Futu Holdings_ Conference takeaways and 4Q preview. Thu Feb 13 2025

Summary of Futu Holdings Conference Call Company Overview - Company: Futu Holdings - Industry: Banks & Financial Services - Date of Conference Call: February 13, 2025 Key Points Financial Performance - Futu's share price increased by 45% over the past month, outperforming NASDAQ's 2% increase year-over-year [2] - Trading at 16.5x 2025 estimated PE, above the mean FY1 PE of 14.1x since 4Q21 [2] - Expected robust revenue and profit growth in 4Q24, driven by strong paying client expansion and increased trading velocity [2][8] - Forecasted 4Q24 profits of HK$1.7 billion, approximately 3% above Bloomberg consensus [8] Revenue and Client Growth - Anticipated 27% quarter-over-quarter (q/q) increase in brokerage income, translating to a 115% year-over-year (y/y) rise [8] - Projected 21% q/q or 76% y/y increase in net revenues [8] - New paying clients expected to reach approximately 200,000 in 4Q24, with net asset inflow estimated at HK$50 billion [8] - Client assets growth expected to be positive despite some mark-to-market losses [15] Market Sentiment and Expansion - Positive sentiment on China, particularly regarding growth stocks, is expected to drive multiple expansion for Futu [2] - Futu's market share in Malaysia reached mid-to-high single digits, with plans for further overseas expansion [8][15] - Client sentiment remains high, with the current rally in the Hong Kong market viewed positively for Futu's business [8] Operating Expenses and Profitability - Operating expenses expected to rise by 56% y/y in 4Q24, driven by increased client acquisition costs and seasonal factors [8][18] - Despite rising expenses, net profits are projected to grow by 94% y/y in 4Q24 [8] - Anticipated moderate increase in client acquisition costs, with a focus on maintaining profitability [15] Crypto Business Development - Futu received a VATP license on January 27, 2025, allowing it to operate as a crypto exchange [8] - Crypto-related trading volume improved significantly, accounting for approximately 30% of turnover at HashKey [15] Future Outlook - Positive outlook for 2025, with expectations of continued strong client growth and elevated trading volumes in both Hong Kong and US markets [8][19] - Anticipated interest income growth due to high market sentiment and elevated rate expectations in the US [8][19] - Price target maintained at US$160, reflecting a PEG valuation methodology based on a 21% EPS CAGR from 2025 to 2027 [11][36] Important Metrics - Adjusted EPS for 2024 revised down to HK$38.65 from HK$39.86, and for 2025 to HK$54.56 from HK$57.85 [6] - Total client assets expected to grow moderately, with a projected increase of 3% q/q in 4Q24 [23] - Futu's client AUM growth correlated with index movements, with expectations of continued growth despite market fluctuations [23] Conclusion - Overall, Futu Holdings is positioned for strong growth driven by client expansion, market sentiment, and strategic developments in the crypto space, despite rising operating expenses and market challenges [10][19]