20140415-兴证国际证券-皓天财经集团-01260.HK-香港唯一一家上市财经公关公司_34页_1mb

Equity Research Summary: Wonderful Sky Financial Group (1260.HK)

Core Content

Wonderful Sky Financial Group (WSFG), listed as 1260.HK, is the only publicly listed financial public relations (PR) firm in Hong Kong. The report recommends a Buy rating with a target price of HK$1.78, representing a 52% upside potential from the current price of HK$1.17.

The PR industry in Hong Kong and China is expected to have significant growth potential, driven by the increasing number of listed companies and the growing demand for financial PR services. The global PR industry has grown at an annual rate of around 8% over the past three years, while the Chinese market has seen a yearly compound growth rate of 28.46% from 2000 to 2012. However, the market remains fragmented, with only about 20 recognized financial PR companies in mainland China.

Key Statistics

Investment Highlights

• Buy Rating: WSFG is the only listed financial PR company in Hong Kong and is expected to benefit from the growing demand for financial PR services in the region.
• Low Valuation: WSFG's P/E ratio is significantly lower than that of international PR firms, indicating a potential for value appreciation.
• High Dividend Yield: The dividend yield is expected to increase from 6.1% in 2014 to 11.1% in 2016, offering attractive returns.
• Strong Client Base: Over 150 long-term non-IPO clients, with a high conversion rate of IPO clients to long-term clients (over 90%).
• Market Leadership: In 2013, 7 out of the top 10 IPOs in Hong Kong were clients of WSFG, highlighting its strong market position.

Competitive Advantages

• Expertise in IPO Projects: WSFG has a proven track record with major IPO projects, including Agricultural Bank of China, China Everbright Bank, and others, which helps consolidate its leadership in the IPO PR sector.
• Cross-Market Experience: With experience in both A and H share markets, WSFG can provide a one-stop solution to companies seeking PR services, especially as the interconnection between Shanghai and Hong Kong markets becomes more established.
• Strategic Partnerships: WSFG has established relationships with investment banks and has signed a three-year exclusive partnership with Ipreo, enhancing its client base and industry influence.
• Deep Understanding of Chinese Market: The company's management has extensive experience in understanding the needs of Chinese companies and the local communication culture, which is a key differentiator from international PR firms.

Financial Status

• Steady Growth: WSFG has shown a 25% CAGR in revenue over the past five years.
• Healthy Margins: The gross margin for financial PR services is expected to remain above 50%, and the net margin above 30%.
• Strong Cash Position: The company holds HK$420 million in cash with no debt, providing a solid financial foundation for expansion.
• Future Expansion: The company is actively seeking acquisition targets to expand its business in mainland China.

Catalysts for Growth

• Successful acquisitions that provide synergies.
• Expansion into mainland China.
• Gaining a better-than-expected market share.

Risks

• Systematic Risk: Global and Hong Kong market downturns could negatively impact financial PR services.
• Liquidity Risk: The company has a 25% free float, which may affect its liquidity.

Market Data

Summary

WSFG is a leading financial PR firm in Hong Kong with a unique position in the market. It offers a comprehensive range of services including PR, investor relations, international roadshows, financial printing, and brand promotion. The company has a strong track record of managing major IPO projects and has a robust client base, with a high conversion rate from IPO to long-term clients. Its financial performance is strong, with consistent revenue and net income growth and healthy margins. The company is well-positioned for future growth due to its strategic partnerships and expansion plans, but it faces risks related to market volatility and liquidity. The report recommends a Buy rating due to its undervaluation and strong growth potential.