US stocks new stock outlook | Anlin Finance and Economics Printing: Eat Hong Kong stock customers' "old capital" hard, but prioritize debt repayment when financing in the United States

After submitting a secret filing on March 19, POWELL MAX LIMITED (hereinafter referred to as "Anlin Financial Printing"), a financial communication service provider from Hong Kong, has officially submitted a prospectus to the U.S. Securities and Exchange Commission (SEC) recently, planning to apply for listing on the U.S. Nasdaq IPO under the stock code "PMAX." At the same time, Anlin Financial Printing plans to issue 1.65 million shares of stock at a price of $4 to $6 per share, raising $9.9 million. However, given the fact that the company is a local enterprise in Hong Kong itself and provides services to clients listed on the Hong Kong market, it should be very familiar with the Hong Kong stock market. What hidden "mystery" lies behind its move to the United States? Backed by the Hong Kong stock market, the "document processing service provider" prioritizes financing for debt repayment For companies listing in Hong Kong, translation and compliance may be the most important factors in aligning with this mature international market. Naturally, there are companies targeting these listed or prospective listed companies to provide services such as translation and compliance, and Anlin Financial Printing is one such company. Founded in 2019, Anlin Financial Printing primarily provides financial communication services to enterprise clients in Hong Kong and their advisors to support the compliance and transactional needs of the capital markets. The company offers financial communication services, including a comprehensive range of financial printing, corporate reporting, communication, and language support services from start to finish, including typesetting, proofreading, translation, design, printing, and electronic reporting. The audience served by Anlin Financial Printing undoubtedly includes domestic and international companies listed on the Hong Kong Stock Exchange and those seeking to list on the Hong Kong Stock Exchange. It is understood that in 2022 and 2023, the company provided services to 168 and 166 domestic and international companies listed on the Hong Kong Stock Exchange, respectively, as well as to 10 and 7 applicants seeking to list on the Hong Kong Stock Exchange within the period. According to the prospectus, Anlin Financial Printing achieved total revenue of HK$49.12 million in 2023, a 30% increase from approximately HK$37.77 million in 2022. The company attributed the increase in total revenue primarily to the increase in revenue from corporate financial communication services and initial public offering financial printing services. Based on the synchronized growth of revenues from these two "source" businesses and cost control measures, Anlin Financial Printing was able to turn a loss in 2022 into a profit of HK$7.0792 million in 2023. Further breakdown reveals that the company's main "livelihood" is divided into two categories: corporate financial communication services and IPO financial printing services. In 2022-2023, the company's revenues from corporate financial communication services accounted for 90.9% and 79.7% of total revenue, respectively, serving as the backbone. Despite the unfavorable situation in the Hong Kong stock market in 2023, the company's revenue from corporate financial communication services increased by approximately 14.3% to approximately HK$39.133 million in 2023. Anlin Financial Printing explained that the increase in revenue from corporate financial communication services was mainly due to an increase in the number of transactions participated in by its clients and an increase in the financial communication materials handled. However, publicly available information shows that in 2023, there were 70 new listings in the Hong Kong stock market, with a total financing amount of approximately HK$46.97 billion, excluding two companies listed in an introduction method. This amount is a decrease of HK$58.275 billion from the HK$104.57 billion in 2022, representing a 55.72% decline. Despite this, Anlin Financial Printing's business in IPOs saw growth against the trend. However, relying on Hong Kong stock market clients does not seem to guarantee a worry-free situation for the company, as evidenced by its determination to venture into the U.S. stock market. The main purpose of the company's fundraising this time is to conduct public market financing for its class A common stock to benefit all shareholders and reduce the company's debt through repayment of existing loans (including loans owed to controlling shareholders). A closer look at the prospectus also reveals that Anlin Financial Printing is in urgent need of funds. As of the end of 2023, the company's trade payables and contractual liabilities, combined with bank borrowings, amounted to HK$336.686 million, accounting for approximately 90.92% of current liabilities. However, the company has a mere HK$3.66 million in cash and cash equivalents, rendering its cash reserves severely insufficient and leaving its risk resistance capability very fragile, which may be an important reason for its single-minded pursuit of the U.S. stock market. Business fluctuations with the Hong Kong stock market, enhancing competitiveness may be the core solution For Anlin Financial Printing, the ups and downs of the Hong Kong stock market also determine the company's future expectations and fate. Since the beginning of the year, the performance of global capital markets has continued to be influenced by negative factors such as the Russia-Ukraine conflict, tensions in the Middle East, delayed interest rate cuts by the U.S. Federal Reserve, and tariffs imposed by Europe and the United States on Chinese products, leading to tighter financing conditions and more volatile market fluctuations. For Anlin Financial Printing, the challenges posed by the market go far beyond this. The instability of global financial markets profoundly affects the domestic stock market, and the trend of slowing down Hong Kong IPO activities in 2023 continues into 2024. According to data from Choice, in the first half of 2024, there were 30 new listings in Hong Kong, including 29 main board listings and 1 GEM (Growth Enterprise Market) listing, with a total fundraising of approximately HK$13 billion, lower than the same period last year. According to a report by Deloitte, the top five exchanges in terms of IPO financing in the first half of 2024 were the NYSE, NASDAQ, National Stock Exchange of India, Madrid Stock Exchange, and Shanghai Stock Exchange, with the Hong Kong Stock Exchange ranking ninth and the Shenzhen Stock Exchange ranking tenth. A large part of Anlin Financial Printing's business comes from services related to financial and commercial transactions in the stock market, and economic trends affecting these transactions may have a negative impact on the demand for its services. On the other hand, the company's business may also be adversely affected by new technologies, and the demand for its services may fluctuate with the market.Customers will also be responsible for creating and submitting regulatory documents themselves, and may begin implementing their own technical assistance during this process, which may have a negative impact on the company's business.At the same time, Anlin Finance and Economics Printing does not have long-term contracts with most clients. Client retention rates, especially in periods of declining transaction volume, are an important component of the company's strategic business plan: In 2022, the company's top five clients accounted for approximately 2.7%, 2.2%, 2.0%, 2.0%, and 2.0% of its total revenue. In 2023, the top five clients accounted for approximately 12.5%, 2.0%, 1.9%, 1.7%, and 1.3% of total revenue, indicating that the proportion of the largest clients in the company's total revenue in recent years is not low. Furthermore, the financial communication services industry where Anlin Finance and Economics Printing operates is highly competitive, with relatively low entry barriers, and the industry remains highly fragmented in Hong Kong and internationally. Competition from existing competitors and new entrants is expected to intensify. In addition, as the company expands its service offerings, it may face competition from both new and existing competitors. Therefore, fierce market competition may bring additional pricing pressure to the company's services, leading to negative impacts on operating performance, financial condition, and cash flow. The good news is that after experiencing a "dormant" period over the past three years, the Hong Kong stock market has gone through multiple rounds of ups and downs in the first half of this year, showing an overall trend of fluctuating upward, with valuations partially restored. The slow recovery of the Hong Kong stock market may bring new business growth opportunities for Anlin Finance and Economics Printing, but dealing with debt burdens and the need to "cultivate internal strength" may be the company's top priorities.