The first half of 2025 has seen global capital markets undergo a stress test - trade barrier reconstruction amid geopolitical tensions, the US twin deficits combined with high debt narratives driving significant gold rallies, and US dollar weakness with narrowing interest rate differentials directing funds toward emerging markets. Against this turbulent macroeconomic backdrop of intertwining narratives, Sun Hung Kai Co (00086) has still achieved strong risk-adjusted returns. Financial results show that in the first half of 2025, the company's total revenue reached HK$1.803 billion, total income was HK$2.8 billion, up 43.47% year-on-year; profit attributable to company shareholders was HK$887 million, up 1,076% year-on-year; basic earnings per share was 45.3 HK cents, with an interim dividend of 12 HK cents per share proposed. With net profit growth exceeding 10-fold, this standout performance in the interim reporting season undoubtedly represents the precise realization of Hong Kong institutions' unique investment research DNA - possessing both global vision for cross-market arbitrage and deep understanding of subtle policy cycles in the Asia-Pacific region. Sun Hung Kai Co has leveraged volatility as a catalyst for excess returns through solid investment returns, strict risk management, and operational flexibility.
Capital markets are voting with real money for Sun Hung Kai Co's strategic achievements. Since the profit alert announcement in early August, the company's stock price has surged over 20%, with year-to-date gains exceeding 60%. This strong performance already shows the characteristic premium of alternative asset management giants - its TTM P/E ratio has rapidly expanded to around 7x, with the corresponding P/E (net) breaking through 21.88x. Behind this lies the buy-side institutions' repricing of its "risk-adjusted return" capabilities.
**Forging an Asset Management Ark with Over 10-fold Profit Growth Amid Macro Chaos**
As global capital markets in the first half of 2025 experienced violent turbulence amid multiple narrative fractures - tariff shockwaves restructuring global supply chain valuation coordinates, gold shining amid monetary faith crises under US twin deficits and debt ceiling pressure, and US dollar weakness cycles triggering emerging market asset repricing waves. Sun Hung Kai Co, leveraging its carefully constructed alternative investment ecosystem, has demonstrated cross-cycle growth resilience - the cash flow fertile ground of credit business nurturing the profit canopy of investment management, while fund management's new branches reciprocally nourish the entire ecosystem's expansion vitality. This organic synergy of the business matrix has enabled it to build an asset management Noah's ark in the storm's eye.
In the first half of 2025, Sun Hung Kai Co's revenue structure underwent subtle transformation: of the total income of HK$2.8 billion, investment management business alone captured HK$1.035 billion, surging 897% year-on-year, becoming the company's largest revenue engine; fee and interest-related business (credit + fund) maintained a stable contribution of HK$1.726 billion, demonstrating strong counter-cyclical capabilities; corporate business contributed HK$39.3 million.
In terms of profit performance, investment management business pre-tax profit strongly reversed from a loss of HK$147.5 million in the same period last year to a profit of HK$785.6 million, not only contributing over 70% of the company's profit sources but also driving overall pre-tax profit to achieve 253.7% strong growth. Behind this business matrix scorecard, it indicates that Sun Hung Kai Co's "ecological flywheel" model driven by three engines is accelerating.
Clearly, the explosion in investment management business has become the key driver of Sun Hung Kai Co's epic profit growth in 2025. Through decoding the investment management business, investors may gain clearer understanding of how it forged an asset management ark with over 10-fold profit growth.
In the first half of 2025, Sun Hung Kai Co's investment management business achieved investment gains of HK$998 million, surging 1,638.5% year-on-year. Behind this revenue map is the investment management team's ability to master capital cycles. Specifically, the company's private equity was the "main battlefield" for value realization, contributing HK$582 million in revenue, accounting for nearly 60%. This segment's strong performance first benefited from two landmark exit projects. The dual crescendo of Jefferson Capital's NASDAQ listing and Saint Bella's Hong Kong IPO not only realized the classic closed loop of private equity "investment-value creation-exit" but also demonstrated its ecological investment management philosophy that transcends economic cycles.
Notably, the company's ecosystem synergy value multiplier cannot be underestimated. First, third-party capital synergy, leveraging external capital through joint investment platforms to achieve management fee income growth. Second, synergistic cooperation with excellent external private equity GPs, pooling mutual advantages to provide enterprises with "1+1>2" composite resource support and strategic guidance. Third, under the independent direct investment model, relying on Sun Hung Kai's own solid foundation, mature professional experience, and extensive business network to provide deep and efficient exclusive support for enterprises, empowering their accelerated growth.
This value creation system spanning the entire "fundraising-investment-management-exit" cycle has enabled its private equity pre-tax contribution to surge dramatically. Beyond private equity, corporate equity gains reversed from losses to HK$304 million in gains, also reflecting Sun Hung Kai Co's investment portfolio management's dual advantages of long-term value discovery and short-term market opportunity capture.
In the first half of 2025, Sun Hung Kai's investment portfolio achieved excellent diversified allocation between high-growth technology stocks (such as AI, fintech) and stable value stocks (such as commodities, consumer leaders), effectively reducing single market risks while capturing investment opportunities under different economic cycles. This approach of rational allocation and dynamic adjustment of various assets under different market environments not only effectively resisted market volatility but also achieved steady asset appreciation.
Sun Hung Kai Co's corporate equity portfolio delivered excellent returns of 22.3%, demonstrating its unique cross-market allocation wisdom. This is not only a victory of asset selection but also a comprehensive performance of trend prediction, regional rotation, and risk management.
