NEW YORK, NY / ACCESSWIRE / May 22, 2019 / As investors became increasingly conservative on the back of the Chinese government's deleveraging efforts and tightened regulations, 2018 proved to be a challenging year for the overall wealth management industry in China. Prolonged US-China trade tension had also contributed to the uncertainty of economic growth outlook.
Jupai (JP) was no exception to the unfavorable macro backdrop in 2018. The company reported net revenues of RMB1,321.7 million (US$192.2 million) for the full year 2018, a YoY decrease of 22.5%, primarily due to decreases in both one-time commissions and other service fees. GAAP operating margin was -12%, compared to 30.7% in 2017, negatively impacted by the one-time goodwill impairment loss of RMB268 million, or US$39 million from Scepter acquisition back in 2015.
Consequently, Jupai returned a net loss per basic and diluted ADS for the full year 2018 of RMB11.60 (US$1.69) and RMB11.60 (US$1.69), compared to a net income per ADS of RMB12.57 and RMB11.95 in 2017 respectively. While on non-GAAP basis, the company generated net income per ADS of RMB0.37 (US$0.05), versus RMB 13.24 in 2017.
Solid Balance Sheet
Jupai's cash position remained strong in 2018, despite the company's using cash for investing and financing related activities in the year. As of December 31, 2018, the Company had RMB1,302.6 million (US$189.5 million) in cash, cash equivalents and restricted cash, slightly down from RMB1,527.8 million as of end of 2017.
Brighter 2019 Outlook
Looking into 2019, management remains "cautiously optimistic" about China's overall economic outlook. The government has introduced various stimulus policies to support private enterprises, especially SMEs, aiming to boost the nation's economic growth. Additionally, the domestic stock market has also shown signs of recovery since the beginning of 2019. Together with better than expected economic performance in Q1-2019 should help restore investor confidence and investment appetite for wealth management products.
During the industry transition period, Jupai will focus on developing high-quality, innovative new product categories, including real estate equity products and overseas products to better meet investors' increasing global capital allocation needs, and to position itself in seizing opportunities as the market recovers.
Overall management expects the company's net loss to narrow significantly in Q1 and turn positive in the 2nd half of 2019, further aided by more streamlined operation, stringent risk control and optimized smaller headcount.
2018 Financial Result Highlights
Financial performance negatively impacted by Challenging macro backdrop and industry headwind.
Non-GAAP net income dropped 97.1% YoY to RMB13 million in 2018, with net margin dropping to merely 1% , as compared to 26.6% in 2017, dragged by higher sales & marketing expenses.
Unsettled US-China trade deals, market deleveraging and tightened policies regulating the wealth management industry and credit market had all prompted investors to withhold a conservative stand in making investments. Consequently, Jupai reported a 22.5% YoY decline in net revenues for the full year 2018, with weakness seen from across the company's product line.
AUM remained healthy coupled with sustainable, upward-trending one-time commission rate
Total assets under management remained healthy at RMB56.8 billion (US$8.3 billion) as of December 31, 2018, only a 1.4% decrease YoY. Additionally, Jupai was able to achieve an average one-time commission rate of 2.4% in 2018, up from 1.9% in 2017, thanks to the company's enhanced bargaining power as real estate companies continued to face the rising cost of capital. Management is confident in maintaining its average one-time commission rate at a healthy level in the next few quarters, basing on overall credit market improvement observed since the beginning of 2019. The company will continue to roll out new innovative real estate related product to leverage and capitalize on its industry knowledge and expertise.
A brighter 2019 looking to a healthy recovery
Facing the industry challenges, Jupai has been preparing itself by focusing on operational efficiency enhancement through upgraded IT system, big data analytics, talent optimization, and risk-controlled product management.
Following an improving stock market and economy strength witnessed in Q1-2019, Management plans to further reduce headcount to 1500 by the end of 2019, and expects the company to make a comeback sometime in the 2nd half of 2019.
SOURCE: Stone Street Group LLC
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