UP Fintech Holding Ltd 4Q22 First Take: More Cost-Effective New Client Acquisition

• Strong interest income drove a 4Q22 earnings beat, 20%/ 15% above our estimate/ Bloomberg consensus.

• Key operating metrics rose sequentially, except trading volume impacted by challenging US markets.

• We have a HOLD rating with a TP of US$5.15 (40.0x 2023E P/E).

4Q22 results beat. UP Fintech (TIGR) posted 4Q22 non-GAAP net profit of US$4.5mn, down 32% QoQ but up from US$0.1mn in 4Q21, beating our estimate of US$3.8mn, mainly helped by strong interest income from the increase in MFSL balance and higher interest rates. New paying clients increased 20.3% QoQ to 27,300 in 4Q22, while customer acquisition cost (CAC) declined to US$271 (vs US$326 in 3Q22), beating company guidance. In 2022, TIGR achieved 108.1% of its annual new paying client target of 100,000. Despite a challenging US stock market in 4Q22 causing lower trading volume,

TIGR demonstrated solid operating metrics with new paying clients, client assets and MFSL balance all increasing sequentially. 4Q22 results highlights include:

New paying clients numbered 27,300 in 4Q22, up 20.3% QoQ but down 55.5% YoY, with over 90% of new paying clients from outside mainland China. TIGR’s total paying clients reached 781,500 (+16% YoY).

Client assets reached US$14bn, up 8% QoQ (-18% YoY), helped by net asset inflow of US$1.4bn (vs US$700mn in 3Q22), with average assets per paying client of US$17,921, +4% QoQ (-29% YoY). Margin financing and securities lending balance(MFSL) was US$2bn (14% of client assets), +28% QoQ (+13% YoY).

Trading volume of stocks was US$20.5bn, -13% QoQ (-39% YoY), with annualized trading velocity (trading volume/average client assets) of 6.1x vs 7.1x/ 6.8x in 4Q21/3Q22. The number of options and futures contracts traded reached 7.4mn, -4% QoQ (-9% YoY). Total trading volume (incl. stocks and derivatives) was US$68.5bn, -12% QoQ (-20% YoY), and gross commission rate was 3.6bps, +0.5bp QoQ.

In corporate services, TIGR participated in 17 US and HK IPOs (vs 11 in 3Q22). It added 26 new ESOP clients (vs. 29 added in 3Q22), taking the total to 419.

Net revenue mix shows a 40% contribution from net commissions in 4Q22 (vs 44% in 3Q22), 49% from net interest income (vs 47% in 3Q22) and 11% from other income (eg, IPO underwriting) (vs 8% in 3Q22).

We have a HOLD rating with a TP of US$5.15, based on a 2023E target P/E of 40.0x.

Key risks include: Upside – improved stock market sentiment; faster overseas expansion.

Downside – market downturn and reduced retail investor participation; slower expansion overseas.