Futu Holdings_Overseas expansion in 2025 to accelerate (1)

Summary of Futu Holdings Conference Call Company Overview - Company: Futu Holdings - Industry: Online Securities Brokerage - Market Cap: US$16.7 billion as of March 14, 2025 - **Current Price**: US$118.47 - 12-Month Rating: Buy with a price target of US$136.00, revised from US$130.00 [6][28] Key Points and Arguments 1. Growth and Client Acquisition - Futu Holdings expects strong growth momentum in Q1 2025, with improvements in client acquisition, net inflow of client assets, and trading volume driven by AI-led market rallies and increased demand for Hong Kong IPO subscriptions [3][12] - The company aims to acquire 800,000 paying clients in FY25, with expectations of exceeding this target, as indicated by UBS estimates of 820,000 [2][4] 2. Market Conditions and Trading Volume - Concerns were raised regarding potential downward pressure on trading velocity due to a bearish US market, which has seen the Nasdaq100 and S&P500 decline by 6.2% and 4.1% year-to-date, respectively [2] - The US market (excluding Chinese ADRs) contributes 60-70% of Futu's trading volume, highlighting the importance of US market conditions to the company's performance [2] 3. International Expansion and Brand Awareness - Futu plans to accelerate its overseas expansion in 2025, particularly in Hong Kong and Malaysia, which contributed to about half of the new paying clients in Q4 2024 [3] - Increased participation in Hong Kong IPO subscriptions is expected to benefit Futu as the market leader [3] 4. Crypto and AI Initiatives - Futu has received conditional approval for a crypto trading service in the US, set to launch in 2025, and will continue to enhance user experience through investor education in Hong Kong and Singapore [3] - The company is leveraging AI to improve operational efficiency and client servicing capabilities, including automatic interpretation of announcements and financial results analysis [3] 5. Operational Expenses and Headcount - Futu targets a customer acquisition cost (CAC) of HK$2,500-3,000 in FY25, with a projected low- to mid-single-digit year-over-year growth in headcount [3] 6. Impact of Interest Rate Cuts - For every 25 basis points cut in interest rates, Futu estimates a negative impact on pre-tax profit (PBT) of HK$96-120 million, which is about 1-2% of UBS's FY25 PBT estimate [3] Financial Projections - Revised client AUM estimates for FY25/26/27 are HK$966 billion, HK$1,162 billion, and HK$1,393 billion, respectively, up from previous estimates [4] - EPS projections for FY25/26/27 have been lifted by 3$6.8, US$8.5, and US$11.4, respectively [4] Valuation Metrics - Price-to-Earnings (P/E) ratio for FY25 is projected at 19x, with a new price target of US$136.00 [4] - The forecast stock return is estimated at 14.8%, with no expected dividend yield [9] Risks - Key risks include lower-than-expected international expansion, adverse market conditions, and increased regulatory scrutiny on mainland China operations [11] Conclusion Futu Holdings is positioned for growth with a strong client acquisition strategy and expansion plans, although it faces challenges from market conditions and regulatory environments. The company's focus on technology, particularly in AI and crypto, may provide additional avenues for growth and operational efficiency.