Stock research on global mid-cap companies

Evaluate Research

Evaluate Research provides institutional quality stock research on small-cap and  mid-cap companies on a global basis, thus helping connect investors with the company.

At Evaluate Research, we provide free of cost to all investors a 20-25 page Initiation Report which evaluates in great detail all aspects of the company:  growth opportunities, catalysts, business description, competitive positioning, SWOT analysis, risks, etc.  In addition, we determine specific price targets for the company based on detailed 5-year complete forecasts of financial statements including IS, BS, CF, ratios, etc.  Finally, whereas many sell-side brokers offer sketchy and irregular ongoing maintenance research of companies, if not outright dropped or termination of coverage, at Evaluate Research we systematically monitor and regularly publish Update Notes covering quarterly earnings, major corporate events, etc.

All of the research reports are broadly and freely disseminated globally to leading Fund Managers and analysts who invest specifically in mid-size equities, and also on leading investment information platforms including: Bloomberg, Thomson Reuters, FactSet etc.

Stock research on global mid-cap companies, Evaluate Research

Equity Bottom-Up

Buy-rated Hywin Holdings [NASDAQ: HYW; US$6.08; $172 million market cap] reported a mixed set of results for the fiscal 1st half [ended December], with strong client growth and internal operating metrics, slightly higher revenues, but lower net income in part due to modestly higher costs.&nbsp; Global markets have been very volatile during the second half of calendar 2021, and that volatility has continued so far in 2022, and this has led to lower earnings for many financial and investment firms.&nbsp; In this respect, Hywin’s revenue growth can be characterized as being overall quite resilient.&nbsp; We are encouraged by the strong growth in the number of clients and active clients, and believe this will serve Hywin well going forward, once the current market pressures eventually ease.&nbsp; Also, it should be pointed out that Hywin is facing extremely strong YoY comparisons, as Hywin’s prior Fiscal Year ended 06/2021 witnessed +43% revenue, +96% net income, and +83% diluted ADS growth.&nbsp; In this context, we firmly believe that Hywin remains on a growth trajectory in a secularly evolving industry with a large TAM [total addressable market] and the stock, trading at extraordinary “deep value” multiples on several metrics, continues to offer very favorable risk-reward for investors.
In terms of robust internal metrics, the number of total clients increased 12.5% YoY to 134,656 and, within this, the number of active clients rose 22.0% to 35,366.&nbsp; The repeat investment rate for existing clients was 81.6% [up from 77% during the prior reported quarter] during the six-month period, which is among the highest levels in the industry.&nbsp; Aggregate transaction value of wealth management products distributed by Hywin increased 3.5%.&nbsp; Hywin continues to emphasize asset allocation and diversity of investment and product choices.&nbsp; Towards this goal, it was encouraging to see the transaction value of Private Equity products grow 296% YoY, while Hedge Fund products surged 440%.
Revenues grew +1.4% YoY against a very tough comparison from the prior year.&nbsp; Asset Management revenues, which are still a small part of overall revenues, grew 35% YoY, and Hywin continues to prioritize rapidly expanding this segment going forward.&nbsp; Management has mentioned “cost control and efficiency focus are key priorities” on their conference call, and overall compensation expenses were flat, while sales/marketing costs were up only 2.0% YoY.&nbsp; General and administrative expenses, however, were up 28.5% YoY, reflecting continued technology infrastructure investments.&nbsp; This led to net income declining -15.9% YoY, and lower foreign exchange translation gains led to overall diluted income per ADS declining -27.5%.&nbsp; The balance sheet remains pristine, with net cash [minus customer deposits, and with zero debt] now at $2.82 per ADS, or about 46% of the current stock price!
Conclusion:&nbsp; Undervalued @ 5x P/E, 46% Net Cash, and strong FCF
Hywin, China’s third largest, and most rapidly growing, independent wealth management provider and investment advisor, represents a unique combination of clear deep value and rapid growth in a secular growth sector.&nbsp; We maintain our Buy rating, but have reduced our price target to $12.00 [from prior $14.00].&nbsp; We have also reduced our model estimates; we are now looking for 3.7% revenue growth, and slight positive income per ADS growth, for the current FY 06/2022.&nbsp;&nbsp; Once financial market conditions are more normalized, we expect a sharp snap-back in overall growth rates for Hywin.
Our $12.00 target is based on a 9.7x P/E multiple on our current FY 06/2022 estimate [8.4x P/E on our forward 06/2023 estimates], suggesting the stock has the potential to double from the current price.&nbsp; Our $12.00 price target is only 20% higher than last year’s [March 2021] IPO price of $10.00.&nbsp; The upside opportunity looks very compelling to us, with the stock currently trading at around a 40% discount to its initial listing price.&nbsp; The stock is still very much undiscovered following its NASDAQ listing, and Evaluate Research remains the only firm who is now actively covering the company.
<ul>
<li>A Market Leader:&nbsp; Hywin is the 3rd largest independent wealth management provider in China, with a growing 7.5% market share.</li>
<li>Strong Growth Potential:&nbsp; +43% revenue, +96% net income, and +83% diluted ADS growth for trailing FY ended 06/2021</li>
<li>Robust Client Growth:&nbsp; 12.5% client growth, 22% active client growth</li>
<li>Clear Deep Value:&nbsp; 4.9x P/E on FY 06/2022, 4.3x P/E on our forward FY06/2023 estimates</li>
<li>Robust FCF &amp; ROE:&nbsp; FCF &gt;/= 100% Net Income; 36% actual ROE for FY 06/2021</li>
<li>Net Cash:&nbsp; Hywin has a stellar BS with 46% net cash to market cap</li>
<li>Secular Growth Sector:&nbsp; 3rd party wealth management penetration rate only 6.2% in China in 2019, versus 32% in Hong Kong &amp; 62% in USA.</li>
</ul>
Today’s Update Note, attached…..

