Hong Kong forex broker KVB Kunlun completes IPO

KVB goes public in Hong Kong at a company valuation of HK$904 million (USD $117 million).

LeapRate Exclusive… IPO fever seems to be gripping the CFD industry. LeapRate exclusively broke the story of CFD broker Plus500’s IPO filing in London just two days ago. Now comes word that Hong Kong based forex broker KVB Kunlun has actually just completed its IPO, going public on the the Growth Enterprise Market (“GEM”) of the Hong Kong Stock Exchange.

In its IPO, KVB raised HK$125 million (USD $16 million) at a company valuation of HK$904 million (USD $117 million).

KVB is a Hong-Kong based financial services company, specializing in serving overseas Chinese and Japanese clients. The company gets about 70% of its revenue from its online forex brokerage business. KVB also provides cash dealing and securities trading referral services. KVB has offices in Auckland, Sydney, Melbourne, Toronto, Hong Kong and Beijing. KVB is licensed by Australia’s ASIC, New Zealand’s FMA, and by the SFC (Securities and Futures Commission) of Hong Kong.

Some more details from KVB’s prospectus:

Revenues — KVB had Revenues of HK$123.2 million (USD $16 million) in 2012, although it did report that revenue in the first four months of 2013 more than doubled over the same period last year.

Trading Volumes — KVB reported average monthly trading volumes of just over $6 billion per month in 2012, although we believe that figure to be closer to $10 billion per month in 2013.  Interestingly, roughly half of KVB’s volumes came from Forex pairs, and about half from leveraged commodities trading.

Profitability — KVB had net profit of HK$2.8 million (USD $0.4 million) in 2012, although that was down from HK$33.3 million (USD $4.3 million) in 2011.

So how does KVB’s valuation compare to other publicly traded CFD brokers, as well as to the planned Plus500 IPO?

KVB’s IPO pricing, on a multiple-of-revenues or price-to-earnings basis, is much richer than the multiples at which public forex brokers such as FXCM, Gain Capital and IG Group trade. KVB’s valuation is also much more aggressive than the proposed pricing for the Plus500 IPO — for example, Plus500 plans to IPO at a company valuation of about $225 million, and that’s while they’re sporting Revenues of $56 million and Profit of $23 million. KVB’s valuation is more than half of Plus500’s but they did less than a third of the revenue and were a lot less profitable than Plus500. But capital markets are fickle, and what might fly on one exchange might not on another.

We will be back early next week with some more analysis on the valuation of publicly traded Forex brokers, and the planned Plus500 deal. Stay tuned to LeapRate…

And as always, you can access original documentation via our posts:

  • to see the KVB IPO prospectus in English click here.
  • to see KVB’s financials in English click here.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.



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