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Noah Holdings Limited (NOAH) $84mm IPO |
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with a market cap of $547 at price range mid-point of $10.
Scheduled for Wednesday, November 10, 2010 |
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SUMMARY |
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Distributes wealth management products in China. Impressive results for the nine months ended September 30. Compared to the year earlier period |
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. Sales increased 260% |
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. Income increased 500% |
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. For the six months ended June 30, 2010 average transaction value per client increased to US$1.0 million from US$0.5 million |
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With a P/E of 41 (annualizing the September three months) NOAH should attract considerable investor interest, because there is room for substantial growth. |
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Conclusion: based on recent quarterly results NOAH should be a good IPO trade, at least. |
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BUSINESS |
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. Distributes wealth management products to the high net worth population in China.
. Wealth management products originated in China, and included primarily fixed income products, private equity funds and securities investment funds.
. Has over 300 relationship managers in 28 branch offices |
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MARKET |
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China’s private wealth management services industry is at an early stage of development, characterized by low market penetration, increasing client awareness, fragmented market and strong growth potential. According to the Heading Report, approximately 80% of China’s high net worth individuals managed their wealth and made investment decisions on their own |
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. Independent wealth management service providers form a small market segment within the overall wealth management services industry in China.
. This segment is fragmented, with only a handful of prominent wealth management service providers that have gained critical mass and can provide comprehensive and client-oriented services.
. According to NOAH Independent wealth management service providers are in a better position to provide independent and objective advice to high net worth clients as they are not affiliated with any financial institutions or product providers. |
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METRICS |
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Registered clients |
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Despite the global financial crisis starting in 2008, the cumulative number of registered clients increased from 3,089 as of December 31, 2007 to 6,606 as of December 31, 2008, and to 9,641 as of December 31, 2009 and further to 12,353 as of June 30, 2010 |
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Active clients |
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Active clients increased from 926 as of December 31, 2007 to 1,065 as of December 31, 2008, and to 1,235 as of December 31, 2009.
For the six months ended June 30, 2010, the number of active clients was 779, as compared to 615 for the six months ended June 30, 2009 |
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Average transaction value per client |
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. Increased from US$0.2 million) in 2007 to US$0.4 million in 2008 and to RMBUS$0.7 million in 2009, representing a three-year CAGR of 102.3%.
, For the six months ended June 30, 2010, NOAH’s average transaction value per client was US$1.0 million as compared to US$0.5 million for the six months ended June 30, 2009. |
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COMPETITION |
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The wealth management services industry in China is at an early stage of development and is growing rapidly. Principal competitors include |
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• Commercial banks.
. Many commercial banks rely on their own wealth management arms and sales force to distribute their products, such as China Merchants Bank, China Minsheng Bank and China Everbright Bank.
. NOAH believes that it can compete effectively with commercial banks due to a number of factors, including an undiluted focus on the high net worth market, client-centric culture and institutionalized services, and independence, which positions NOAH better to provide wealth management recommendations and services and to gain clients’ trust, according to NOAH. |
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• Trust companies.
Because a substantial portion of products that NOAH distributes are fixed income trust products, NOAH competes with trust companies with in-house distribution functions. |
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• Independent wealth management service providers.
A number of independent wealth management service providers have emerged in China in recent years.
USE OF PROCEEDS
$75mm |
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• 15.0 million to set up new branch offices and expand our coverage network, including hiring additional relationship managers, to carry out geographic expansion strategy to target cities in high growth and relatively more affluent regions
• $15.0 million to update IT infrastructure;
• $15.0 million for capital contribution to funds of funds formed by NOAH; and
• remaining amount for general corporate purposes, including funding potential acquisitions of complementary business |
