HUNDSUN TECHNOLOGIES(600570):ACQUIRING FINASTRA‘S SUMMIT UNIT TO COMPETE GLOBALLY IN FINTECH BUSINESS

类别:公司 机构:中国国际金融股份有限公司 研究员:Xingyu CHEN/Zhonghai YU/Guanfei WEI 日期:2021-11-30

What's new

    Hundsun Technologies recently announced that its controlling subsidiary Cloudwing Network had entered an agreement with Finastra to acquire the latter’s Summit business on the Chinese mainland and in the Hong Kong and Macau SARs for US$65mn. The consideration will be paid with incremental capital from Hundsun Technologies or bank loans.

    Comments

    Continues expansion into banking IT and capital market products. Finastra provides capital-management system solutions for large and medium-sized banks via its Summit business unit, which now services 17 banks on the Chinese mainland and in HK and Macau (incl. state-owned banks, joint-stock banks, and large city commercial banks). In FY21 (year ends on May 31), Summit generated revenue of US$15mn, with half from product licensing and half from project execution. As part of the deal, Cloudwing will transfer intellectual rights such as Summit source code and in-progress orders from Summit. Hundsun Technologies has acquired Finastra’s capital management system for small and medium-sized banks, Opics. We believe Cloudwing’s acquisition of Summit will facilitate Hundsun’s integration and synergies of capital market products.

    Combing domestic advanced technology with international advanced industry experience. While Chinese fintech companies visibly lag foreign peers in business development, they have established a leading position in technological strength, thanks to late-mover advantage brought by rapid IT technology advances, and strong demand for advanced fintech in China. As the opening up of the financial market progresses, Chinese firms are facing competition from international industry giants with more sector experience. In response, Hundsun has begun acquiring mature international financial products, and adapting to domestic demand. We think that the acquisition of the Summit business will enhance Hundsun’s capability in derivatives solutions, and the upgrade of Summit system’s underlying technology framework should further cement the firm’s market leadership.

    Valuation and recommendation We leave our earnings forecast unchanged. We are upbeat on the long-term growth potential of financial IT sector, and Hundsun Technologies’ competitive advantage. We maintain OUTPERFORM and TP of Rmb76, implying 60x 2022e P/E, offering 33% upside. The stock is trading at 45x 2022e P/E.

    Risks

    Internal consolidation risk; new product execution and expense control disappoint.