Main points of investment
Pursue the value investment principle to promote internal governance and get ready for the great era of capital management: 1) as the first asset management company to be listed on the main board of the HKEx, Wai Li adheres to the concept of value investment and actively captures opportunities in Greater China and Asia. By enriching its products and channels, Huili highlights its brand influence in its global business. 2) as the actual controller of the company, Xie Qinghai continues to promote the succession of senior executives and the reserve of talents. Hui Li's early partners maintained absolute control over the company, made succession plans for the chairman of the board and the chief executive, and optimized the age structure and incentive plan of the workforce. 3) the asset management market in mainland China has a large potential dividend. The transformation of residents' asset allocation and the reform of capital market will contribute to the development of China's wealth management market, and the benefit management in the industrial chain will benefit.
Located in the tuyere of the industry chain of the equity market, Hui Li has a high upper limit of profit space: 1) the operating performance of Hui Management is greatly affected by market trends. In 2020, the company's fee income was HK $2.561 billion, + 59.70% compared with the same period last year, and the net profit was HK $1.379 billion and + 168.69%, of which the performance fee increased from HK $55 million (2019) to HK $1.468 billion (2020), contributing a large increase to the performance of Huili Group. The annualized total management fee of Hui Li has reached 1.03% (2020), which has a large room for adjustment, and the rate of return of its fund products is in the forefront of the industry. 2) Huili pays attention to the layout of asset management strategy, which involves the new economy and the traditional blue chip sector. At the end of 2020, the scale of factoring returned to US $14.166 billion, an increase of US $2.322 billion over 2020H1. The strategy of beneficial management and management is "fixed income + long position".
Mainly, and the proportion of fixed-income assets has increased significantly. Ample US dollar liquidity and Hong Kong equity valuation repair will boost the expansion of factoring management. The trend of retail investment management is obvious, and the proportion of mainland customers' capital management scale has reached 10% (2020), which has become a new driving force for the increase of factoring capital management scale. 3) in the profit model, Huili relies on management fees to obtain stable income, and shows high performance flexibility through performance fees.
With the increase of the proportion of fixed-collection asset management, the high elasticity will gradually weaken, which will help to alleviate the cyclical performance of factoring. With the improvement of the discourse power of the distribution channel, the proportion of the management fee rebate given by the benefit to the distribution channel gradually increases.
Whilst maintaining the core competitiveness, Hui Management explores new growth points from the strategy and market: 1) it strictly implements the principle of cost control, and the fixed cost coverage rate is maintained at 2 times the level for a long time. The benefit manager runs the risk management system into the core business operation, and further improves the risk management system by formulating additional regulations on the basis of the Hong Kong Securities Regulatory Commission's standards and gradually quantifying risk reporting. 2) solvency and asset structure match each other, and benefit management is actively distributed in alternative investment. The solvency of factoring has been maintained at more than 4 times, and the composition of assets is dominated by cash and investment, accounting for 61% of the total in 2020, with strong room for appreciation. Huili's alternative investment strategy is mainly focused on unlisted securities, which accounted for 87% of the investment by 2020.
3) the benefit manager arranges the mainland business from the two dimensions of license and talent. Hui Li has obtained 11 mainland business licenses and qualifications and is currently actively seeking the qualification of public offering fund manager in the mainland. Hui Li continues to promote the construction of the mainland staff team and enhance the influence of investment and research in the mainland market. in 2020, it has a total of 39 employees in the mainland. The asset management scale of the mainland has great potential for improvement, and its A-share listed companies have excellent performance in terms of product returns, with a degree-based return of more than 11% from its inception to this year.
Profit forecast and investment rating: 1) We expect the company's revenue from 2021 to 2023 to reach HK $2.14 billion, HK $2.44 billion and HK $2.66 billion, of which fee income will reach HK $2.05 billion, HK $2.35 billion and HK $2.57 billion (compared with the same period last year). 2) We estimate that the company's net return profit in 2021-2023 is HK $1.06 billion, HK $1.25 billion and HK $1.33 billion, corresponding to PB 2.01x, 1.86x and 1.75x, respectively, and PAUM is 8.55% x, 7.49% x and 6.75% x, respectively.
Optimistic about the company's long-term development prospects, covering for the first time, giving a "buy" rating.
Risk tips: 1) the performance of the capital markets in Hong Kong and the mainland is not as expected; 2) there is uncertainty in the Fed's monetary policy; 3) there are structural changes in corporate equity; 4) retail investment aggravates the instability of the scale of assets under management; 5) the process of applying for mainland business licenses is blocked.