US-listed Futu Holdings Ltd (NASDAQ:FUTU) should be no stranger to fellow Singaporean investors – many of us know should be familiar with the company’s MooMoo online trading platform:
The MooMoo Online Trading Platform by US-listed Futu Holdings Ltd
From my understanding, as at the end of the financial year 2022 ended 31 December, MooMoo had a user base of over 25% of the country’s local adult population. Apart from Singapore (which was launched in March 2021), MooMoo is also available in the United States (where it was launched in 2018), and in Australia (where it was launched in 2022). Also, just this year alone, they have expanded in another 3 countries – in Malaysia (May 2023), Canada (August 2023), and Japan (September 2023).
Another online trading platform by the US-listed company is Futubull – which is mainly available to users based in Hong Kong and China.
In terms of income generation by the company, it comes mainly from the trade execution of stocks, ETFs (Exchange Traded Funds), warrants, options, and futures across different markets, along with margin financing and securities lending.
So, is Futu Holdings Ltd a ‘buy’? The best way to answer this question is to look at its financial performances and debt profile over the years, and in today’s post I will be looking at them in detail (where I will be evaluating the company’s financial performances and debt profile recorded over the last 3 years – between FY2020 and FY2022).
As mentioned in the introductory paragraph, I will be looking at Futu Holdings Ltd’s financial performance over the last 3 financial years (between FY2020 and FY2022 – the company has a financial year end every 31 December) – particularly, I will be looking at its total revenue and net profit, gross and net profit margin, and return on equity:
Total Revenue & Net Profit:
Both its total revenue and net profit have recorded a strong compound annual growth rate (CAGR) over a 3-year period – with the former at 31.7%, and the latter at 29.9%.
Also, both the company’s total revenue and net profit have recorded year-on-year improvements throughout the entire 3-year period I have looked at.
Gross & Net Profit Margin:
The following is Futu Holdings Ltd’s gross and net profit margin I have computed:
In my opinion, the company have recorded a very good gross profit margin over the last 3 years, where it has been on an upward moving trend – from 78.9% in FY2020 to 86.9% in FY2022.
Looking at its net profit margin, while it has moved in the opposite direction in the same time periods, but in my opinion, at such a percentage (of around the high-end of 30+%), I consider it to be pretty decent.
Return on Equity:
In layman terms, Return on Equity, or RoE for short, is a computation of profits (in percentage terms) generated by the company for every dollar of shareholders’ money it uses in its businesses. Personally, my preference is towards companies that are able to maintain their RoE at above 15.0%.
With that in mind, let us look at Futu Holdings Ltd’s RoE over the last 3 years which I have computed in the table below:
The company’s RoE slipped to 13.4% in FY2021 before recovering to 14.0% in FY2022. I will have a look at this statistic in the coming full year to see if it manage to record further improvements.
Besides financial performance, another area I look at when I study a company is its debt profile – where my preference is towards those with little or no debt. At the same time, I would also prefer to invest in companies that are able to maintain a net cash position.
Did Futu Holdings Ltd’s debt profile meet the above 2 requirements? Let us find out in the table below:
|Cash & Cash|
One of the things I like about Futu Holdings Ltd is the company having minimal borrowings. As a result, it has not only maintained a net cash position throughout the entire 3-year period I have looked at, but its net cash position have also improved every single year.
Dividend Payout to Shareholders
The management of Futu Holdings Ltd did not declare any dividends to its shareholders – its something you need to be mindful of if your objective is to build a dividend portfolio.
A strong CAGR growth in its total revenue and net profits (at 31.7% and 29.9% respectively over a 3-year period), steadily rising gross profit margin (up every year from 78.9% in FY2020 to 86.9% in FY2022), and the company’s improving net cash position over the 3-year period I have looked at are aspects that I find desirable.
If there’s one slight negative, it will be the net profit margin, which recorded successive years of decline throughout the entire 3-year period I have looked at.
With that, I have come to the end of my share on Futu Holdings Ltd today. I hope the contents presented in this post have given you a good understanding about this US-listed company. As always, do note that everything you have just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the company’s shares. You are strongly encouraged to do your own due diligence before making any investment decisions.
Disclaimer: At the time of writing, I am not a shareholder of Futu Holdings Ltd.
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