After a year of continuous downward and bottom adjustment, Baoxin Financial (01282) shares have recently overfallen and rebounded, rising nearly 165% in one day, and the unexpected performance has attracted a lot of attention.

Since the share price hit an all-time low of HK $0.024 on May 12, Baoxin Financial's trading volume has been very light for quite a long time, until a few days ago, when it suddenly got a precise bottom of the capital, it started an amazing increase. Data from the Stock Exchange show that at present, southward funds hold 35.12% of Baoxin Financial, with a cumulative increase of about 17 percentage points.

Since the opening of the Hong Kong Stock Exchange, mainland investors have become important participants in the Hong Kong stock market. As of June 17, among the shares of Hong Kong stocks, the overall shareholding ratio of southbound funds to Hong Kong stocks was 9.14%, and 81 stocks held more than 20% of southbound funds. On June 17, the net inflow of southward capital totaled 2.595 billion yuan, and Baoxin Financial's daily turnover reached 578 million yuan, with a turnover of 10.234 billion yuan, in sharp contrast to its millions during the downturn.

However, behind the surge, share prices have fallen somewhat. On June 20, Baoxin Financial fell more than 20% in intraday trading, with a trading volume of 9.663 billion. As of press time, trading volume ranked first among Hong Kong stocks and third among Hong Kong stocks.

Judging from the weekly gains of Hong Kong stocks from June 13 to June 17, funds in the Hong Kong stock market are particularly fond of small market value stocks and "fairy stocks" with low share prices. Stocks with a market capitalization of less than 1 billion, such as Rongke Holdings (02323), Qiantang Holdings (01466) and Titan Zhihua (00872), have become hot targets for capital speculation, with gains of more than 50 per cent during the week.

So, what is the intrinsic value of Baoxin Financial, which has suddenly experienced "ups and downs"?

Baoxin Financial, which is mainly engaged in financial services, property investment and development, automation and securities investment, was listed on the main board of the HKEx in December 2010. The company holds securities and futures trading, corporate financing, asset management, wealth management, money lending and precious metals trading licenses, and can provide comprehensive financial services in Hong Kong and the mainland; the property investment and development division has expanded rapidly in recent years, operating a number of property projects, including commercial complexes, high-end residential and hotels, commercial apartments and commercial office buildings. Is one of the leaders of automation equipment distribution in China, the subsidiary Jiali Technology Co., Ltd. focuses on the sales and technical services of high-end intelligent manufacturing equipment, including SMT and semiconductor production equipment, and provides equipment leasing, financing and other supporting services.

In 2021, the company's performance picked up somewhat, achieving a continuing business income of HK $2.615 billion, an increase of 66.2% over the same period last year; a loss attributable to shareholders of HK $189 million, a year-on-year reduction of 13%; and a basic loss of HK0.60 cents per share. During the year, the company's gross profit increased by about 28.0% to about HK $433 million, while the gross profit margin decreased to 16.6%. According to the financial report, the change is mainly due to an increase in the scale of property sales transferred to customers this year compared with 2020.

From the perspective of business structure, the growth of performance is mainly driven by property business and automation business. Of this total, the property investment and development business earned HK $1.768 billion, accounting for 67.6% of revenue, up from 51% in 2020, generating a profit of HK $98 million, turning a loss into a profit as a whole.

According to Zhitong Financial APP, at present, the company has implemented three property investment and development projects in Shenzhen and Ganzhou, including commercial complex, high-end residential, hotel, commercial apartment and office building. As at 31 December 2021, the company's investment property was approximately HK $3.63 billion.

The automation business earned HK $794 million, an increase of 45.58% over the previous year, accounting for about 30.4% of revenue, mainly due to the economic recovery after the epidemic and the resumption of factory production.

The financial services business suffered a sharp decline in revenue in 2021, falling about 58.4 per cent to HK $103 million from HK $247 million in 2020, with a revenue share falling from 15.7 per cent to 3.9 per cent and an operating loss of about HK $182 million. Of this total, the securities investment business grew slightly in 2021, with revenue rising from HK $22 million to HK $49.6 million, accounting for only 1.9 per cent of total revenue.

In terms of liquidity, as of December 31, 2021, the group's total liabilities decreased by 84.1 per cent to about HK $3.55 billion, and the asset-liability ratio (calculated by borrowing divided by net asset value) decreased significantly to 31.7 per cent; the working capital reflected by net current assets is about HK $1.765 billion, with a current ratio of about 1.5. At the end of 2021, Baoxin Financial's cash and cash equivalents were about HK $730 million, compared with HK $1.724 billion in 2020.

According to Zhitong Financial APP, Baoxin Financial has been reduced several times by Yao Jianhui (Chairman and CEO), executive director of Baoxin Financial since the beginning of 2022. In mid-May, Yao Jianhui reduced his holdings of the company for two consecutive days, accumulatively reducing about 5.9 billion shares, from 40.57% to 21.77%. In June, Yao Jianhui again reduced his holdings of 74 million shares, involving an investment of about HK $27.084 million. Yao Jianhui said that the proceeds from the sale were intended to be used to repay loans to financial institutions owed by the companies under his control.