Hot Stock to Track: Jupai Holdings Limited (NYSE: JP)

On Tuesday, Shares of Jupai Holdings Limited (NYSE: JP) surged 6.48% to $7.89. The stock opened its trade at $7.40 and after floating in a price range of $7.33 to $7.91; the stock grabbed the investor’s attention and traded 160,499 shares as compared to its average daily volume of 235.66K shares. The stock’s institutional ownership stands at 11.80%.

Jupai Holdings Limited (JP), a leading third-party wealth management service provider, focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China, recently declared its unaudited financial results for the second quarter and six months ended June 30, 2018.

SECOND QUARTER AND FIRST HALF 2018 FINANCIAL HIGHLIGHTS

  • Net revenues in the second quarter of 2018 were RMB443.60M (US $67.00M), a 1.6% increase from the corresponding period in 2017. For the first half of 2018, net revenues were RMB876.80M (US$132.50M), a boost of 8.9% from the same period in 2017.
  • Income from operations in the second quarter of 2018 was RMB160.30M (US$24.20M), a 3.5% decrease from the corresponding period in 2017. For the first half of 2018, income from operations was RMB312.80M (US$47.30M), a boost of 7.4% from the same period in 2017.
  • Net income attributable to ordinary shareholders in the second quarter of 2018 was RMB87.80M (US$13.30M), a 21.9% decrease from the corresponding period in 2017. For the first half of 2018, net income attributable to ordinary shareholders was RMB203.70M (US$30.80M), a boost of 0.3% from the same period in 2017.
  • Non-GAAP net income attributable to ordinary shareholders in the second quarter of 2018 was RMB115.50M (US$17.50M), a 7.9% decrease from the corresponding period in 2017. For the first half of 2018, non-GAAP net income attributable to ordinary shareholders was RMB241.60M (US$36.50M), a boost of 6.6% from the same period in 2017.

ECOND QUARTER AND FIRST HALF 2018 OPERATIONAL UPDATES:

  • Total number of active clients during the second quarter of 2018 was 3,765.  The aggregate value of wealth management products distributed by the Company during the second quarter of 2018 was RMB9.70B (US$1.50B), a 21.0% decrease from the corresponding period in 2017. For the first half of 2018, the aggregate value of wealth management products distributed by the Company was RMB20.60B (US$3.10B), a 22.2% decrease from the corresponding period in 2017. Jupai’s coverage network as of June 30, 2018 included 76 client centers covering 48 cities, as contrast to 76 client centers covering 47 cities as of June 30, 2017.
  • Total assets under management as of June 30, 2018 were RMB56.70B (US$8.60B), a 4.0% increase from March 31, 2018 and an 18.1% increase from June 30, 2017.

SECOND QUARTER AND FIRST HALF 2018 FINANCIAL RESULTS:

Net Revenues:

Net revenues for the second quarter of 2018 were RMB443.60M (US$67.00M), a 1.6% increase from the corresponding period in 2017, mainly because of increases in both one-time commissions and recurring management fees. Net revenues were RMB876.80M (US$132.50M) for the first half of 2018, a boost of 8.9% from the same period in 2017.

  • Net revenues from one-time commissions for the second quarter of 2018 were RMB282.20M (US$42.70M), a 22.7% increase from the corresponding period in 2017, mainly as a result of a boost in fee rates. For the first half of 2018, net revenues from one-time commissions were RMB558.70M (US$84.40M), a boost of 20.2% from the same period in 2017.
  • Net revenues from recurring management fees for the second quarter of 2018 were RMB121.70M (US$18.40M), a 29.6% increase from the corresponding period in 2017 mainly because of a boost in the value of assets under management. The Company recognized RMB23.30M (US$3.50M) and RMB21.80M carried interest in the second quarter of 2018 and 2017, respectively. For the first half of 2018, net revenues from recurring management fees were RMB244.60M (US$37.00M), a 51.4% increase from the same period in 2017. RMB44.00M (US$6.70M) and RMB23.50M carried interest was recognized as part of Jupai’s recurring management fees for the first half of 2018 and the same period in 2017, respectively.
  • Net revenues from recurring service fees for the second quarter of 2018 were RMB11.40M (US$1.70M), a 65.7% decrease from the corresponding period in 2017, mainly because the Company offered ongoing services to fewer product suppliers. The Company recognized RMB0.30M (US$0.10M) and RMB11.40M variable performance fees in the second quarter of 2018 and 2017, respectively. For the first half of 2018, net revenues from recurring service fees were RMB26.50M (US$4.00M), a 55.5% decrease from the same period in 2017, mainly because the Company offered ongoing services to fewer product suppliers. The Company recognized RMB0.30M (US$0.10M) and RMB12.80M variable performance fees for the first half of 2018 and the same period in 2017, respectively.
  • Net revenues from other service fees for the second quarter of 2018 were RMB28.20M (US$4.30M), a 64.5% decrease from the corresponding period in 2017, mainly because of a decrease in sub-advisory fees collected from other companies. For the first half of 2018, net revenues from other service fees were RMB 47.00M (US$7.10M), a decrease of 60.7% from the same period in 2017.

