AMTD International Begins U.S. IPO Effort - AMTD International (Pending:AMTDI)

AMTD International has filed its initial registration statement for a $200 million U.S. IPO.

The firm provides a variety of institutional bank and wealth management solutions in the Asia Pacific region.

The financial services sector is quite active in the region but global competitors are seeking to expand.

AMTD International (AMTDI) has filed to raise gross proceeds of up to $200 million from a U.S. IPO, according to an F-1 registration statement.

The firm provides investment banking, asset management, and strategic investment services in the Asia Pacific region.

AMTDI is a prominent financial services firm but faces an uncertain business environment in the primary regions it operates in.

I’ll provide an update when we learn more details about the IPO.

Hong Kong-based AMTD was founded in 2003 to provide investment banking, asset management, and strategic investment services in the Asia region.

Management is headed by Chairman and CEO Calvin Choi, who has been with the firm since 2016.

The company has developed the ‘AMTD SpiderNet” ecosystem, which represents an interconnected network of company clients, shareholders, business partners, and investee companies, among which the firm actively advocates the exploration of business collaboration opportunities.

Additionally, AMTD provides financial solutions and additional resources that are required for such collaborations.

The company’s investment banking solutions include ‘equity underwriting, debt underwriting, advisory (on credit rating, financing, and mergers and acquisitions transactions), securities brokerage, institutional sales and distribution, and research, among others.’

The firm also provides professional investment management and advisory services to institutional clients.

Additionally, AMTD makes long-term strategic investments through which the company obtains access to unique opportunities and resources that complement its other businesses and augment its SpiderNet ecosystem.

AMTD’s primary customers include banks in China, privately-owned organizations with a focus on new economy sectors, as well as Hong Kong-based blue-chip corporations, among others.

Management claims that the company is the largest independent asset management firm in Asia in serving regional banks in China and new economy companies, in each case as measured by assets under management as of March 31, 2019, according to the CIC Report.

AMTD utilizes sales and channel teams that support product distribution activities across the company’s business operations.

Additionally, the company’s institutional sales team actively participates in its investment banking transactions by introducing institutional clients to the various products the firm offers and providing institutional investors with value-added corporate access services.

Staffing expenses as a percentage of revenue have been dropping as revenue has fluctuated in recent periods, per the table below:

According to a 2019 market research report by Wise Guy Reports, investment banks across the globe are moving toward businesses requiring less regulatory capital due to regulatory changes that have made some investment banking activities more expensive than the others.

As a result, large players, such as Barclays, Deutsche Bank, and Credit Suisse have announced their plans to move from only traditional underwriting business to other activities, including mergers and acquisitions advisory as well as fundraising.

However, despite the regulatory change restricting the range of some banks and forcing them to specialize, others, such as Citibank and J.P. Morgan have continued to offer a complete range of investment banking services.

Major competitors that provide or are developing investment banking globally include:

Management believes that the company’s SpiderNet ecosystem and the expertise in the Asia regions to be the firm’s core competitive strengths.

AMTD’s recent financial results can be summarized as follows:

Below are relevant financial metrics derived from the firm’s registration statement:

As of March 31, 2019, the company had $20.0 million in cash and $580.0 million in total liabilities. (Unaudited, interim)

Free cash flow during the twelve months ended March 31, 2019, was $9.9 million.

AMTDI intends to raise $200 million in gross proceeds from an IPO of ADSs representing underlying Class A shares.

The firm will be a controlled company and its controlling shareholder is L.R. Capital Group, which is possibly related to AMTDI’s founding parent, CK Hutchison Holdings of Hong Kong.

Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:

approximately 50% to invest in our business and infrastructure expansion, which may include setting up new subsidiaries, acquiring new talents, and applying for new business licenses in other jurisdictions to provide global and more comprehensive financial services and solutions to our clients, although we have not decided on any particular locations for such plan as of the date of this prospectus; approximately 30% to fund potential acquisitions of, and investments in, complementary businesses, although we do not have specific targets or commitments for such plan as of the date of this prospectus; and the remainder for general corporate purposes, which may include working capital needs, branding and marketing activities, upgrading technology infrastructure, and other general administrative matters.

Management’s presentation of the company roadshow is not available yet.

Listed underwriters of the IPO are AMTD Global Markets and Tiger Brokers.

AMTD is attempting to raise public investment at a difficult time for Chinese companies in the U.S.

Chinese firms have generally disappointed U.S. investors in the wake of U.S. China trade tensions and for other reasons as well.

The firm’s financials have been variable in recent periods, with a topline revenue reduction due to changes in net fair value on financial assets. Staffing expenses as a percentage of total revenue have been dropping in recent periods, resulting in greater capital efficiency.

The market opportunity for Asia Pacific investment banking is difficult to determine as the region is undergoing a period of uncertainty as supply chains adjust to U.S. China trade relations challenges.

The wealth management service sector is a bright spot as the region continues to accumulate assets and individuals and businesses seek a greater range of options for investing their assets.

However, competition is heating up, with international firms looking to increase their access and a more amenable China reducing regulatory barriers to encourage foreign investment.

AMTD is operating in a somewhat volatile market environment with uncertain growth prospects in the years ahead.

I’ll provide an update when we learn more details.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Seekingalpha.com

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