On March 15, BofA issued a research report, maintaining a "buy" rating on FUTU with a target price of $62.8.
The following are the main points:
1.The overall profit in 4Q23 did not meet expectations, but the basic trend is solid.
(1) Reasons for Performance Decline:
Diminished Trading Activity: A significant factor contributing to the downturn was the reduced trading velocity, primarily driven by the weakness in the Hong Kong market and decreased turnover of key U.S. technology stocks. Investors seemingly adopted a buy-and-hold strategy rather than engaging in frequent trading to capitalize on market rallies.
Decreased Average Idle Cash Balance: The drop in daily average idle cash balance also negatively impacted the company's performance, effectively lowering its overall financial metrics.
(2) Robust Underlying Growth Momentum:
Strong Growth in New Paying Clients: Despite disappointing overall financial figures, Futu demonstrated remarkable capacity for customer acquisition as it added 59,000 new paying clients in Q4.
Steady Increase in Client Assets: Net asset inflows were notably robust across all regions, surpassing the anticipated HKD 47.7 billion, indicating sustained investor engagement and asset accumulation within the platform.
(3) Company’s Share Repurchase Program Reflects Confidence:
Futu's announcement of a USD 500 million share repurchase program underscores the company's confidence in its long-term intrinsic value and demonstrates its commitment to efficient capital allocation.
2.Sustainable Growth Outlook in 2024: Futu's Market Deepening & Emerging Market Push via CAC Control & New Products
(1) New Paying Client Targets: For FY2024, Futu ambitiously targets adding 350,000 new paying clients, exceeding optimistic forecasts.
(2) Customer Acquisition Cost (CAC) Management: Futu projects a 10%-20% YoY decrease in CAC in 2024, benefitting from Japan's regulated CAC cap and utilizing brand recognition established in Singapore to reduce costs in the Malaysian market.
(3) Market Penetration Strategy: In Q1 2024, Futu Securities will introduce local Japanese stock trading services, extending this offering to Hong Kong and Singapore clients in Q2, aiming to diversify service provisions and attract a broader range of investors.
Investment Recommendation:Maintain Buy Rating.
In light of favorable overseas market dynamics and untapped potential of upcoming product launches, BofA uphold our “Buy” recommendation for Futu Securities despite near-term financial softness, as these elements are deemed central to propelling the company's long-term growth trajectory.
Risk:
Stricter-than-expected regulations.
Large US/HK market correction.
Intensified competition.