Lufax’s humble market debut is worth a closer look. The Chinese financial technology outfit has priced its $2.4 billion New York initial public offering at a much lower valuation than rival Ant. It may not be growing as fast, but its online lending unit is profitable and established. A $33 billion valuation makes for a compelling option.
The Ping-An backed company’s rocky path to the public markets has included a change of venues and an entire reinvention of its peer-to-peer lending business model after a regulatory crackdown. Similar to Jack Ma’s financial services colossus, Lufax now operates a marketplace for small businesses and consumers to borrow from third-party lenders. Whereas Ant’s sheer size and blistering revenue growth has garnered much attention, its smaller peer’s comparable operating margins and stable business has attracted far less.
The offering will be the biggest Chinese listing in New York in more than two years, though that pales in headline-grabbing terms next to rival Ant’s record-shattering $34 billion share sale this week in Hong Kong and Shanghai. Lufax shares are set to debut at $13.50 each on Friday in New York, the top of the indicative price range, according to industry publication IFR, or 13 times forecast 2021 earnings. Include some 170 million additional shares from options and optional convertibles, the bulk of which are not profitable to convert at its IPO price, and Lufax’s multiple would reach about 15 times. That’s still lower than the 31 times 2021 forecast earnings Ant shares will trade at, Reuters reported on Oct. 27, citing sources.
Lufax’s debut will also be a so-called downround: it was last valued at $39 billion in a 2018 funding round. That compares with Ant’s massive jump, from $150 billion two years ago to $312 billion. Even so, for Ant to live up to its rosy valuation, it will have to double its earnings in two years, while Lufax’s multiple implies net profit will rise a much more feasible 25% next year. While Ant wins the headline battle, the valuation gap suggests Lufax may offer investors more upside.