Chapter 10 of the Singapore Exchange Securities Trading listing manual, based on its FY2021 financials.

After the distribution, the counter's net tangible assets per share would drop from 9.0845 yuan (S$1.96 ) to 3.9868 yuan. Its net asset value per share would fall from 9.1562 yuan to 4.0586 yuan. Earnings per share would also fall from 0.9579 yuan to 0.5035 yuan.

Yangzijiang said, however, that there is no impact on profit or loss since, from an accounting perspective, it is considered to be a distribution rather than a disposal.

The shares will be distributed to the entitled shareholders in proportion to their shareholding in the company as at the books closure date, it pointed out.

Shares of the counter BS6 : BS6 0%closed up 0.7 per cent or S$0.01 at S$1.54 before the announcement on Friday.