• Expect 1Q24 profitability to improve sequentially, with trading volume, MFSL and client assets up QoQ, based on current run rate.
• Targeting 150K new paying clients in 2024, with incremental increase from its existing markets.
• Maintain HOLD and trim TP to US$4.66 (based on 15.0x 2024E P/E).
Strong new paying clients and asset inflow despite low commission income in 4Q23.
UP Fintech (TIGR) acquired 39,034 new paying clients in 4Q23, up 59% QoQ, with Singapore and Southeast Asia (SEA) contributing 60%, US 20%, AUS/NZ 10% and Hong Kong 10%. The sharp 29.3% QoQ decrease in customer acquisition cost (CAC) to US$148 in 4Q23 was helped by online customer acquisition initiatives in SEA, where CAC is much lower than the group level, leveraging TIGR’s Singapore market presence. The company enjoyed strong net asset inflow of US$8.2bn in 4Q23, although most of this came from institutional investors in the primary market whose trading volume is much lower than retail clients’. Thus, this had a limited contribution to commission income in 4Q23, and also going forward. Based on the current run rate, management expects trading volume, MFSL and client assets to rise QoQ in 1Q24. With USD FX movement relatively stable QTD, 1Q24 profitability is expected to be better than in 4Q23, per management.
Target to acquire 150K new paying clients in 2024.
In its customer acquisition strategy, TIGR will focus on existing markets to further increase new paying clients in 2024, as well as increasing ARPU in its existing markets through diversified product offerings, while evaluating new market potential. In 2024, TIGR targets to acquire 150K new paying clients, up from 123K in 2023, with incremental increases coming from each market. Singapore and SEA should contribute 60% of new paying clients, followed by AUS/NZ at 15%, US at 15% and Hong Kong at 10%. In addition, TIGR plans to launch crypto asset trading for professional investors in Hong Kong in Apr-May 2024, for which the commission rate will be referenced against current market players’. TIGR will continue to apply for licenses to provide crypto services to retail investors. In Hong Kong, net asset inflow in 4Q24 surpassed the first three quarters of the year, while average client assts from retail paying clients stood at US$5,000, higher than US/AUS at US$1,000, indicating good client quality.
Maintain HOLD and trim TP to US$4.66.
We revise down our forecasts for 2024E/ 25E non-GAAP net income by 15%/ 19% as we: 1) lower commission income forecasts by 9%/ 15% and 2) raise opex estimates by 2%/ 1%, offsetting 3) higher forecasts for MFSL balance (up 10%/ 14%). With our earnings revisions, we lower our target price to US$4.66 from US$5.42 based on a 2024E P/E target of 15.0x (unchanged). We expect TIGR’s share price to be range-bound until it demonstrates strong client acquisition in Hong Kong and a steady profitability outlook. Thus, we keep our HOLD rating. Key risks include: Upside – improved stock market sentiment; faster overseas expansion. Downside – further market downturn and reduced retail investor participation; slower expansion overseas.
Comments