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Sep 1, 2021
[5 min Read]
OK, so we all know Chinese ADRs are super risky yadda yadda. But I'm gonna tell you about the real China play, one which sort of flies under the radar because it doesn't have the same prominence as BABA or PDD or DIDI. It's TIGR, or UP Fintech Holdings Limited. Known as ‘the Robinhood of China', UP Fintech has a couple of significant differences to the platform we all love to hate (for one thing, they didn't prevent users from buying GME). Let's take a closer look.
1. What's UP, doc?
UP Fintech is a brokerage offering an app and a desktop client/server platform. It's mainly focused on Chinese investors, but the occasional gweilo like me is welcome as a customer, too. Apparently, there are over a billion Chinese in China alone, and countless others all over the world. While listed on the Nasdaq since 2019 (at an initial offering of US8), the Cayman Islands domiciled UP Fintech holding company has operating entities in Asia (including China), Oceania (that's all the islands and nations surrounding the Eastern Pacific, including Hong Kong, Singapore, New Zealand, Australia, etc). The company was founded in Beijing in 2014 and has its HQ-proper, there.
2. The good: An excellent platform
TIGR's primary product is its trade platform, much ike Robinhood. TIGR's trading platform is called Tiger Trade and consists of an app as well as a desktop client/server application, which work in concert. It provides options trading as well as the usual trading of stocks; unlike RH, TIGR offers access to global markets, so from a single app you can trade the Nasdaq, NYSE, OTCs, LSE, Hang Seng, the ASX, etc. This is a powerful feature as I am sure WSB degens will appreciate: why lose money for 8 hours a day when you can lose it around the clock!
Tiger Trade provides full access to markets, eg pre and post. Execution is excellent, the interface is very good on the app (although not quite RH good, particularly when it comes to options), and the platform is comprehensive, offering up to the minute charting, news, analysis, all SEC filings, company profiles and analyst price targets, in a single place. You get NYSE Arcabook standard and can buy additional data packages. It is gamified, like RH, incentivising trades and encouraging community engagement by awarding ‘Tiger Tokens' for various actions, including making trades, as well as ‘social' actions such as commenting, sharing positions, producing DDs, and so on. These tokens can be used to purchase various items including ‘Commission-free trade cards'.
Which brings us to another matter - the cost of trading on Tiger. Signup is free (in my country, NZ, at least - I don't know if this is the case elsewhere). Typically, a trade will cost you .99c US, no matter the value of the trade. You can't trade fractional shares. Tiger Trade also supports short selling for the brave or really foolish (like me).
3. The bad: It's an ADR. And some other stuff.
Probably the biggest risk I see with TIGR is its status as an ADR. While TIGR hasn't ‘enjoyed' the scrutiny of the CCCP which has befallen BABA, BIDU, VIPS and especially the edus the tickers of which can no longer be mentioned on WSB, it is nevertheless joined at the hip with other Chinese ADRs. This means whether or not the CCCP has a blowtorch on TIGR specifically, it is subject to the same vagaries of a dictatorial party, ie there is political risk either directly or by association. This has, I think, underpinned recent volatility in the stock, which tends to move in lockstep with the other ADRs…China stocks up, TIGR stock up, and vice versa. It's a China stock, what can I say.
There was also the issue, so to speak, of a share issue in June, where a further 6.5 million ADRs were issued. In a statement, the company said the proceeds are to go towards (i) expanding its customer base and driving customer engagement with its services, (ii) investing in expanding its products, services and technologies to enhance its user experience and operating efficiency, and (iii) expanding its international presence. Issues are never good for existing holders, but at least TIGR didn't include the ‘general corporate purposes' which invariably means ‘We need the money for rent and salaries'. The other thing is that the offering is complete, so there shouldn't hopefully be any further dilution on the cards for now.
4. The pretty: A growth story
Let's take a look at some numbers. The company is currently valued at around 2.4 billion and has around 800 employees (compare with RH with a valuation north of 16b, and around 1300 employees).
At the last quarter, TIGR published the following results:
· Total revenues increased 255.5% year-over-year to US$81.3 million.
· Total net revenues increased 245.7% year-over-year to US$75.7 million.
· Net income increased to US$21.1 million from net loss of US$0.5 million in the same quarter of last year.
· Net income attributable to UP Fintech increased to US$21.1 million from net loss of US$0.2 million in the same quarter of last year.
· Non-GAAP net income attributable to UP Fintech increased to US$23.5 million, compared to US$1.1 million in the same quarter of last year. A reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics is set forth below.
· Operating Highlights for First Quarter 2021
· Total account balance increased 289.8% year-over-year to US$21.4 billion.
· Total margin financing and securities lending balance increased 177.3% year-over-year to US$2.3 billion.
· Total number of customers with deposits increased 180.4% year-over-year to 376.0K.
Right now, TIGR is trading at a PE of about 52. There's plenty of volume, with around 10 mil per day, so liquidity isn't an issue.
After the publication of these results in May, the share price shot through the roof, going from around 17 to around 28 in a little over two weeks.
5. Upcoming earnings
TIGR reports on 10 September (pre). Given the rapid expansion of its customer numbers in the preceding quarter, and given the growing interest in easy-to-use, affordable trading platforms not only in the USA but everywhere (and the Chinese are everywhere, along with compliant gweilos like myself), I fully expect the customer growth numbers to shoot out the lights. That share issue described above may even prove a major catalyst in driving customer growth, after all, they completed the offering fast and have the money, let's see how well they have invested it.
My expectation for earnings is a big boost in the share price. Right now, with the Chinese ADRs experiencing something of a comeback, I have a price target of at least $24. That's solid upside from the current SP of around 13.70.
6982 shares at 14.56. Looking for any dips below 13 to add more. Considering buying some calls for the week after earnings, but a noob when it comes to options trading.
EDIT TO ADD: 5 analysts rate Up Fintech ADR with an average target price of 29.68; low of 21.06 and high of 38.67. Go get it boys!