HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Bright Smart Securities / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-commodities-group" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a> rallied by 132% since our last Insight, fueled by the euphoria in the brokerage and securities sector on the HK government's stablecoin initiative.</li>
<li>At HK$16.44, it is at 100% PER premium to the sector average, ex-<a href="https://www.smartkarma.com/entities/guotai-junan-international" target="_blank" data-smartkarma-citation="entities:13438:1" rel="noopener">Guotai Junan International (1788 HK)</a>. The risk-reward payoff now looks less attractive.</li>
<li>It also implies net profit to grow by 150% by FY31F and priced at 18x PER. This appears stretched in the near term, though long-term prospects stay decent. </li>
</ul>



Bright Smart Securities (1428 HK) rallied by 132% since our last Insight, fueled by the euphoria in the brokerage and securities sector on the HK government's stablecoin initiative.
At HK$16.44, it is at 100% PER premium to the sector average, ex-Guotai Junan International (1788 HK). The risk-reward payoff now looks less attractive.
It also implies net profit to grow by 150% by FY31F and priced at 18x PER. This appears stretched in the near term, though long-term prospects stay decent. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-and" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a>'s earnings rebounded solidly by 20.4% YoY in 2H FY25, fueled by higher client accounts and assets, and better HK market turnover.</li>
<li>BSS has been an underperformer against peers since May, as other brokerage companies rallied on the back of potential entry into the virtual asset dealing business. </li>
<li>Ant Financial will be able to transform BSS into a sizeable cross-asset house. The share price's current implied earnings growth and PER valuations are conservative.</li>
</ul>



Bright Smart Securities (1428 HK)'s earnings rebounded solidly by 20.4% YoY in 2H FY25, fueled by higher client accounts and assets, and better HK market turnover.
BSS has been an underperformer against peers since May, as other brokerage companies rallied on the back of potential entry into the virtual asset dealing business. 
Ant Financial will be able to transform BSS into a sizeable cross-asset house. The share price's current implied earnings growth and PER valuations are conservative.


Bright Smart (1428 HK): Bright and Smart FY25

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-and" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a> will benefit from Ant Financial's technology innovation capabilities, customer group, digitalisation, and cross-selling to over 640m of Alipay users.</li>
<li>With <a href="https://www.smartkarma.com/entities/futu-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27858:1" rel="noopener">Futu Holdings Ltd (FUTU US)</a> having an average PER of 19x for 2020-2025, we use 15x for BSS after a conservative estimate of 50% earnings growth in 5 years. </li>
<li>We value BSS at HK$8.13, but this is a conservative estimate. Its earnings growth is likely to be faster than our forecast, given its better leverage on the new parent.  </li>
</ul>



Bright Smart Securities (1428 HK) will benefit from Ant Financial's technology innovation capabilities, customer group, digitalisation, and cross-selling to over 640m of Alipay users.
With Futu Holdings Ltd (FUTU US) having an average PER of 19x for 2020-2025, we use 15x for BSS after a conservative estimate of 50% earnings growth in 5 years. 
We value BSS at HK$8.13, but this is a conservative estimate. Its earnings growth is likely to be faster than our forecast, given its better leverage on the new parent.  


Bright Smart (1428 HK): An Attempt to Derive a Value

<ul>
<li>The offer price of HK$3.28 by Ant Financial is attractive - 2.9x P/B and 8.3x PER, both on 12-month forward basis. It is also appealing relative to peers.</li>
<li>
<a href="https://www.smartkarma.com/entities/bright-smart-securities-and" target="_blank" data-smartkarma-citation="entities:20511:1" rel="noopener">Bright Smart Securities (1428 HK)</a>'s massive outperformance against the HSI showed its strong marketing and execution capabilities. Ant Financial will bring many synergies to it.  </li>
<li>Risk-Averse investors may take this opportunity to cash out, but we are on the long-term bull camp and prefer to hold for further upside. </li>
</ul>


The offer price of HK$3.28 by Ant Financial is attractive - 2.9x P/B and 8.3x PER, both on 12-month forward basis. It is also appealing relative to peers.

Bright Smart Securities (1428 HK)'s massive outperformance against the HSI showed its strong marketing and execution capabilities. Ant Financial will bring many synergies to it.  
Risk-Averse investors may take this opportunity to cash out, but we are on the long-term bull camp and prefer to hold for further upside. 


Bright Smart (1428 HK): To Sell or Not to Sell?

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China

China Renaissance Holdings Limited provides investment services. The Company offers investment banking, investment management, capital marketing, securities underwriting, research, and trading services. China Renaissance Holdings serves clients in China, Hong Kong, and the Untied States.

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China Renaissance Holdings (1911 HK)

Bright Smart (1428 HK): Valuation Update

Bright Smart announced that it is still working on satisfying condition c.), which is reporting with the NDRC. Given that the Long Stop Date is 25...

Osbert Tang, CFA

Bright Smart (1428 HK): Bright and Smart FY25

BSS saw a 20.4% YoY earnings rebound in 2H FY25, driven by increased client accounts and assets, and better market turnover. Ant Financial's...

Osbert Tang, CFA

Bright Smart (1428 HK): An Attempt to Derive a Value

Bright Smart benefits from Ant Financial's technology and customer base, with potentially faster-than-forecast growth. At a 50% 5-year growth and...

Osbert Tang, CFA

Bright Smart (1428 HK): To Sell or Not to Sell?

Ant Financial's attractive offer price of HK$3.28 for Bright Smart is appealing relative to peers, and is at a good premium to historical P/B and...

Osbert Tang, CFA

CX Daily: China’s Never-Ending Bond Bull Run Fuels Speculation Regulators May Intervene

Bonds / In Depth: China's never-ending bond bull run fuels speculation regulators may intervene Over the past year, China’s bond market has...

Caixin Global

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Bright Smart (1428 HK): Valuation Update

Bright Smart announced that it is still working on satisfying condition c.), which is reporting with the NDRC. Given that the Long Stop Date is 25...

Osbert Tang, CFA

Bright Smart (1428 HK): Bright and Smart FY25

​BSS saw a 20.4% YoY earnings rebound in 2H FY25, driven by increased client accounts and assets, and better market turnover. Ant Financial's...

Osbert Tang, CFA

Bright Smart (1428 HK): An Attempt to Derive a Value

​Bright Smart benefits from Ant Financial's technology and customer base, with potentially faster-than-forecast growth. At a 50% 5-year growth and...

Osbert Tang, CFA

Bright Smart (1428 HK): To Sell or Not to Sell?

​Ant Financial's attractive offer price of HK$3.28 for Bright Smart is appealing relative to peers, and is at a good premium to historical P/B and...

Osbert Tang, CFA

CX Daily: China’s Never-Ending Bond Bull Run Fuels Speculation Regulators May Intervene

Bonds / In Depth: China's never-ending bond bull run fuels speculation regulators may intervene Over the past year, China’s bond market has...

Caixin Global

BSS saw a 20.4% YoY earnings rebound in 2H FY25, driven by increased client accounts and assets, and better market turnover. Ant Financial's...

Bright Smart benefits from Ant Financial's technology and customer base, with potentially faster-than-forecast growth. At a 50% 5-year growth and...

Ant Financial's attractive offer price of HK$3.28 for Bright Smart is appealing relative to peers, and is at a good premium to historical P/B and...