AGBA Group Holding — Year-to-date pre-tax result in line

AGBA (NASDAQ: AGBA)

Last close As at 20/04/2024

USD1.03

0.63 (157.50%)

Market capitalisation

USD77m

More on this equity

Research: Financials

AGBA Group Holding — Year-to-date pre-tax result in line

AGBA’s Q323 results continued to be affected by the weak recovery in China and consequent subdued mainland demand for Hong Kong health and wealth products. As a result, revenues were flat year-on-year at US$13.2m, but down from US$17.4m in Q223. The pre-tax loss was US$12.9m, putting the company on track to meet its US$49m projected loss for FY23. AGBA also announced that it has entered into term sheets for a US$6.2m private share placing with a new institutional investor, AGBA’s group president and AGBA management at US$0.70 per share plus warrants with an exercise price of US$1.00/share. The amount could expand subject to ongoing conversations with additional potential investors. The significant premium to the current share price signals management’s confidence in AGBA’s long-term value. The capital will go towards funding organic growth, strategic acquisitions and managing liquidity until projected material profitability in FY25.

Written by

Robert Murphy

Managing Director, Financials and Investment Trusts

agba3

Financials

AGBA Group Holding

Year-to-date pre-tax result in line

Q323 results
and new funding

Financials

21 November 2023

Price

US$0.50

Market cap

US$34m

HK$7.80/US$

Net debt* (US$m) at end Q323
*Including leases

22.2

Shares in issue

67.56m

Free float

9.1%

Code

AGBA

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

Business description

AGBA Group Holding is a diversified financial services company operating from Hong Kong. AGBA distributes health and wealth products to over 400,000 retail and corporate clients through its extensive independent financial advisor network, the largest in Hong Kong. It holds several unlisted investments in fintechs, notably selling its holding in Nutmeg to JP Morgan in June 2021

Analysts

Rob Murphy

+44 (0)7900 484 805

Armando Hoxha

+44 (0)20 3077 5700

AGBA Group Holding is a research client of Edison Investment Research Limited

AGBA’s Q323 results continued to be affected by the weak recovery in China and consequent subdued mainland demand for Hong Kong health and wealth products. As a result, revenues were flat year-on-year at US$13.2m, but down from US$17.4m in Q223. The pre-tax loss was US$12.9m, putting the company on track to meet its US$49m projected loss for FY23. AGBA also announced that it has entered into term sheets for a US$6.2m private share placing with a new institutional investor, AGBA’s group president and AGBA management at US$0.70 per share plus warrants with an exercise price of US$1.00/share. The amount could expand subject to ongoing conversations with additional potential investors. The significant premium to the current share price signals management’s confidence in AGBA’s long-term value. The capital will go towards funding organic growth, strategic acquisitions and managing liquidity until projected material profitability in FY25.

Year end

Revenue (US$m)

PBT
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/21

11.5

120.0

1.74

N/A

0.29

N/A

12/22

31.1

(44.4)

(0.79)

N/A

N/A

N/A

Note: *EPS is diluted.

AGBA’s flat year-on-year revenue performance in Q323 should not be surprising given the continuing slow recovery in China, with visitor numbers to Hong Kong still only at 70% of 2018 levels. The weaker revenue versus Q223 has been largely offset by fixed cost reduction and the automatic fall in sales commissions, leading to an operating loss of US$10.9m, only US$0.5m below Q223. The year-to-date pre-tax loss of US$35.5m puts AGBA on track to meet its FY23 projection of a US$49m loss.

The minimum US$6.2m private placement at a c 40% premium to the current share price represents a vote of confidence in AGBA’s franchise value by group president Mr Wing-Fai Ng and the management team. Alongside the earlier announced US$50m equity purchase agreement with Williamsburg Venture Holdings, the company should have ample funding to execute its growth strategy based on its sales and pre-tax profit projections. Recent growth initiatives include a new distributor portal accessible across any device, launch of the HSBC Life partnership, a strategic collaboration with Zurich (HK) Life Assurance and signing 14 new general insurance providers. AGBA is expecting stronger Q4 sales and continued momentum into 2024.

Revenue growth may be further supported by recent Hong Kong government initiatives aimed at stimulating the local economy through increased integration with Mainland China. One such recently announced initiative is the Capital Investment Entrant Scheme (CIES). The scheme will allow entry (a precursor to residency) into Hong Kong, provided a minimum HK$30m is invested in stocks, funds or bonds. The CIES could attract substantial funds from affluent Mainland Chinese investors to Hong Kong and provide a boost to its financial markets. According to AGBA management, further initiatives to enhance sentiment and market attractiveness are planned, which will play to the strengths of AGBA’s services.

General disclaimer and copyright

This report has been commissioned by AGBA Group Holding and prepared and issued by Edison, in consideration of a fee payable by AGBA Group Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by AGBA Group Holding and prepared and issued by Edison, in consideration of a fee payable by AGBA Group Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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