GuruFocus -
- Total (EPA:TTEF) Revenue: HKD 3.4 billion, up 30% year-over-year.
- Brokerage Commission and Handling Charge Income: HKD 1.5 billion, up 52% year-over-year.
- Interest Income: HKD 1.7 billion, up 13% year-over-year.
- Other Income: HKD 209 million, up 52% year-over-year.
- Total Cost: HKD 625 million, up 43% year-over-year.
- Gross Profit: HKD 2.8 billion, up 27% year-over-year.
- Gross Margin: 81.8%, down from 83.5% year-over-year.
- Operating Expenses: HKD 1.1 billion, up 21% year-over-year.
- Income from Operations: HKD 1.7 billion, up 31% year-over-year.
- Operating Margin: 50.4%, up from 49.8% year-over-year.
- Net Income: HKD 1.3 billion, up 21% year-over-year.
- Net Income Margin: 38.4%, down from 41.2% year-over-year.
- Effective Tax Rate: 15.3%.
- Total Client Assets: HKD 693 billion, up 48% year-over-year.
- Total Trading Volume: HKD 1.9 trillion, up 17% quarter-over-quarter.
- Special Cash Dividend: USD 0.25 per ordinary share or USD 2 per ADS.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Futu Holdings Ltd (NASDAQ:FUTU) reported a 138% year-over-year increase in net new paying clients, reaching a total of approximately 2.2 million paying clients.
- Total client assets grew by 48% year-over-year and 20% quarter-over-quarter to HKD693 billion, driven by strong net asset inflow and appreciation of client stock holdings.
- The company launched several new product offerings, including a US stock dividend reinvestment plan in Hong Kong and NISA savings accounts in Japan, enhancing its value proposition.
- Total trading volume increased by 17% quarter-over-quarter to HKD1.9 trillion, with US stock trading volume rising 23% sequentially.
- Futu Holdings Ltd (NASDAQ:FUTU) announced a special cash dividend of USD0.25 per ordinary share, reflecting its commitment to shareholder value.
- Margin financing and securities lending balance decreased by 7% to HKD41 billion due to clients taking profits amid sharp market movements.
- The blended commission rate declined slightly due to clients gravitating towards higher-priced stocks, impacting brokerage commission income.
- Net income margin declined to 38.4% from 41.2% in the same quarter last year, primarily due to unrealized foreign exchange losses.
- Operating expenses increased by 21% year-over-year, driven by higher R&D and general administrative expenses.
- Interest expenses rose by 43% year-over-year, mainly due to higher costs associated with the securities borrowing and lending business.
A: In late September and early October, trading volumes for Hong Kong stocks and China ADRs surged, contributing over 50% to our total trading volume at one point. Although there was a pullback, the numbers remain stronger than in the third quarter. Regarding crypto, we launched our crypto business in Hong Kong in Q3, and trading volumes have been significant, ranging from USD10 million to USD20 million daily. We are still undergoing regulatory review for the VATP license and hope to provide updates soon.
Q: What is the rationale behind the special dividend, and how does it align with your growth strategy in overseas markets?
A: The special dividend marks our fifth anniversary since IPO and reflects our commitment to shareholder value. It amounts to USD280 million, or 7.8% of our net equity, and is feasible given our strong balance sheet. We will consider future dividend policies based on market conditions and business development.
Q: Can you break down the AUM growth and interest income, and how do interest rate changes impact your net interest income?
A: Over half of our AUM growth in Q3 came from market appreciation, particularly in China equities. Hong Kong remains the largest contributor to net asset inflows. Interest income from idle cash accounts for 40-45% of total interest income, with the rest from margin financing and securities lending. Despite rate cuts, increased idle cash balances helped offset negative impacts.
Q: How do you balance between share buybacks and dividends, and what factors influence this decision? Also, can you explain the 'other costs' item in your financials?
A: We use both share buybacks and dividends to cater to different investor preferences. The 'other costs' mainly stem from unrealized foreign exchange losses due to currency fluctuations, which are non-cash items. Most of these will likely reverse in Q4.
Q: What strategies have you implemented in major markets like the US, Canada, and Australia to drive client asset growth?
A: We've tailored our approach to each market, focusing on understanding client needs and offering unique products and marketing strategies. This has led to consistent double-digit growth in client assets across these regions for three consecutive quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.