As one of the major international financial centres in the world, Hong Kong's financial services industry is one of the most important economic pillars. Over the past few years, the corporate income market engaged in the financial services industry in Hong Kong has been expanding, with more and more participants ranging from large-scale bank insurance to small and medium-sized wealth management institutions. Yibo Financial Holdings Limited (hereinafter referred to as "Yibo Financial") is one of them.

Zhitong Financial APP observed that ebo Financial recently submitted an application for listing on the main board to the Hong Kong Stock Exchange, with Maisheng Capital Co., Ltd. as the exclusive sponsor, while Yibo Financial applied for listing in June last year, which is the second time the company has sought to list.

EBo Financial is a financial services provider in Hong Kong that provides a wide range of financial and wealth management services to clients (mainly high net worth individuals, enterprises and financial institutions). Its business includes sales and advisory services, asset management services and other financial services. In terms of income, the company's main business is sales and consulting services, but the proportion of income from asset management services has gradually expanded in the past two years, and the prospectus also emphasizes that the company will continue to strengthen the development of asset management services.

Trillion-level market with many participants

Financial services are an important pillar of the Hong Kong economy, and its market is huge. Hong Kong's financial services industry is generally divided into banking, insurance and other financial services. From 2014 to 2018, the size of Hong Kong's financial services market increased from about HK $1.4 trillion to HK $1.67 trillion, a compound annual growth of 4.4 per cent, and is expected to grow to about HK $2,000bn by 2024. In the past five years, the insurance industry has developed the fastest, with a compound annual growth rate of 6.7%, followed by the banking industry, with a compound annual growth rate of 5.7%, and other financial services at a compound annual growth rate of 1.6%.

Zhitong Financial APP learned that other financial services leaders in Hong Kong, including HSBC Holdings PLC, JPMorgan Chase & Co, Bank of China International, Haitong International, Goldman Sachs Group Group, Citigroup Inc and so on, are all leaders in the industry. In comparison, eBO Financial is significantly less competitive, with the Group's market share in other financial services divisions in Hong Kong less than 0.2 per cent in 2018.

About 1/3 of other financial services come from financial and wealth management companies, with a market size of about HK $211.3 billion in 2018. On the other hand, the market rules of financial and wealth management are more concentrated, with the market share of the top ten participants about 35%, 40%, and more than 3000 participants. The competition is very fierce.

Financial and wealth management includes sales and advisory services, asset management and fund consulting services, of which the main business sales and advisory services of eBO Finance can be further divided into three categories: Securities trading and brokerage services, investment and corporate financing advisory services, placing and reimbursement services. According to the value chain analysis, upstream investors include professional individual investors, professional institutions and corporate investors, as well as non-professional investors.

In 2018, in Hong Kong's financial and wealth management industry, securities trading and brokerage business accounted for 35.1%, asset management and fund consultants accounted for 34.3%, and placement and reimbursement accounted for 19.2%.

From 2017 to 2019, Yibo financial sales and consulting services accounted for 87.7%, 55.9% and 59.5% respectively, while asset management services accounted for 3.9%, 19.6% and 27.4%, respectively. As of September 2020, sales and consulting services accounted for 61.7%, and asset management services accounted for 25%. It can be seen that the group's income from asset management services has been increasing in recent years, which is also consistent with the changes in the size of the entire market. Including its business strategy, it also specifically mentions the need to expand the asset management business, including supporting the new fund and expanding the asset management team and increasing the scale of asset management in the long run.

The fundamentals are stable and the growth is average.

Although Yibo Financial grows in a trillions-level market, the growth rate of the group's performance in the past few years is relatively mediocre because of the large number of participants and the group's lack of head advantage.

Zhitong Financial APP observed that the earnings of eBO Financial increased by 3.1 per cent from HK $104 million in fiscal year 2017 to HK $107 million in fiscal year 2018, and by a further 13.8 per cent to HK $122 million in fiscal year 2019 and from HK $82.4 million in nine months in 2019 to HK $103 million in nine months in 2020. The company's profits in fiscal years 2017, 2018 and 2019 remained stable at HK $30.9 million, HK $31.5 million and HK $29.9 million respectively, with an increase of 38.4% from HK $19.1 million in 2019 to HK $26.4 million in 2020.

From the data, we can see that the company's performance is relatively stable, but the compound growth rate of earnings from 2017 to 2019 is only 8.3%, and the net profit has even declined. during the period, the net interest rate fell from 29.8% to 24.5%. The company's performance growth performance is also very mediocre.

However, there are some risks under the seemingly stable performance. In terms of business, revenue from sales and consultancy services shrank from 91 million to HK $59 million in 2018, while revenue from asset management services increased from 4 million to 21 million in the same period.

Zhitong Financial APP observed that the sales and consulting business mainly includes placing commission, of which securities placing commission is the main source. The decline in revenue was mainly due to a decrease in the amount of bonds and equity placed by client A from HK $408 million to HK $92.7 million in 2018, resulting in a drop in commission income from placing securities to HK $342 million from HK $550 million in 2017.

According to the prospectus, from 2017 to 2019, the business of the company's five major customers accounted for 87.1%, 64.4% and 57.7% of the total income respectively, and the largest customer accounted for 47.6%, 32.6% and 24.2%, respectively. it can be seen that the proportion of revenue from the five largest customers and the largest customers decreased significantly in 2018, which also diluted the business risk to a certain extent, but so far the revenue contribution of the top five customers still reached 60%. The risk of customer concentration still exists.

It is also worth noting that after the previous records, the company provided for the residential development project in Melbourne, Australia, under which in October 2020, the company sought funds of up to HK $84.8 million per month for sales and consulting clients. In November, the company made a profit of about HK $25.74 million from investing in Yat-sen depositary receipts, a listed company with new stocks, which it plans to use for its operations. As of September 2020, the company had cash and bank balances of about HK $36.31 million, partly complementing the scale of cash flow.

Listing will further expand the scale of cash and improve the business environment, but it is difficult to change the lack of horizontal competitiveness and low business growth of Yibo Finance.