Forensic Analyst

Jason Yap, CFA

Forensic Accounting

After Ant Financials' IPO was pulled in November 2020, market participants eventually came to terms with the potential repercussions on the fintech industry.  The initial concerns of anti-monopoly, systemic risks, and data protection have since become familiar topics. 
Amongst listed fintech companies, <a href="https://www.smartkarma.com/entities/lufax-holdings" target="_blank" data-smartkarma-citation="entities:29690:1" rel="noopener">Lufax Holdings (LU US)</a> bore the brunt of the regulatory crackdown on the fintech sector, losing more than half its market capitalisation since the mid February 2021 peak. Lufax currently trades at a forward EV/EBITDA of 4.2x and P/B of 1.3x.
While Lufax initially distanced itself from Ant (drawing attention to its loan facilitation model instead of Ant's co-lending model) and the harsh rules that Ant was subject to, it soon became apparent that Lufax's loan facilitation model would not be spared.
Lufax started a series of self-policing efforts, citing ongoing dialogue with regulators, while searching for alternative models to maintain loan book growth and net margins. 
The narrative has gradually since switched to negatives being discounted to Lufax's share price, renewed optimism of business reform efforts, and that Lufax has turned the tide. 
This article discussed potential risks that remain and how recent new regulations imposed on Ant would (once again) have a ripple effect on fintech players, like Lufax.

After Ant Financials' IPO was pulled in November 2020, market participants eventually came to terms with the potential repercussions on the fintech industry.  The initial concerns of anti-monopoly, systemic risks, and data protection have since become familiar topics. 
Amongst listed fintech companies, Lufax Holdings (LU US) bore the brunt of the regulatory crackdown on the fintech sector, losing more than half its market capitalisation since the mid February 2021 peak. Lufax currently trades at a forward EV/EBITDA of 4.2x and P/B of 1.3x.
While Lufax initially distanced itself from Ant (drawing attention to its loan facilitation model instead of Ant's co-lending model) and the harsh rules that Ant was subject to, it soon became apparent that Lufax's loan facilitation model would not be spared.
Lufax started a series of self-policing efforts, citing ongoing dialogue with regulators, while searching for alternative models to maintain loan book growth and net margins. 
The narrative has gradually since switched to negatives being discounted to Lufax's share price, renewed optimism of business reform efforts, and that Lufax has turned the tide. 
This article discussed potential risks that remain and how recent new regulations imposed on Ant would (once again) have a ripple effect on fintech players, like Lufax. 

Lufax (LU) - Not Yet a Turnaround Story Despite Sharp De-Rating