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Tuesday, September 12, 2017

Hopefluent: Profit Increased 32%, Insiders Continued To Buy Shares After Half Year Results


Following the initial write-up in August,  Hopefluent has announced a pretty decent set of results for six months ended 30 Jun 2017. Sales turnover increased by 29% to HK$2,247mil while profit attributable to shareholders of the company increased by 32% to HK$122M.

 BUSINESS RESULTS

On a trailing twelve month basis, the company continued to experience growth in its businesses.


Net profit Margin was maintained along with ROE.


Its financial position continued to be strong with HK$1.3 billion cash in hand which is more than 50% of its market capitalization based on the share price of HK$3.50.


The pleasant surprise was the 50% increase of interim dividends from 3cts to 4.5cts, which provide an annualized dividend yield of 3.8% at current share price of HK$3.50. With a net cash per share of HK$2.18, there is no foreseeable difficulty for Hopefluent to maintain such a dividend payout.

BUSINESS COMMENTARIES

For six months ending June 2017, all business segments experienced growth over the same period last year.


1.       Primary Property Real Estate Agency Service Business

Business performance in core cities such as Guangzhou, Shenzhen, Foshan, Dongguan and Hefei grew notably, which further consolidated Hopefluent’s industry leadership advantages. The Group allocated its sales teams of primary and secondary property real estate agency businesses with flexibility and strived to accelerate the business development in second- and third-tier cities such as Nanjing, Wuhan, Zhengzhou, Jinan, Guiyang, Nanning, Zhongshan and Zhuhai, and further capture the market share in those areas. As of 30 June 2017, turnover of the segment amounted to HK$1,383.7 million (2016: HK$1,069.4 million), an increase of approximately 29% from the last corresponding period.

2.       Secondary Property Real Estate Agency Service Business
Turnover increased by about 34% to about HK$597.3 million as compared with the corresponding period last year (2016: HK$444.9 million) from handling around 32,500 secondary property transactions (2016: 26,400). In the past six months, although the property policies in China have become moderately more restricted, the Group has won the trust of customers and delivered outstanding results for this segment with its quality and reliable services and nationwide business coverage. The number of branches of the Group increased from around 400 at the end of 2016 to 430 during the review period, and the number of staff also grew from 7,200 to 7,600.


3.       Financial services
As at 30 June 2017, loans originated from financial services exceeded HK$1.5 billion and turnover was approximately HK$52.3 million (2016: HK$39.4 million). The Internet financial service platform has been operating for nearly two years and has performed so well that it has become the Group’s growth spotlight. The Group has continued to enhance its strong cooperation with various renowned and reputable financial institutions. It also worked closely with partners from different sectors such as offline points-of-sale, secondary branches and community resources to build an extensive financial customer base. It has strived to meet the demand of consumers through optimizing the O2O sales model and increasing the value of the transaction chain. The Group’s financial service products feature small amounts, diverse targets, short cycles and controllable risk, and these products have gained the widespread recognition from customers since their debut.


4.       Property Management Services
In the first half of 2017, this segment’s turnover increased from approximately HK$188 million in the same period last year to approximately HK$214 million. The Group has provided property management services to about 300 residential, office and commercial properties in Guangzhou, Shanghai, Tianjin and Wuhan with a total gross floor area of approximately 30 million square meters.

SHARE PURCHASES BY DIRECTORS









Mr Fu, Executive Chairman, and Ms Ng Wan, Executive Director, continued to purchase shares from the open market subsequent to the company’s half year results announcement in August and September, spending a total of HK$9.9M on share purchases this year.


The amounts these two founders spent on share purchases were significantly higher than their remunerations received in whole of FY2016 (Mr Fu: HK$2.4M, Ms Ng: HK$1.8M). Is this a testament of their confidence in Hopefluent’s future?


MANAGEMENT’S VIEW ON PROSPECTS FOR 2017

-          Chinese economy is expected to maintain the steadily upward momentum in the second half. The property market will progress under the macroeconomic control and adjustment.

-          Although a tighter financing environment may affect the rapid expansion of the property market, market demand is still expected.

-          To suppress rising property prices, local governments have started to increase land supply this will lead to further expansion of the market provide opportunities for the group

-          The development of the national policy of Guangdong-Hong Kong-Macau Greater Bay Area has accelerated. Given that Hopefluent’s has a core business focus in this key development area and that it occupies a key position in the market, this provides enormous business opportunities for the Group.


VALUATION




Based on the Discounted Cashflow Model (DCM), assuming a ultra-conservative growth rate project of ZERO percent and a discount rate of 4% over the 10 year period, the IV is worked out as follows.









From DCM calculation, Hopefluent seems to be grossly undervalued at current share price. This is without taking into account the value to be unlocked from the potential listing of its Property Management Business.

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Previous Post:
2 August 2017 - Hopefluent: Co-founders cum Directors Spent 1.72x of Their Annual Income In Just One Month (July 2017) to Buy Its Shares. Is There Hope in Hopefluent?





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