Buy-rated Hywin Holdings [NASDAQ: HYW; US$6.08; $172 million market cap] reported a mixed set of results for the fiscal 1st half [ended December], with strong client growth and internal operating metrics, slightly higher revenues, but lower net income in part due to modestly higher costs.&nbsp; Global markets have been very volatile during the second half of calendar 2021, and that volatility has continued so far in 2022, and this has led to lower earnings for many financial and investment firms.&nbsp; In this respect, Hywin’s revenue growth can be characterized as being overall quite resilient.&nbsp; We are encouraged by the strong growth in the number of clients and active clients, and believe this will serve Hywin well going forward, once the current market pressures eventually ease.&nbsp; Also, it should be pointed out that Hywin is facing extremely strong YoY comparisons, as Hywin’s prior Fiscal Year ended 06/2021 witnessed +43% revenue, +96% net income, and +83% diluted ADS growth.&nbsp; In this context, we firmly believe that Hywin remains on a growth trajectory in a secularly evolving industry with a large TAM [total addressable market] and the stock, trading at extraordinary “deep value” multiples on several metrics, continues to offer very favorable risk-reward for investors.
In terms of robust internal metrics, the number of total clients increased 12.5% YoY to 134,656 and, within this, the number of active clients rose 22.0% to 35,366.&nbsp; The repeat investment rate for existing clients was 81.6% [up from 77% during the prior reported quarter] during the six-month period, which is among the highest levels in the industry.&nbsp; Aggregate transaction value of wealth management products distributed by Hywin increased 3.5%.&nbsp; Hywin continues to emphasize asset allocation and diversity of investment and product choices.&nbsp; Towards this goal, it was encouraging to see the transaction value of Private Equity products grow 296% YoY, while Hedge Fund products surged 440%.
Revenues grew +1.4% YoY against a very tough comparison from the prior year.&nbsp; Asset Management revenues, which are still a small part of overall revenues, grew 35% YoY, and Hywin continues to prioritize rapidly expanding this segment going forward.&nbsp; Management has mentioned “cost control and efficiency focus are key priorities” on their conference call, and overall compensation expenses were flat, while sales/marketing costs were up only 2.0% YoY.&nbsp; General and administrative expenses, however, were up 28.5% YoY, reflecting continued technology infrastructure investments.&nbsp; This led to net income declining -15.9% YoY, and lower foreign exchange translation gains led to overall diluted income per ADS declining -27.5%.&nbsp; The balance sheet remains pristine, with net cash [minus customer deposits, and with zero debt] now at $2.82 per ADS, or about 46% of the current stock price!
Conclusion:&nbsp; Undervalued @ 5x P/E, 46% Net Cash, and strong FCF
Hywin, China’s third largest, and most rapidly growing, independent wealth management provider and investment advisor, represents a unique combination of clear deep value and rapid growth in a secular growth sector.&nbsp; We maintain our Buy rating, but have reduced our price target to $12.00 [from prior $14.00].&nbsp; We have also reduced our model estimates; we are now looking for 3.7% revenue growth, and slight positive income per ADS growth, for the current FY 06/2022.&nbsp;&nbsp; Once financial market conditions are more normalized, we expect a sharp snap-back in overall growth rates for Hywin.
Our $12.00 target is based on a 9.7x P/E multiple on our current FY 06/2022 estimate [8.4x P/E on our forward 06/2023 estimates], suggesting the stock has the potential to double from the current price.&nbsp; Our $12.00 price target is only 20% higher than last year’s [March 2021] IPO price of $10.00.&nbsp; The upside opportunity looks very compelling to us, with the stock currently trading at around a 40% discount to its initial listing price.&nbsp; The stock is still very much undiscovered following its NASDAQ listing, and Evaluate Research remains the only firm who is now actively covering the company.

A Market Leader:&nbsp; Hywin is the 3rd largest independent wealth management provider in China, with a growing 7.5% market share.
Strong Growth Potential:&nbsp; +43% revenue, +96% net income, and +83% diluted ADS growth for trailing FY ended 06/2021
Robust Client Growth:&nbsp; 12.5% client growth, 22% active client growth
Clear Deep Value:&nbsp; 4.9x P/E on FY 06/2022, 4.3x P/E on our forward FY06/2023 estimates
Robust FCF &amp; ROE:&nbsp; FCF &gt;/= 100% Net Income; 36% actual ROE for FY 06/2021
Net Cash:&nbsp; Hywin has a stellar BS with 46% net cash to market cap
Secular Growth Sector:&nbsp; 3rd party wealth management penetration rate only 6.2% in China in 2019, versus 32% in Hong Kong &amp; 62% in USA.

Today’s Update Note, attached…..


HYWIN [HYW]: Secular Growth @ 5x P/E, 46% Net Cash, Strong FCF, Industry Leadership: Earnings Update