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Jupai Holdings Ltd. - Growth Momentum Supported by Product Mix Strategy

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NEW YORK, NY / ACCESSWIRE / December 11, 2018 / Jupai (JP) reported 9M-2018 net revenue of RMB 1,187.4 million (USD $172.9 million), a YoY decrease of 4.7%. Net income attributable to ordinary shareholders was RMB 205.4 million (USD $29.9 million), a YoY decrease of 35.6%, and diluted earnings per ADS was RMB 5.85 (USD $0.85), a YoY decrease of 38%. However, non-GAAP net income attributable to ordinary shareholders, adjusted by GAAP required items including share-based compensation, amortization and impairment loss, was RMB 267.1 million, a YoY decrease of 24.2% and non-GAAP diluted earnings per ADS was RMB 7.60 (USD $1.11), a YoY decrease of 27.1%.

Result Highlights

Expanding asset under management (AUM) driving recurring management fees growth.

Due to the impact on stringent regulations in financial service industry, Jupai posted 9M-2018 net revenue of RMB 1.2 billion, down 4.7% y/y, while one-time commission, the largest source of revenue accounted for 59.5% of total revenue to RMB 706.4 million, slid only 3.2% for 9M-2018. Meanwhile, the net revenues contributed from recurring management fees increased 35.2% y/y to RMB 341 million, accounting for the second largest revenue source and primarily driven by a YoY growth of 15.3% in AUM of RMB 57.8 billion (USD $8.4 billion). The company's AUM is expected to continue to grow by optimizing its products mix toward private equity product and actively managed funds, given equity products' longer investment horizon, which in turn should generate higher management fees over the long haul.

As the 3Q-2018, the total aggregate value of wealth management products distributed by Jupai was RMB 5.3 billion. Looking forward, in the fourth quarter of 2018, Jupai is expected to record RMB 5 billion worth of the total distributed wealth management products in line with this quarter.

Sustained one-time commission rate growth ascribed to tightened regulations.

In light of the property purchase restriction policy coupled with new regulations in financial service industry, property developers have been facing challenges on the tight liquidity and the limited access to funding, and hence property developers are willing to accept higher cost of capital, which in turn enhance Jupai's bargaining power for its real estate-related private equity products. As the 3Q-2018, the company's one-time commission rate increased to 2.8% in 3Q-2018, up from 2.2% in 3Q-2017 and in line with 2Q-2018. Such transition is reflective in 3Q-2018 product mix, where fixed-income products accounted for 16.4% of total products distributed compared to 83.8% in 3Q-2017, while private equity products accounted for 70.1% of total products distributed compared to 11.0% in 3Q-2017.

Improving operational efficiency driven by digitization adoption

During this turbulent time in wealth management industry, the company's strengths and reputation are two key factors to build clients' trust. Jupai has been prepared to cope with the challenges by focusing on reinforcing operational efficiency through upgrading IT system and strengthening its talent base, and by optimizing risk control system with product management system. Such enhancements will lead not only to digitize entire customers' investment decision-making processes through mobile app or online platform but also to ensure the quality of product design as well as the risk controls of its assets under management. Overall, the integrated digitization strategy will enable the company to improve customer experience via big data analytics.

As of September 30, 2018, Jupai ensures broader client reach with expanding coverage network of 77 client centers in 49 cities, from 72 client centers covering 48 cities as of September 30, 2017.



SOURCE: Stone Street Group LLC