China Renaissance Announces Unaudited 2020 Interim Results

Source: DesFran 2020-08-24

Results Demonstrate Strength and Resilience of Diversified Business Model and Optimized Business Structure Despite Challenging Market Conditions

Strong Revenue and Operating Profit Contributions from Investment Management Segment

China Renaissance Holdings Limited ("China Renaissance" or the "Company"; stock code: 1911.HK) today reported its unaudited interim results for the six months ended June 30, 2020.

2020 Interim Results Highlights (all growth rates reflect year-over-year growth):

Total revenue and net investment gains increased 48.7% to RMB1.17 billion;
Total operating profit increased 151.1% to RMB467.9 million;
Net profit attributable to owners of the Company increased 130.4%to RMB407.4 million;

Investment management segment delivered exceptional growth with revenue and investment gains up 105. 3% to RMB643.3 million, which accounted for 55% of the Company's revenue and investment gains for the period;
Investment banking segment revenue was the most affected by COVID-19 with revenue down 23% to RMB271.1 million, stronger performance expected in the second half of 2020 due to robust project pipeline in China;
Huajing delivered strong results with revenues up 93.5% to RMB194.2 million, reflecting increased integration with investment banking operations;
Wealth management business is on track, gaining traction amongst new economy clients, and provides important synergies with investment banking and investment management businesses, and along with structured financing contributed to increased return on capital and higher ROE;
Annualized return on average equity increased to 15.3% from 7.1% in the year-ago period;
Cash position^[1] of RMB4.6 billion and 15.5% gearing ratio.

Commenting on the Company's financial results, Fan Bao, Chairman and Chief Executive Officer of China Renaissance, stated:

"In spite of the challenging market conditions, where uncertainties have become the 'new normal' and financial markets are increasingly volatile, China Renaissance's results for the first half of 2020 demonstrated the soundness of our strategy and the resilience of our business model in adapting to changing circumstances. We are particularly pleased with the record results of our Investment Management segment, which contributed to the strong growth in our total revenue and profit in the first half of this year.

As China's capital market reforms deepen, we continue to evolve our Investment Banking business and believe we can unlock the value of this key segment in the second half of this year based on a robust project pipeline for the foreseeable future. We will remain focused on maintaining our premium position in the New Economy sector by leveraging the synergetic operations of our Investment Management, Investment Banking and fast-growing Wealth Management businesses and by steadily working towards a full-service capital markets strategy to capture the opportunities ahead of us."

2020 Interim Results Overview

Total revenue and net investment gains were RMB1.17 billion for the six months ended June 30, 2020, a 48.7% increase from RMB784.9 million for the corresponding period in 2019. Transaction and advisory fees were RMB278.6 million, a decrease of 22.2% from the prior period. Management fees decreased to RMB204.7 million, a decrease of 6.7% from the prior period. Interest income was RMB35.4 million, an increase of 106.5% from the prior period. Net investment gains were RMB627.8 million, a significant increase of 297.6% from the prior period.

Operating profit was RMB467.9 million, a strong 151.1% increase from RMB186.4 million in the same period last year. Net profit attributable to owners of the Company increased significantly by 130.4% to RMB407.4 million from the same period last year. As of June 30, 2020, the Company's cash position1 was RMB4.6 billion, compared to RMB5.01 billion on December 31, 2019 and RMB5.2billion on June 30, 2019. China Renaissance's gearing ratio was 15.5% at June 30, 2020.

Total assets were RMB10.4 billion, representing an increase of 9.5% from RMB9.5 billion at fiscal year-end 2019.

Business Segment Results (for the six months ended June 30, 2020)

In addition to providing consolidated financial results, China Renaissance reports separate financial information for its four business segments: Investment Banking, Investment Management, Huajing and Others.