Operating Costs and Expenses:

Operating costs and expenses for the second quarter of 2018 were RMB283.30M (US$42.80M), a boost of 4.7% from the corresponding period in 2017. For the first half of 2018, operating costs and expenses were RMB564.00M (US$85.20M), a boost of 9.7% from the same period in 2017.

  • Cost of revenues for the second quarter of 2018 was RMB173.90M (US$26.30M), a 7.4% increase from the corresponding period in 2017. For the first half of 2018, cost of revenues was RMB304.40M (US$46.00M), a boost of 2.6% from the same period in 2017.
  • Selling expenses for the second quarter of 2018 were RMB71.80M (US$10.80M), a 9.8% increase from the corresponding period in 2017, mainly because of the increase in marketing expenses. For the first half of 2018, selling expenses were RMB157.10M (US$23.70M), a boost of 25.8% from the same period in 2017.
  • G&A expenses for the second quarter of 2018 were RMB52.50M (US$7.90M), a 16.4% increase from the corresponding period in 2017, mainly because of the increase in both the numbers of managerial and administrative personnel and their average compensation. For the first half of 2018, G&A expenses were RMB117.60M (US$17.80M), a boost of 20.3% from the same period in 2017.
  • Other operating income (government subsidies) received by the Company in the second quarter of 2018 was RMB14.90M (US$2.30M), a 670.9% increase from the corresponding period in 2017. For the first half of 2018, other operating income was RMB15.00M (US$2.30M), a boost of 181.6% from the same period in 2017. Government subsidies were recorded when received, with their availability and amount dependent upon government administrative policies.

Income tax expenses for the second quarter of 2018 were RMB49.30M (US$7.40M), a 10.2% increase from the corresponding period in 2017. For the first half of 2018, income tax expenses were RMB88.40M (US$13.40M), a boost of 18.9% from the same period in 2017, mainly because of a boost in taxable income.

Net Income

– Net Income:

  • Net income attributable to ordinary shareholders for the second quarter of 2018 was RMB87.80M (US$13.30M), a 21.9% decrease from the corresponding period in 2017. For the first half of 2018, net income attributable to ordinary shareholders was RMB203.70M (US$30.80M), a boost of 0.3% from the same period in 2017.

– Non-GAAP Net Income

  • Non-GAAP net income attributable to ordinary shareholders for the second quarter of 2018 was RMB115.50M (US$17.50M), a 7.9% decrease from the corresponding period in 2017. For the first half of 2018, non-GAAP net income attributable to ordinary shareholders was RMB241.60M (US$36.50M), a 6.6% increase from the same period in 2017.

Balance Sheet and Cash Flow:

As of June 30, 2018, the Company had RMB 1,080.50M (US$163.30M) in cash and cash equivalents, contrast to RMB 1,527.80M as of December 31, 2017.

Net cash offered by operating activities during the second quarter of 2018 was RMB139.50M (US$21.10M). For the first half of 2018, net cash used in operating activities was RMB11.10M (US$1.70M).

Net cash offered by investing activities during the second quarter of 2018 was RMB224.50M (US$33.90M). For the first half of 2018, net cash used in investing activities was RMB332.50M (US$50.20M).

Net cash used in financing activities during the second quarter of 2018 was RMB107.80M (US$16.30M). For the first half of 2018, net cash used in financing activities was RMB103.70M (US$15.70M).

BUSINESS OUTLOOK:

The Company estimates that its net income attributable to ordinary shareholders for the full year of 2018 will be in the range of RMB532.30M to RMB573.30M, a boost of 30.0% to 40.0% contrast to 2017. This forecast reflects the Company’s current and preliminary view, which is subject to change.

JP has a market value of $250.74M while its EPS was booked as $1.69 in the last 12 months. The stock has 31.78M shares outstanding. In the profitability analysis, the company has gross profit margin of 57.90% while net profit margin was 23.00%.

Grover Beam

Grover Beam has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. He is an active day trader spending the majority of her time analyzing earnings reports and watching commodities and derivatives. He has a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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