IPO Report: Jupai Holdings Ltd. (JP)

Francis Gaskins |

Jupai Holdings Ltd. (JP) is a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China. It is based in Pudong New District, Shanghai, China.

Seven other companies are scheduled for the week of July 13. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Credit Suisse, China Renaissance
Co-managers: None

End of lockup (180 days): Wednesday, January 13, 2016
End of 25-day quiet period: Tuesday, August 11, 2015

JP scheduled a $65 million IPO with a market capitalization of $323 million at a price range midpoint of $11 for Thursday, July 16, 2015 on NYSE.

Jupai Holdings Ltd. Summary

JP is a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China.

JP’s integrated business model featuring an established wealth management product advisory services operation complemented by its growing in-house asset management capabilities.

Jupai Holdings Ltd. Valuation

Glossary

Retained earnings

.

.

$5

     

Per share dilution

.

.

-$7.66

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Jupai Holdings Ltd. (JP)

$322

5.8

15.2

2.1

3.3

20%

             

Jupai Holdings Ltd. Conclusion

Neutral

Q1 '15 rev +73%

But 61% from related party, primarily from one tme commissions

5.8 price to sales

15 price to earnings, but that was before the China stock market crash

2.1 price to book

Chinese stocks are volatile

Jupai Holdings Ltd. Business

JP is a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China.

JP’s integrated business model featuring an established wealth management product advisory services operation complemented by its growing in-house asset management capabilities.

Jupai Holdings Ltd. Related Party Revenues

JP's related-party revenues consist primarily of one-time commissions and recurring management fees paid by limited partnership funds where JP serves as general partner or co-general partner or other funds where we serve as managers.

Jupai Holdings Ltd. Asset Management Business

The asset management business, which JP started in 2013, not only diversifies its wealth management product offerings and increases its competitiveness, but also enhances its overall profitability.

JP believes that its client-focused service model, alongside its broad range of carefully selected third-party and self-developed products, have made JP a trusted brand among its clients.

JP aspires to become a leading player in China's fast growing wealth management industry focusing on the high-net-worth population.

JP provides its wealth management product advisory services mainly to China's high-net-worth individuals who have investable assets in excess of RMB3.0 million (US$0.5 million).

With its network of 32 client centers in 18 economically vibrant cities as of March 31, 2015, JP strategically brings its services closer to its clients by maintaining a physical presence in key markets in China.

JP’s network primarily covers the Bohai Rim, the Yangtze River Delta and the Pearl River Delta regions, where over 80% of China's high-net-worth individuals reside or work, according to the Heading Report.

JP’s high-net-worth client base has grown significantly since its inception. During 2012, 2013, 2014 and the three months ended March 31, 2015, JP had 1,090, 2,122, 4,678 and 1,941 active clients, respectively.

JP believes that its comprehensive and personalized client service, delivered by experienced service professionals, is key to its success to date.

JP operates under a proven and cost-efficient client service model, which features a team approach that covers the full service cycle for each client.

A typical wealth management service team is centered around a seasoned wealth management product advisor who maintains regular contact with and facilitate the execution of transactions for JP’s clients.

Each wealth management product advisor is supported by an average of five client managers, who are tasked with searching for and making contact with potential clients, and a centralized client care unit that specializes in maintaining client relationships.

JP’s wealth management product advisors, many of whom possess industry-recognized qualifications, are primarily recruited from reputable institutions in the wealth management industry and have an average of approximately eight years of industry experience.

JP believes its wide spectrum of value-added services offered, before, during and after distribution of wealth management products have helped JP generate client loyalty.

Among JP’s active clients in 2012, 2013, 2014 and the three months ended March 31, 2015, approximately 21.4%, 34.4%, 41.8% and 63.8% of them had previously purchased wealth management products that JP distributes at least once before their latest purchase, demonstrating its strong client retention ability despite the fast expansion of its client base.

Jupai Holdings Ltd. Intellectual Property

JP relies on a combination of trademark and trade secret laws as well as confidentiality agreements and non-compete covenants with its wealth management product advisors and other employees, its third-party wealth management product providers and other contractors.

JP has one registered trademark in China and four registered domain names, jpinvestment.cn, 51touzi.cn, Jp-fund.com and toushenme18.com.

The registrants of Jp-fund.com is Yumao and the other three domain names are registered by the Beijing branch of Shanghai Jupai. JP also has three registered copyrights in China.

Jupai Holdings Ltd. Competition

JP’s principal competitors include:

Third-party wealth management service providers.  JP’s direct competition comes from other third-party wealth management service providers, some of which are relatively well developed, such as Noah Holdings Limited. JP believes that it can compete effectively due to the quality of its client-oriented and customized services, its product sourcing and development capabilities and its rigorous risk management systems, in light of the great potential of the wealth management services market.

Commercial banks.  Many commercial banks rely on their own wealth management arms and sales forces to distribute their products. JP believes that it competes effectively with commercial banks due to a number of factors, including its independence, which positions JP as a centralized wealth management product aggregator to provide and recommend suitable wealth management product advice and product combinations that suit its clients' financial objectives.

Asset management service providers.  A number of mutual fund management companies, trust companies and securities companies have emerged in the asset management business in China in recent years. JP believes that it competes effectively due to the quality of its services, its fund sourcing capabilities from third parties and its in-depth experience in industries such as real estate development.

Jupai Holdings Ltd. 5% Shareholders Pre-IPO

Tianxiang Hu     25.9%

Xin Zhou           12.0%

Weishi Yao       5.4%

E-House (China) Capital Investment Management Limited            41.4%

Juda Holding Inc.          25.9%

SINA Hong Kong Limited           11.0%  

Jupai Holdings Ltd. Dividends 

JP’s board of directors has discretion on whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that its company may only pay dividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would result in its company being unable to pay its debts due in the ordinary course of business.

Jupai Holdings Ltd. Use of Proceeds

JP expects to receive $42 million from its IPO and use it for the following:

US$12.6 million to set up new client centers and expand its coverage network, including hiring additional wealth management product advisors and client managers;

US$12.6 million to fund capital expenditures in new office buildings, infrastructure and enhanced information technology system for operational needs; and

the remaining amount for general corporate purposes, including funding potential acquisitions of complementary business, although JP is not currently negotiating any such transactions, other than its acquisition of Scepter Pacific, the holding company of E-House Capital, the consideration of which will be its equity securities.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
JP Jupai Holdings Limited American Depositary Shares 9.30 0.14 1.53 100

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