On 24 October, Sheng Ye Capital Limited (“Sheng Ye Capital” or the “Group”, stock code: 6069.HK), a professional enterprise financial services provider offering accounts receivable financing and other related solutions mainly in the energy, construction and medical sectors in the PRC, has transferred its listing from GEM to the Main Board of The Stock Exchange of Hong Kong Limited (“HKEX”), adopting the new stock code “6069”. As the first commercial factoring company in the PRC to get listed on the Main Board of the HKEX, Sheng Ye Capital is well-positioned to capture future business opportunities, capitalizing on a greater awareness and acceptance of the “Sheng Ye” brand among investors.
Sheng Ye Capital has been principally engaged in the provision of factoring services; sales of factoring assets; and other services since its founding in 2014. Under the factoring services segment, the Group primarily generates interest income for financing provided to its factoring customers, with that financing secured by their accounts receivables. Under the sales of the factoring assets segment, the Group records a gain that is equal to the excess of the consideration received and receivable over the book value of the factoring assets as that value was recorded prior to the transfer. In addition, the Group also generates income through fees for its provision of guarantee services, consulting services, information technology services and miscellaneous services principally including accounts receivables management services without financing. The Group has a strong capital base with its principal operating subsidiary in the PRC – SY Factoring Limited having a registered capital of US$200 million, which provides assurance and confidence to the Group’s customers and financiers with its strong financial position and business commitment.
Investment Highlights
Encouraging Financial Performance with Growing Income from Factoring and Other Services
During the Track Record Period, the Group recorded an outstanding financial performance with the income from factoring and other services rising at a CAGR of approximately 99.1% to approximately RMB118.7 million, RMB215.3 million and RMB470.4 million for each of the years ended 31 December 2016, 2017 and 2018 (the “Track Record Period”). The significant increment was mainly attributed to the increase in revenue from factoring services driven by the successful expansion of the factoring business of the Group with the support of the net proceeds from the Global Offering of GEM Listing in 2017, the top-up placing, bank and other borrowings, as well as an increase in gain on sales of factoring assets due to a rising market demand. Along with the expansion of the factoring business, the Group’s profit for the year rose at a CAGR of approximately 110.1% amounting to approximately RMB48.0 million, RMB88.8 million and RMB211.9 million for each of the years ended 31 December 2016, 2017 and 2018.
Broader Shareholding Base and Recognition from Investment Community to Support Business Growth
In July 2018, Sheng Ye Capital completed a top-up placing arrangement and received active engagement of three subscribers, namely Taiping Trustees Limited, Olympus Capital Asia and Pavilion Capital Pte Ltd, with subscription comprising up to approximately 73% of the total share placement. Sheng Ye Capital received total net proceeds of approximately HK$819.5 million from the subscription and the funds raised provide further strong support for the development of the Group’s online factoring platform and factoring operations. The completion of such a large-scale financing provided Sheng Ye Capital with additional funding for fueling future business growth and at the same time broadened the Group’s shareholder base. The Group was included as one of the constituents of MSCI China All Shares Small Cap Index in May 2018, clear evidence of its strengths and widespread appreciation of its business development and future prospects among investors.
Continuously Growing High-quality Customer Base Focusing on the Energy, Construction and Medical Industries
Sheng Ye Capital has been providing factoring and other services to suppliers of established corporates which are Fortune Global 500 or State-owned Enterprises in three main strategic and non-cyclical industries, reflecting a high quality and reliable customer base. As at 30 June 2019, the Group had served over 3,000 customers across the entire country and is still expanding.
Advanced Online Factoring Platform “Sheng Yi Tong” for Integrated Factoring Services
To facilitate the further development of its factoring business and better serve its customers who engage the Group’s factoring services, Sheng Ye Capital has launched its own online factoring platform, “Sheng Yi Tong” in November 2016. Currently the platform can perform a variety of functions in relation to the Group’s factoring business, whereby Sheng Ye Capital can promptly assess and approve the factoring loan application of customers, and, at the same time, carry out all-in-one risk management and monitoring services on this self-developed online factoring platform. Sheng Ye Capital will continue to invest in and upgrade its online factoring platform as well as to enhance the security and backup features of the platform to better serve its factoring business in the forthcoming years with the enhancement expected to be completed in the financial year ending 31 December 2020.
Stringent Risk Management System Tailored to the Characteristics of the Group’s Business Operations
As a specialized enterprise financial services provider offering accounts receivable financing and other related services, it is important that Sheng Ye Capital has effective risk management procedures for identifying and mitigating its operational risks. In this regard, the Group has developed a risk management system specifically tailored to its business operations to manage such risks through comprehensive due diligence on its customers and underlying debtors, independent information review and multi-level approval processes. During the Track Record Period and up to 29 September 2019, the Group did not experience any non-performing assets, nor impairment loss on the Group’s factoring assets, reflecting the effectiveness of its risk management system.
Business Outlook and Future Prospects
Looking forward, the Group will continue to focus on the construction, energy and medical sectors and expand its clientele and factoring assets. The Group considers that the transfer of the listing status from GEM to the Main Board of HKEX can raise awareness and acceptance of the “Sheng Ye” brand among investors, providing greater access to more efficient financing channels both locally and abroad to support its business growth. The Group is also determined to explore new and relatively low-cost financing channels in the future in order to raise funds for growing the business most cost-effectively.
Driven by the supportive national policy in the PRC, Sheng Ye Capital will continue to capitalize on its strengths and core competencies in conducting business. With its advanced online factoring platform “Sheng Yi Tong” and a professional risk management mechanism, the Group will be able to standardize its financial products and customize solutions and offer customers integrated factoring service account receivable financing, account receivable management services and credit evaluation, among other services, helping them secure funding at different stages of their development.
About Sheng Ye Capital Limited (Stock code: 6069.HK)
Sheng Ye Capital Limited is a professional enterprise financial services provider offering accounts receivable financing and other related solutions to customers who mainly engaged in the energy, construction and medical sectors in the PRC. It has a strong capital base with its principal operating subsidiary in the PRC – SY Factoring Limited having a registered capital of US$200 million. Sheng Ye Capital was listed on GEM of The Stock Exchange of Hong Kong Limited (“HKEX”) in July 2017, and it was included as one of the constituents of MSCI China All Shares Small Cap Index in 2018. Sheng Ye Capital transferred its listing to the Main Board of HKEX in October 2019. For more information about Sheng Ye Capital, please visit: http://www.shengyecapital.com/.
