Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...
Well, that seemed fast!
Just 25 days ago, Hong Kong-based investment bank AMTD International (AMTD -0.58%) made its public debut on the NYSE. Twenty-five days later, AMTD already has its first buy rating.
And wouldn't you know it? The recommendation came from one of the bankers who underwrote AMTD International's IPO!
Now, as new as AMTD International is to the public markets, we haven't written anything much about the stock here on The Motley Fool just yet -- so allow me to introduce you to it. Here's what you need to know.
Image source: Getty Images.
What you need to know about AMTD International
As our friends at StreetInsider.com kindly inform us, AMTD International is "a subsidiary of AMTD Group, a premier Hong Kong-headquartered financial institution, Asia's No. 1 independent investment banking firm and the largest independent asset management firm in Asia for PRC regional banks and new economy companies." It's also the first home-grown Hong Kong financial institution and the first independent Asian investment banking firm to ever list on the New York Stock Exchange.
Or put more simply, this is a Chinese bank.
What you need to know about AMTD International's IPO
AMTD International went public on the NYSE on Aug. 5 at $8.91 per share, and was quickly off to the races, finishing the day up 13% at $10.09. Unfortunately, it has been mostly downhill from there. Over the three weeks that its underwriters have been bound by a quiet period to say nothing in support of the stock, AMTD International shares slumped 17% to close below their offer price last night.
Six investment bankers (most of which you've probably never heard of before) teamed up to underwrite the IPO. Notably, these included both AMTD Global Markets (AMTD International's parent company) and Loop Capital Markets.
It's this second analyst, Loop Capital, that initiated coverage of AMTD International with a buy rating this morning.
What you need to know about today's rating
So why does Loop Capital like AMTD International? Well, first and foremost, I suspect, because it underwrote the IPO -- natch. But as Loop Capital explains in today's note, covered on TheFly.com, it also likes AMTD International's "deep roots to tycoon families" in China, which is evolving into a big market for investment banking services.
And Loop Capital hopes to see the bank itself evolve into a "super-connector" between capital and technology in this market, connecting new companies to the money that will fund their growth. Already, the analyst sees AMTD International "rapidly growing" in the market. Far from continuing to slide, Loop Capital believes the stock will soon turn around, resume growing, and hit $12 a share within a year.
What you need to know, period
Do the numbers bear that out? Yes and no. (Or rather, at first glance no, but maybe yes.)
According to S&P Global Market Intelligence data, AMTD International did a little less than $129 million in revenue in 2017. That revenue shrank nearly 30% in 2018 (albeit in the midst of a fierce trade war that's proved to be a drag on China's economy, let us not forget). Revenue is, however, bouncing back. Over the past 12 reported months, S&P Global puts AMTD International's total revenue at $153.5 million (up from 2017 levels). Assets under management are growing nicely as well, up from $1.1 billion at the end of 2016 to $2.3 billion at the end of last year.
Net income for the last 12 months is an impressive $118.1 million, such that, with a market capitalization of $1.9 billion, AMTD International stock currently sells for only a little over 16 times earnings. That doesn't seem an unreasonable valuation to me, and with analysts currently forecasting that both sales and earnings will more than double by 2021 (against 2018 levels), growth currently doesn't seem to be something investors in AMTD International need to worry about.
It may be too early in the game to call this stock a winner -- and I'd really like to see AMTD International get an earnings report or two under its belt before making any predictions -- but for now, I'd say the odds of Loop Capital being right on this one look pretty good.