Investment Management:

The investment management segment reported solid revenue and net investment gains of RMB643.3 million and an operating profit of RMB394.4 million, which represent increases of 105.3% and 166.6%, respectively, compared to the prior year period. Segment operating margin improved from 47.2% for the six months ended June 30, 2019 to 61.3% for the six months ended June 30, 2020. The growth of this segment was primarily related to the strong investment performance of our own private equity funds, notably Huaxing Growth Capital, China Renaissance's flagship PE investment fund that invested in a number of leading companies such as MGI Tech (Huada Zhizao), Popmart, Helios, HiRain Technologies and Insgeek. The committed capital and assets under management (AUM) of our private equity funds were RMB26.9 billion and RMB39.0 billion as of June 30, 2020, representing an increase of 3.2% and of 13.9% from the end of 2019, respectively. As of June 30, 2020, the IRR of investments in our own private equity funds was 33%. The Company also noted that its average multiple on invested capital (MOIC) of its private equity funds has reached 2.5x. In addition, Beike and Li Auto, both portfolio companies of Huaxing Growth Capital, recently held successful IPOs on the New York Stock Exchange and Nasdaq Global Select Market, respectively.

Investment Banking:

The investment banking segment reported revenue and investment gains of RMB276.8 million and an operating profit of RMB39.1 million, compared to revenues of RMB353.2 million and an operating profit of RMB45.3 million in the prior year period. Segment operating margin was 14.1% for the six months ended June 30, 2020, compared to 12.8% for the six months ended June 30, 2019. The decline in revenues was primarily a result of a decrease in private placement advisory fees and M&A advisory revenue resulting from challenges in the domestic and global economic/financial landscapes and delays in execution due to the impact of COVID-19, partially offset by an increase in sales, trading, and brokerage fees.

The investment banking segment was the most affected by the COVID-19 pandemic, which caused delays in project progress and revenue recognition. The challenging market conditions notwithstanding, China Renaissance maintained its leading position in the New Economy private placement sector and advised on a number of private placement and M&A transactions for leading companies across a number of sectors, including MGI Tech (Huada Zhizao), MissFresh, MiningLamp Technology, Gome, NIO and Sohu. The Company also supported the initial public offerings ("IPOs") of JD.com, I-Mab Biopharma and Kintor Pharmaceutical. Meanwhile, the Company has been investing considerable resources in building out our IPO underwriting capabilities, sales and trading, recruiting talent and expanding revenue sources, and further integrating our investment banking business with Huajing. In view of our strong IPO projects pipeline, we expect stronger momentum in the second half of 2020 for the investment banking business. Over the past six months, our healthcare investment banking business continued to show robust results and demonstrate synergies with the investment management business.

Huajing:

Huajing continued to achieve growth, with segment revenues and net investment gains of RMB194.2 million and operating profit of RMB44.9 million, compared to revenues of RMB100.4 million and an operating loss of RMB8 million in the prior year period. This growth was primarily due to higher synergies with the investment banking business and appreciation in investment in a listed equity on the STAR Board. We expect higher returns with principal investment and financial product distribution licenses expected to take effect from the second half of 2020 onwards.

Others:

The others segment mainly comprises of wealth management business, investment and management of our own funds. Revenues and net investment gains totaled RMB53.1 million, up 194.8% compared to the year-ago period, reflecting the expansion of our wealth management business. The AUM of our Wealth Management Business increased by RMB700 million to RMB2.6 billion in the first half of 2020.

China Renaissance's 2020 Interim Results Announcement, which was filed with the Hong Kong Stock Exchange.

[1] Including cash and cash equivalents, term deposits, and financial assets at fair value through profit or loss (current portion)

About China Renaissance Holdings Limited

China Renaissance Holdings Limited (stock code: 1911.HK) is a leading financial institution that combines private placement advisory, M&A advisory, direct investment, equity underwriting, sales, trading and brokerage, research, structured products, asset management, wealth management and other financial services. Providing one-stop financial services across mainland China, Hong Kong and the United States, China Renaissance operates a competitive and unique international network that connects China's capital markets with the rest of the world, serving new economy entrepreneurs and investors globally.

China Renaissance has offices in Beijing, Shanghai, Hong Kong and New York, with over 600 employees. As of June 30, 2020, China Renaissance had advised on approximately 980 transactions worth over USD$146 billion since its inception, and the company's private equity funds had AUM of approximately RMB39.0 billion in new economy investments.

China Renaissance's subsidiary Huajing Securities is one of the first securities firms set up in accordance with 10th Supplementary Agreement of "Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)". Since its establishment, Huajing Securities has assembled strong investment banking, fixed income, asset management, wealth management, securities brokerage, and research teams to serve existing and new clients.

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China Renaissance Announces Unaudited 2020 Interim Results

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