GMTEight special offer | Multiple funds start to "lurk", what signal is behind YEAHKA (09923) "squat jump"?

The Hong Kong stock market is full of stories of "bright and dark again in another village". After several days of consolidation, YEAHKA (09923) showed a sudden strong rise on January 14, demonstrating strong market buying power and attracting the attention of many investors. Specifically, on that day, YEAHKA's stock price opened high and continued to rise strongly throughout the day, with the stock price soaring over 19% at one point during the closing moments, and ultimately closing up 16.38% at 8.24 Hong Kong dollars. In the previous 10 trading days, the stock price had been continuously declining, with a total decline of over 36%. Due to the significant market pullback in the previous period, the sharp rise on January 14 clearly also reflected a certain extent of demand for technical rebound in the company. In fact, looking at the data of the top ten net buyers/net sellers among brokers, it is easy to find that there are also many funds beginning to "lurk". On January 14, the top four brokers with the highest net buying in the past five days were Citibank, Hong Kong Stock Connect (Shanghai), Bank Of China, and Futu Securities, with net purchases of 11.82 million shares, 4.41 million shares, 1.75 million shares, and 1.71 million shares respectively. In addition, as of January 14, Citibank, Futu Securities, CMBC, Hong Kong Stock Connect (Shenzhen), and HSBC Hong Kong were all among the top five brokerages holding the company's shares, with ownership ratios of 21.37%, 20.20%, 8.66%, 5.53%, and 5.26% respectively. With Futu Securities being a retail investor hub, and Hong Kong Stock Connect (Shenzhen) and Hong Kong Stock Connect (Shanghai) representing southbound funds, it can be seen that a significant amount of incremental funds have started entering the market. Although YEAHKA fell by 4.73% the following day (January 15), this decline seems insufficient to mask the signs of the company's stock price "squatting and jumping up". What is puzzling, however, is what "charm" YEAHKA has that has caused funds to start lurking early? Optimizing business structure, significant improvement in profitability of two major business segments Looking at YEAHKA's operating performance, the pressure on its performance in the first half of 2024 is clearly discounted for investors. However, there are two major growth information points hidden in this, which may arouse the interest of many investors. In the first half of 2024, YEAHKA achieved revenue of 1.578 billion yuan, a year-on-year decrease of 23.5%, and a net profit of 33 million yuan, an increase of 7.3% year-on-year. This "increase in profit without increasing revenue" performance was mainly due to the negative impact of the macroeconomic environment on the payment business, but was partially offset by the growth in merchant solution business. Meanwhile, the company's steady growth in profit during this period was mainly attributed to the optimization of the gross profit margin of the merchant solution business and in-store e-commerce business, as well as the increase in the corresponding revenue proportion, and the efficiency improvement of AI empowerment business, driving a year-on-year decrease in sales expenses. In the first half of 2024, the company's one-stop payment service revenue was 1.35 billion yuan, the merchant solution business revenue was 202 million yuan, a year-on-year growth of 21.2%, the number of active merchants increased by 5.8% year-on-year, and the in-store e-commerce service income was 29 million yuan. The company's impressive growth in merchant solution business revenue was mainly driven by the adjustment in product structure and the increase in revenue from high-profit services, with the gross profit margin of this business reaching 90.9% year-on-year. Furthermore, due to the company's strategic adjustment of its business model, focusing on high-profitability customers, the gross profit margin of the in-store business increased by 4.6 percentage points to 81.5% year-on-year, and it is expected to achieve breakeven in the second half of 2024. From the specific performance of these businesses, we can easily see two important growth points in YEAHKA's business as follows: Firstly, the increasing demand for digital operations among small and medium-sized merchants is driving the penetration rate of active merchants in the company's merchant solutions to less than 20%, leaving plenty of room for improvement in conversion rates. With the improvement in the business environment for small and medium-sized merchants, revenue growth is expected to recover. At the same time, by integrating a range of merchant solutions into its payment application, YEAHKA is able to convert payment service merchants into merchant solution merchants at almost no additional customer acquisition cost. Secondly, as an acquiring service provider that understands merchant operations the best, YEAHKA's in-store e-commerce business, which is based on payments, also has great potential. It is predicted by Ciar that the scale of local life services in 2025 will exceed 35 trillion yuan, with an average annual growth rate of 12.6% from 2020 to 2025, and the online penetration rate is expected to reach 30.8% by 2025. The vast local life market and continuously increasing online penetration rate will provide broad development space for YEAHKA's in-store e-commerce services. As of the first half of 2024, the company's service brand merchants have surpassed 18,000, representing a year-on-year growth of about 35%, with revenue per merchant and per capita revenue both achieving year-on-year growth. It can be seen that with the continuous release of growth potential in the company's merchant solution and in-store e-commerce business, YEAHKA's performance certainty will also continue to improve. Holding multiple advantages, competitiveness is expected to gradually strengthen As is well known, in the China Mobile Limited payment industry, Alipay and WeChat Pay dominate the market, forming a duopoly structure, with the two accounting for over 94% of the market share in the third quarter of 2023. In comparison, although the "duopoly dominance" structure is established, YEAHKA is actually in a leading position in independent QR code acquiring. YEAHKA, as the largest non-bank independent QR code acquiring leader, has a market share of nearly 6.0% in the QR code acquiring market. Although its market share is not high, it is in a leading position in independent QR code acquiring, which provides a solid foundation for its business expansion and revenue growth. Clearly, as a second-tier company, YEAHKA may have a gap in market share and brand influence compared to the giants, leading to higher costs for acquiring new customers and retaining old ones. Additionally, it may also face competition pressure in transaction fees, which could impact the company's profitability. However, with YEAHKA continuously consolidating its development advantages, its competitiveness is constantly strengthening.Enhance.On the one hand, YEAHKA has obvious advantages in business diversification. In addition to its core payment business, YEAHKA has actively expanded into in-store e-commerce and merchant solutions businesses. The in-store e-commerce business has grown rapidly in terms of GMV and is expected to become the company's second growth curve; the merchant solutions business can meet the customized needs of merchants in different consumer industries, helping merchants improve operational efficiency and business expansion capabilities, further enhancing the company's profitability and risk resistance. On the other hand, YEAHKA also has a certain advantage in technological innovation. In recent years, YEAHKA has actively developed AI technology and successfully launched more than 10 AI tools, including AI content generation tools and AI cloud editing tools, and also launched the metaverse solution YVerse. Through AIGC technology, it has improved operational efficiency, saved KOL editing and production costs, provided merchants with new marketing scenarios and data-driven means, and helped merchants significantly increase repeat purchase rates and private domain community weekly active rates. In addition, YEAHKA also has advantages in licenses and compliance. It is understood that YEAHKA has been issued a payment business license by the People's Bank of China, which allows it to provide national bank card acquiring and mobile phone payment services. Its legal and compliant operating qualifications give it a competitive advantage in the market and earn trust from merchants and consumers. Currently, third-party payment institutions have scarce licenses. As of the end of December 2023, there are only 186 existing third-party payment licenses, among which there are 57 payment licenses with bank card acquiring qualifications. It is expected that regulators will continue to monitor enterprises with third-party payment licenses for a long time in the future, and license renewal will also be more cautious, highlighting the value of licenses. Overall, the short-term pressure on performance may lead some cautious funds to hesitate about investing in YEAHKA, but in fact, the company has already experienced a long period of correction before the "take-off" phase, accompanied by a strong breakthrough on January 14th, it seems that the company still has enough momentum to attract many short-term traders to participate.