Result first take: 3QFY23 earnings result above market expectation with strong net investment income
- 3QFY23 net profit increased 30% YoY to HK$2.95bn, slightly above market expectation.
- Revenue increased 18% YoY to HK$5.1bn in 3QFY23, thanks to strong net investment income of HK$360mn from corporate funds, compared to a 3QFY22 loss of HK$46mn
- In the near term, market uncertainties such as geopolitical tension, property-related concerns, and high interest rates will continue to impact the market sentiment in HK
- However, we expect risk appetite will gradually improve in 2024 with roll out of more policy measures in China and peaking of the interest rate hike cycle, providing clearer direction for investors in longer term
- We recommend BUY and TP is currently HK$349
3QFY23 Net profit increased 30% YoY to HK$2.95bn, slightly above market expectation with strong net investment income. The surprise comes from the strong net investment income from corporate funds of HK$360mn, compared to a 3QFY22 loss of HK$46mn. It is driven by the higher investment income from internally-managed Corporate Funds, and lower fair value losses on the externally-managed investment funds of HK$5mn. Revenue increased 18% YoY to HK$5.1bn also thanks to the increase in net investment income from margin funds and clearing house fund. Average daily turnover was at HK$98.4bn, similar to 3QFY22. EBITDA margin was at 74%, 4% higher YoY also thanks to the improvement in corporate items’ margin.
Average daily turnover recorded HK$107bn YTD, dropped c.12% comparing to the same period last year. Market sentiment has remained fragile since the National Day Holiday, with escalating geopolitical tensions. In October MTD, the ADT stands at HK$74bn, the lowest on a monthly basis since December 2018. In the short term, a robust rebound in ADT seems unlikely, as market uncertainties such as geopolitical tension, property-related concerns and high interest rates, have yet to be resolved. Looking further ahead, we anticipate an improvement in risk appetite in 2024, driven by the peaking of the interest rate hike cycle, the implementation of economic stimulus measures in China, and the attractive valuation of Hong Kong stocks supported by strong earnings growth forecasted for 2024. We recommend BUY and TP is currently HK$349.