The publicly listed Hong Kong-based brokerage KVB Kunlun has reported solid growth in 2013, with a strong balance sheet composure, which could spell 2014 to be a better year for the company’s share price. The annual report filed with the Hong Kong Exchange reveals that leveraged FX dealing income rose more than 55% over last year to $17.5 million (HK$135.5 million). According to the company the results are driven by increased volatility in the market increasing trading volumes.
In an important move, for the first time KVB Kunlun has separated its leveraged foreign exchange business from its cash dealing operations report and other income. They were previously bulked together hence it was unclear as to what was the real share of the firm’s margin FX business.
Solid Client and Volumes Growth
Extensive marketing efforts conducted by KVB lead to their client base increasing by more than 30% year-on-year, while net deposits have spiked by 75% when compared to 2012. As a result, profitability from the company’s operations from leveraged foreign exchange trading has grown substantially. The company’s net profit margin has totaled to about 20%, however we need to take into account that the share of non-margin FX products is unknown, as the company did not report its margins from leveraged FX dealing separately.
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Net profit amounted to $4.4 million (HK$34.8 million), with figures driven by KVB’s New Zealand registered subsidiary named KVB Kunlun New Zealand Limited, accounting for more than half of those – $1.9 million (HK$15 million). No doubt that the favorable regulatory framework in place in the country is the main reason for the subsidiary’s existence. However as Forex Magnates has already reported, that could soon be changing with New Zealand’s regulatory framework likely transforming by the end of the year, targeting unlicensed FX providers.
The company boasts solid cash and cash equivalent reserves which open the door for future investments, namely regional expansion into Japan and China and strategic acquisitions. According to future plans unveiled by the company, KVB Kunlun plans to spend about $4.6 million (HK$36 million) for expanding in the above mentioned regions, and almost as much for increasing the range of the firm’s offerings to its clients.
Platform development has not been left behind with the plans detailing a total of $3.6 million (HK$28 million) being set aside for that, and a further $2.7 million (HK$21 million) dedicated for strategic acquisitions.
The company appears to have achieved a stable footing in 2013, as market participants will be looking closely to observe how its position in the market evolves as KVB dedicates more resources to growing in additional markets. Share prices are currently trading substantially below KVB Kunlun’s IPO price of $0.10 (HK$0.80) at $0.06 (HK$0.425). After a recently published press release by KVB Kunlun that the company has obtained a license to operate in mainland China, and the imminent opening of the office in the city of Zhuhai, there could really be scope for further growth at the firm. However, for now it is unclear as to what the nature of its mainland China business will be and whether it will be margin FX related.