These Financial Services Stocks Look Primed For Significant Upside (AGBA, MNY)

February 28
05:04 2024

As the world’s major economies grapple with the threat of a looming recession, it has never been more crucial for investors to look harder for opportunities with the potential for above-average returns.

According to BCA strategist Roukaya Ibrahim, a recession is still on the way despite Wall Street’s optimism, and stocks are at risk of a steep decline when the downturn hits. Ibrahim believes that the economy will likely tip into a downturn before early 2025, and once it does, the S&P 500 could fall as low as 3,500, which would take the benchmark index around 26% lower from its current levels. 

The UK already slipped into a technical recession in the second half of last year after its economy registered two consecutive quarters of negative economic growth, according to official figures, with the BoE expecting only a slight improvement in 2024, if any.

In Asia, however, particularly Hong Kong, the post-pandemic economic recovery is still going strong considering it recorded 3.2% growth in 2023, partly driven by private consumption. In fact, Hong Kong’s GDP in the third and fourth quarters rose by 4.1 and 4.3 percent year-on-year, respectively, illustrating the resilience of the economy.

It’s therefore not surprising that Asian-based companies have started getting on investors’ radar, especially the ones with multiple positive catalysts that could drive their share price higher.

For instance, AGBA Group Holding Limited (NASDAQ:AGBA), which is known as the one-stop financial supermarket, provides ‘wealth and health’ to its customers with state-of-the-art technologies and passionate customer care. For some background, AGBA has a long and rich history, having been established as far back as 1993 and only going public on the NASDAQ in November 2022.

Before going public, the group restructured to separate its legacy broker-dealer business into a platform business and a distribution business, which today offer unique products and services composed of:

  • B2C: market-leading portfolio of wealth and health products
  • B2B: tech-enabled broker management platform for advisors

Trusted by over 400,000 individual and corporate customers, the group now has four distinct market-leading businesses: platform business, distribution business, healthcare business, and fintech business. Essentially, AGBA has become a leading one-stop financial supermarket offering the broadest set of financial and healthcare products in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) through its tech-enabled ecosystem, enabling clients to unlock the choice that best suits their needs.

AGBA Group Holding Limited (NASDAQ:AGBA) has the potential to unlock significant shareholder value going forward based on a number of facts. 

For starters, the group is led by top-notch management with deep industry expertise and impeccable credentials across platform, distribution, healthcare, and fintech businesses spanning over 20 years. The group is also well experienced in navigating the stringent regulatory regime in the country, having secured national and provincial operating licenses since 2006, which reiterates the group’s commitment to operational excellence and credibility when it comes to regulatory compliance.

The choice of AGBA’s strategic location in the Greater Bay Area also ties in perfectly with the fact that it provides an easy and efficient way of capturing huge organic and inorganic growth opportunities, considering that Hong Kong accounts for roughly 13% of China’s $17 trillion economy.

So far, AGBA’s unique ‘universal’ one-stop financial business solution platform serving financial advisors, brokers, and financial institutions has reaffirmed why the company is primed for massive growth going forward, considering the group is already servicing 16% of the Hong Kong broker market and reaches more than 400,000 individual and corporate customers in the GBA.

Also, according to its recently released third quarter earnings report for the period ending September 30, 2023, the company generated $41 million in revenue for the first nine months of 2023, which was more than double compared to the first nine months of 2022 (up 115%). 

On February 15 this year, AGBA Group Holding Limited (NASDAQ:AGBA) hit a major corporate milestone after it announced that it had completed a private placement with an institutional investor, AGBA’s Group President, Mr. Wing-Fai Ng, and AGBA’s management team, which raised approximately $5.1 million.

This not only demonstrates the trust and confidence that both external investors and the company’s management have in the company’s franchise strength and growth potential but also reaffirms its long-term prospects based on the fact that it was executed at a price significantly above the market price of AGBA ordinary shares.

Unsurprisingly, it seems that the market has been taking note of the company’s recent wins, as illustrated by the stock’s recent rally, which has seen the share price surge by roughly 35% over the past month alone. However, this could just be the early stages of a much bigger rally, considering the extent of the company’s undervaluation.

While there are no direct comparable companies to AGBA on the NASDAQ, we believe that the most relevant categories for comparison are insurance brokerage and tech-enabled wealth platforms. According to data from last year, insurance brokerages and tech-enabled wealth platforms had a median EV/Sales ratio of about 6.5x and 3.8x, respectively, which is in stark contrast to AGBA’s EV/Sales ratio of just 0.06x based on 2023 revenue estimates.

That implies that AGBA Group Holding Limited (NASDAQ:AGBA) stock has significant upside potential once the market fairly values the company, which currently has a market cap of $35 million. Luckily, that may not be too far off into the future considering that the company expects approximately $150 million in revenue for 2023. 

Also, according to AGBA’s recent press release, the company will be implementing a number of cost-cutting measures in a bid to reduce operating expenses to further boost growth and profitability. At the same time, the company plans to sell assets from non-core activities to support growth. Following these strategic initiatives, AGBA will be well positioned to become a key player in the market and also be nimble enough to take on new partnerships. Ultimately, we believe that China’s improving macro environment, coupled with AGBA’s refined business model, will help close the current valuation gap.

Another stock that has been generating investors’ interest is MoneyHero Group (NASDAQ:MNY), which operates in the online personal finance aggregation and comparison sector in Greater Southeast Asia. It has operations in Singapore, Hong Kong, Taiwan, the Philippines, and Malaysia, with respective brands for each local market. The company manages 279 commercial partner relationships, and its brands in Hong Kong and Singapore currently serve about 2.6 million monthly unique users across both markets.

Back in January, the company released its 2023 fourth quarter earnings guidance, which further reaffirmed the substantial opportunity in Asia for financial services companies.

MNY expects group revenue to increase by more than 50% year-over-year from $17.2 million in Q4 ’22, with Singapore looking set to become the key growth driver thanks to the 100% increase in revenue contribution. In addition to that, as recently as last week, the company provided a corporate update revealing that it anticipates year-over-year revenue growth of 50% in Hong Kong for the month of this year.

Prashant Aggarwal, Chief Executive Officer of MoneyHero, noted, “Singapore and Hong Kong represent the center of Southeast Asia’s economy. To win in these markets, companies need to dedicate themselves to maintaining pace with ever-evolving consumer demands through both consistent innovation and elevated customer experiences.”

That is exactly why the company has embarked on building the largest ecosystem of creators, influencers, KOLs, and channel partners throughout Hong Kong and Singapore to further enhance its platform and reach. In addition to this, by leveraging the latest financial innovations, including artificial intelligence, MNY plans to introduce a host of new offers and products to further drive growth.

At the moment, the company has a market cap of about $92 million, following a massive 97% rally over the past month alone. This suggests that MNY’s valuation may have become significantly richer for most risk-averse investors, meaning they are likely to remain on the sidelines as they wait for a better entry point.

 

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