The Offer

Company Overview

Prestige Financial Holdings Group Limited, through its subsidiaries, is a Hong Kong-based supplier of wealth management and asset management services, with most of its companies' operations taking place in Hong Kong. The group subsidiaries help their clients find and buy well-suited wealth management solutions and products for worldwide asset management. High-net-worth and ultra-high-net-worth people in Asia make up the bulk of the subsidiaries' clients for both wealth managing and asset management services, and most of them are from mainland China or Hong Kong.

Key Highlights

Primary Offering: The total gross proceeds to the firm, before underwriting discounts and expenses, will be between USD 15,812,500 and USD 18,687,500 based on an offering price between USD 5.50 and USD 6.50 per Ordinary Share. Additionally, the business anticipates receiving USD 12,144,264 at USD 6.00 per share or around USD 14,236,764 if the underwriters fully practice their option to purchase additional shares.

Use of proceeds:

Dividend policy: Prestige Wealth Inc. distributed a cash dividend of about USD 1.16 million to other shareholders proportionately as of September 30, 2021, and Prestige Financial Holdings Group Limited decided to use the cash dividend owed by the company in the amount of approximately USD 2.34 million to counterbalance part of the loan principal and interest due to the company. PWM does not expect to pay any cash dividends soon since it plans to maintain all earnings after this cash dividend distribution to support the company's growth. Being a holding company, PWM's capacity to pay and declare dividends will be influenced by a variety of elements, including the receipt of funds from its PPWM and PAI subsidiaries in the British Virgin Islands. Money for PPWM comes from its subsidiaries PWM and PWAI, while funds for PAI come from its subsidiaries PAM, PGAM, and PGCI. If there are any cash dividends on the Ordinary Shares, they will be paid out in US dollars.

Industry and competitive analysis

• The income level of Hong Kong households has increased due to the robust expansion of the local and global economies. The total number of households in Hong Kong with monthly incomes over HKD 50,000 increased from roughly 515,000 units in 2015 to 691,000 units in 2021, a CAGR of about 5.0%. This shows a sharp increase in the number of middle- and upper-class households in recent years, which has fueled demand for wealth and asset management services.
• In the last ten years, money has accumulated quickly due to the tremendous economic and social growth in Mainland China. As a result, the number of high net worth and ultra-high net worth persons in Mainland China has increased significantly, growing at a CAGR of over 6.7% between 2015 and 2021 from roughly 1,034,400 to roughly 1,527,700. At a CAGR of almost 6.9% from 2022 to 2026, the number of high net worth and ultra-high net worth persons in Mainland China is anticipated to reach about 2,080,400 in 2026.
• Despite the worldwide stock market slump in 2015, Hong Kong's wealth management sector has expanded quickly in recent years. The wealth management and asset management sectors saw a growth in market size between 2015 and 2021, with the revenue of the companies involved in these sectors rising from around HKD 630.6 billion to roughly HKD 1,007.6 billion, or a CAGR of about 8.1%.
• The preferred markets for fund managers in Hong Kong have historically been Mainland China and Hong Kong, with investments in these two areas growing at an average annual rate of about 26.7% and reaching about USD 752.1 billion in 2020, or about 41.4% of the total assets managed in Hong Kong that year.

Financial Highlights (Expressed in USD):

• Increased wealth management services revenue: For the six months ending March 31, 2022, PWM's wealth management service income was USD 1,765,325, a rise of more than 400% over the corresponding period in 2021. When PWM began offering wealth management services to customers in the U.S. market, income from those services increased significantly compared to the same period in 2021, accounting for the bulk of the six-month period ending March 31, 2022.
• Decreased net income: For the H1FY22 and H1FY21, respectively, net income was USD 1,305,169 and USD 2,209,205 because of the decreased total revenue and decreased operational expenditures.
• Liquidity and capital resources: PWM has cash and cash equivalents totaling USD 106,026, USD 750,221, and USD 213,414 as of March 31, 2022, September 30, 2021, and 2020, respectively. The subsidiaries held the on-demand bank deposits that make up PWM's cash and cash equivalents, which are open to unlimited withdrawal and usage. PWM had a working capital of USD 4,012,985 and USD 5,398,067 as of September 30, 2021, and 2020, respectively.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “PWM” is exposed to a variety of risks such as:

• PRC’s law and regulation: An offshore holding company, like PWM, may at any time have its Hong Kong activities influenced or interfered with by the PRC government. Foreign investment in Hong Kong-based issuers as well as offers made in other countries may be subject to increased regulation by the PRC government. If the PRC government were to exercise greater oversight and control over offerings made by foreign issuers and/or foreign investment in Hong Kong-based companies, and the company was to be subject to such oversight and control, it might have a materially negative impact on the business operations and financials of the subsidiaries.
• Limited operating history: A sufficient foundation for evaluating the subsidiaries' prospects and operational performance may not be provided by their short operating histories. Due to the firm's short history of activities, it is impossible to forecast future results of operations; therefore, previous results of operations attained by the company should not be interpreted as an indication of the rate of growth, if any, that can be anticipated in the future. In view of the dangers and uncertainties faced by early-stage businesses in a market that is continuously changing and becoming more competitive in Hong Kong and the United States, PWM should think about its future possibilities.
• COVID-19 pandemic: The ongoing COVID-19 pandemic has had a negative impact on the subsidiaries' operations, financial situation, and business, and it might continue to do so. The extent to which COVID-19 continues to have an impact on the financial situation, operating results, and cash flows throughout the rest of 2022 will depend on how the pandemic develops in the future, including any new details about the severity of the outbreak globally and the steps taken to contain it. These developments are highly uncertain and unpredictable. Additionally, if quarantine regulations and travel restrictions to Hong Kong are maintained and the COVID-19 epidemic negatively impacts Hong Kong's economy, the financial situation, operating performance, and cash flows might all suffer.

Conclusion

PWM's wealth management service revenue for the six months ended March 31, 2022, was USD 1,765,325, an increase of more than 400% over the same time in 2021. The income from such services climbed dramatically compared to the same time in 2021 when PWM started providing wealth management services to consumers in the U.S. market, making up most of the six-month period ending March 31, 2022. Although it is anticipated that PWM will have opportunities to expand using IPO funds, the success of the company's entire operation is dependent on the asset management industry and the overall Chinese economy’s performance in the upcoming time. With the ongoing COVID-19 pandemic has had a negative impact on the subsidiaries' operations, financial situation, and business, and it might continue to do so. The uncertainty brought by the current situation in the Chinese economy due to COVID-19 has made this IPO to be lesser attractive than normal times.

Hence, given the financial performance of the company for the six months ending March 31, 2022, decreased net income, current Chinese economic scenario, and associated risks “Prestige Wealth Inc (PWM)” IPO seems “Neutral" at the IPO price.