In summary, Sun Hung Kai Co's asset management ark's ability to break through in the turbulent waves of 2025 essentially stems from the reconstruction of three core capabilities: first, ecological value discovery capability, through flexible investment models, always committed to creating enormous value for invested enterprises, empowering their full-cycle growth; second, cross-cycle allocation capability, constructing asymmetric risk-return structures across multiple asset classes including private equity, corporate equity, and hedge funds; finally, dynamic risk management capability, transforming market volatility from threat to revenue source, achieving dual optimization of Sharpe ratio and maximum drawdown.
The company has proven with 10-fold profit growth that: amid macro trend fractures, the leverage effect of capital reallocation through refined operations is the important significance of value creation.
**Credit + Fund Providing HK$1.7 Billion Cash Flow, Steadily Guarding Value Ballast**
In 2025, when global financial asset volatility soared, Sun Hung Kai Co's credit and fund businesses jointly contributed HK$1.726 billion in revenue, like ballast in a giant ship, providing crucial stability in macro storms. Behind these numbers is a carefully designed risk-adjusted return strategy - ensuring basic cash flow from traditional businesses while achieving revenue optimization through innovative financial instruments, demonstrating Sun Hung Kai Co's attack-defense balance artistry.
First, refined credit business operations. UA Finance, a controlled subsidiary of Sun Hung Kai Co, once again confirmed its unshakeable market position - remaining at the top of Hong Kong's non-bank unsecured lending institutions for the eighth consecutive year and maintaining a top-five excellent performance among all types of lending institutions in Hong Kong. During the period, UA Finance demonstrated exceptional operational resilience - while maintaining prudent loan approval processes, it achieved efficiency improvements through refined cost management, ultimately recording revenue of HK$1.599 billion, up 2.0% year-on-year, optimizing the cost-to-income ratio to an industry-leading 30.6%, maintaining loan return rate at an ideal level of 28.4%, reflecting continuously optimized risk pricing capabilities.
This scorecard reflects its strategic determination of "quality over scale" and operational management capabilities. As the core vehicle of Sun Hung Kai Co's credit business, UA Finance's role extends beyond cash flow stabilizer to include data asset pool and innovation testing ground functions. On one hand, the company's accumulated tens of millions of customer behavioral data feeds back into the group's investment decision models; on the other hand, after new technologies like AI risk control mature, they can be exported to other group businesses.
When some consumer finance peers are still struggling to balance between scale expansion and asset quality, UA Finance has proven a sustainable development path through the dual efforts of prudent risk control and operational efficiency enhancement - true competitiveness lies not in loan balance growth rate but in revenue efficiency created per unit of risk consumption.
Second, fund business innovation value creation. Sun Hung Kai Capital Partners Limited ("SHKCP"), a regulated entity under Sun Hung Kai Co executing fund management business for the group. During the period, the company's total assets under management climbed strongly to US$2.6 billion, setting a record. Behind this breakthrough growth, it benefited from the company's fund partnerships, family office solutions, and SHKCP funds collectively recording US$434 million in net cash inflows and US$155 million in market gains.
This combination not only reflects its strong capital attraction capability but also demonstrates excellent investment management strength, showing the dual advantages of "new capital recognition" and "existing asset appreciation." From the capital inflow perspective, fund partnerships became the main contributor, with the partnership with ActusRay Partners (which adopts equity market neutral strategies in Europe, Asia, and Japan) managing total assets exceeding US$1.7 billion; family office solutions and SHKCP showed strong appeal, building cross-regional investor networks, connecting Asia-Pacific family offices with global institutional capital needs, achieving true interest alignment rather than simple distribution relationships through ecological capital synergy.
This trust-based growth model not only brings SHKCP stable capital sources but also indicates that asset managers can build long-term win-win partnerships with investors. Notably, Sun Hung Kai Co's fund business is completing a strategic transformation from "proprietary capital-driven" to "third-party capital-driven" - external investor capital proportion increased from 79.9% to 85.0%, while proprietary balance sheet capital decreased from 20.1% to 15.0%.
This structural change not only reflects the market's high recognition of its investment capabilities but also demonstrates its maturity improvement as a leading alternative investment management platform in Asia. This capital structure optimization actually constructs a virtuous cycle: higher-quality external capital injection → enhanced investment capability and scale → better performance generation → attracting more external capital.
**Summary: Value Reassessment and Premium Trilogy of Ecological Asset Management Platform**
From a valuation evolution perspective, Sun Hung Kai Co's current valuation reconstruction is only the initial stage of the value discovery process, and also represents capital market repricing of alternative asset management giants' business model innovation - essentially reflecting its paradigm leap from traditional credit institution to ecological asset management platform.
We believe Sun Hung Kai Co's core valuation premium stems from three structural transformations: first, revenue model reconstruction premium - investment management business contributing over 70% of profits, marking the company's upgrade from spread-driven to alpha-driven, deserving a valuation system different from traditional financial institutions; second, ecological barrier scarcity premium - the cross-border investment network, third-party capital synergy mechanism, and transparency management system constructed by Sun Hung Kai Capital Partners form irreplicable platform value; finally, cross-cycle capability certainty premium - achieving 1,076% profit growth in a high macro volatility environment, proving its unique ability to transform market volatility into excess returns.
Sun Hung Kai's valuation reconstruction story has just begun - when the market truly understands its trinity model of providing stable cash flow through credit business (valuation foundation), creating excess returns through investment management (valuation elasticity), and cultivating future growth through fund management (option value), this Hong Kong boutique asset management stock may become the preferred vehicle for global capital allocation to Asian alternative assets.
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