2Q24 revenue beat but earnings missed due to an unexpected loss provision.
Operating metrics strong, rising QoQ across the board.
We have a HOLD rating with a TP of US$4.96 (15.0x 2024E-25E P/E).
2Q24 earnings missed. UP Fintech (TIGR) posted 2Q24 non-GAAP net profit of US$5.2mn, -65% QoQ and -66% YoY, missing our estimate and Visible Alpha consensus by 59%/ 49%, respectively, mainly impacted by an unexpected US$13.2mn loss provision for the suspended Hong Kong stock pledge business, which offset strong top-line growth. Total revenue was up 11% QoQ to US$87.4mn, beating our estimate and Visible Alpha consensus by 4%/ 14%, respectively, helped by strong commission income (+22% QoQ) and solid interest income (+5% QoQ). New paying clients rose 69.8% QoQ to 48,900 in 2Q24, well above our expectation, while customer acquisition cost was lowered to US$131 (vs US$152 in 1Q24), based on our calculation. In addition, TIGR enjoyed solid net asset inflow and mark-to-market gains that led to robust sequential growth in client assets in 1Q24, while trading volume of stocks and trading velocity were both up QoQ. The gross commission rate was slightly down 0.03bp QoQ in 2Q24.
New paying clients numbered 48,900 in 2Q24, up 69.8% QoQ and 68.2% YoY, and TIGR’s total paying clients reached 982,300 (+17% YoY).
Client assets reached US$38.2bn, +16% QoQ (+121% YoY), helped by solid net asset inflow of US$1.7bn (vs US$5.3bn in 1Q24) and US$3.6bn mark-to-market gains, with average assets per paying client of US$38,877, +10% QoQ (+89% YoY). Margin financing and securities lending balance (MFSL) was US$3.45bn (9% of client assets), +25% QoQ (+66% YoY).
Trading volume of stocks was US$33.5bn, +17% QoQ (+73% YoY), with annualized trading velocity (trading volume/average client assets) of 3.8x vs 4.6x/ 3.6x in 2Q23/ 1Q24. The number of options and futures contracts traded reached 12mn, +12% QoQ (+57% YoY). Total trading volume (incl. stocks and derivatives) was US$105.9bn, +24% QoQ (+63% YoY), and gross commission rate was 3.2bps, down 0.03bp QoQ.
Net revenue mix shows a 44% contribution from net commissions in 2Q24 (vs 41% in 1Q24), 47% from net interest income (vs 51% in 1Q24) and 9% from other income (eg, IPO underwriting) (vs 7% in 1Q24).
We have a HOLD rating with a TP of US$4.96, based on 2024E-25E average P/E of 15.0x. Key risks include: Upside – improved stock market sentiment; faster overseas expansion. Downside – further market downturn and reduced retail investor participation; slower expansion overseas.
