Source: Beast Finance Author: Beast Finance
Monster Finance learned that [Huaying Securities], an Internet Hong Kong-based US stock broker from Hong Kong, has recently submitted a prospectus to the US Securities and Exchange Commission (SEC), applying for IPO listing on Nasdaq, with the stock code (SWIN). Huaying Securities plans to issue 3 million Class A shares at the proposed middle price of US$5.00 per share through this Nasdaq IPO listing and raise US$15 million.
No existing or potential new shareholders have expressed interest in purchasing shares of Huaying Securities at the IPO price.
Assuming that Huaying Securities successfully listed on the Nasdaq IPO, the market value of the company at the time of IPO (excluding underwriter options) will be close to 61.5 million US dollars.
Huaying Securities does not currently plan to pay a dividend and retains future earnings to reinvest back into the business to meet its growth and working capital needs.
As for valuation expectations, management is asking IPO investors to pay an enterprise value/revenue multiple of 29.35 times.
Business
Huaying Oriental (Asia) Holdings Co., Ltd. Solowin Holdings (referred to as Huaying Securities) is a comprehensive financial license broker, a licensed corporation recognized by the Hong Kong Securities Regulatory Commission (central number: BIF175), a participant in the Hong Kong Stock Exchange and Clearing House, Holding a Type 1/4/6/9 license issued by the Hong Kong Securities Regulatory Commission (SFC), it is qualified to provide securities transactions, provide advice on securities, provide advice on corporate financing, and provide asset management.
Huaying Securities focuses on providing customers with one-stop investment services. Through the one-stop digital financial service platform "Solomon Pro" developed and operated by the company, the company provides customers with 24/7 electronic account opening, online transactions, market conditions, and news. Information, social interaction and other services. By providing the best user experience, the lowest transaction cost, the fastest execution speed, and the best transaction price, we provide customers with professional trading solutions to maximize their trading profits and return on investment.
Huaying Securities mainly provides one-stop financial services for Chinese investors who are interested in purchasing securities listed on Hong Kong stocks, US stocks, and A-shares through its subsidiary Solomon JFZ in Hong Kong.
The management of Sino Win Securities is led by CEO Mr. Shing Tak Tam, who has been with Sino Win Securities since 2019 and before that Shing Tak Tam worked in various securities firms in Hong Kong.
The main products and services of Huaying Securities include:
(1) securities brokerage business
(2) investment consulting services
(3) corporate financing services and asset management services
(4) pre-listing and IPO services in Hong Kong
Huaying Securities mainly seeks clients among individual and institutional investors inside and outside of China. As of September 30, 2022, Huaying Securities has more than 19,000 users and more than 1,500 active clients who have assets in Huaying Securities' trading accounts.
As of September 30, 2022, Huaying Securities has received US$4.8 million in investment from investors including Vulcan Worldwide Holdings Limited, Gemini Asia Holdings Limited and FORTUNE DYNASTY GLOBAL Limited.
Industry Overview
According to the 2022 market research report of the Hong Kong Trade Development Council, as of December 31, 2021, the Hong Kong stock market ranks fourth in Asia and seventh in the world.
As of the end of 2021, the total size of the Hong Kong stock market is approximately US$5.4 trillion.
The Hong Kong stock market is also the world's fourth largest market for IPO financing, raising US$42.3 billion through IPOs in 2021.
As of December 31, 2021, there were 638 active exchange participants and 64 non-tradable exchange participants in the Hong Kong stock market. Since 2012, the number of participants has grown very strongly.
Huaying Securities' competitors in this industry mainly include
Futu Holdings (FUTU), Tiger Securities (TIGR), Interactive Brokers, Huasheng Securities, Xueying Securities, etc., and some other small-scale Internet Hong Kong and US stock brokers.
Financial Situation
According to the IPO prospectus, Meng Beast Finance sorts out the financial performance of Huaying Securities as follows:
(1) The income is highly concentrated in a small number of customers, and its income fluctuates greatly, and it has dropped sharply in the most recent reporting period. For the six months ended September 30, 2022, Huaying Securities' income concentration was 95%, mainly from the top five customers, which is a very high proportion. If one of the top five customers is lost, it will cause Huaying Securities' revenue to dramatically drop.
(2) Growing gross profit and gross margin
(3) Decreasing pre-tax loss
(4) Unbalanced cash used in operations
(5) General and administrative expenses as a percentage of total revenue as revenue decreases (in the most recent reporting period becomes negative)
Total income: Huaying Securities' fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), and fiscal year 2022 (within the six months ending September 30, 2022) The total income is: 11.81 billion US dollars, 32.56 billion US dollars, 11.66 billion US dollars.
Gross profit (loss): Huaying Securities' fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), fiscal year 2022 (six months ending September 30, 2022) Gross profit in ) are: USD 8.29 billion, USD 18.86 billion and USD 1.16 billion.
Gross profit margin: Huaying Securities' fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), and fiscal year 2022 (within the six months ending September 30, 2022) The gross profit margins are: 70.19%, 57.92%, and 99.49%.
Profit (loss) before tax: Huaying Securities’ fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), fiscal year 2022 (six months ending September 30, 2022) The pre-tax profits of the month) were: 6.45 billion US dollars, 9.79 billion US dollars, 2.000 million US dollars.
Comprehensive income (loss): Huaying Securities' fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), fiscal year 2022 (six months ending September 30, 2022) The comprehensive income within) are respectively: USD 6,490 million, USD 9,840 million, and USD 2,060 million.
Operating cash flow: Huaying Securities' fiscal year 2021 (ending March 31, 2021), fiscal year 2022 (ending March 31, 2022), fiscal year 2022 (within the six months ending September 30, 2022) The operating cash flows are: 110.46 billion U.S. dollars, 57.38 billion U.S. dollars, and 16.15 billion U.S. dollars.
As of September 30, 2022, Huaying Securities had $638,000 in cash and $6.1 million in total liabilities.
Huaying Securities has negative free cash flow ($5.2 million) for the 12 months ended September 30, 2022.
The intermediary agency
EFHutton, division of Benchmark Investments, LLC is the sole underwriter of Huaying Securities’ Nasdaq IPO listing. The average return rate of IPOs underwritten by the company in the past 12 months since the IPO has been negative (58.5%). That was the lowest performance of any major underwriter for the period.
The auditors of Huaying Securities’ Nasdaq IPO listing are: WWC, PC
Huaying Securities’ Chinese lawyers for this Nasdaq IPO listing are: Cinda Law Firm, Liu Lin Chen Law Firm, Bevilacqua
PLLC The underwriter lawyer for this NASDAQ IPO listing is: Winston & Strawn LLP