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TIAN RUIXIANG Holdings Ltd (Nasdaq:TIRX) is a Buy

TIAN RUIXIANG Holdings Ltd (Nasdaq:TIRX) (the “Company”), a China-based insurance broker, announced today its financial results for the fiscal year ended October 31, 2020.

Fiscal Year 2020 Financial Highlights

For the Years Ended October 31,
($’000, except per share data)20202019% Change
Revenue$3,249$2,00262.3%
Operating expenses$2,689$1,90041.6%
Income from operations$560$103445.6%
Operating margin17.2%5.1%12.1%
Net income attributable to TIRX ordinary shareholders$634$176260.7%
Earnings per share$0.13$0.04225.0%
  • Revenue increased by 62.3% to $3.25 million for the fiscal year 2020, primarily attributable to the growth of our business resulting from the increase in the number of our sales professionals and activities.
  • Operating expenses increased by 41.6% to $2.69 million for the fiscal year 2020. The increase was primarily related to the increase in selling and marketing expenses.
  • Operating profit margin was 17.2% for the fiscal year 2020, compared to 5.1% for the same period of last year.
  • Net income attributable to TIRX ordinary shareholders increased by 260.7% to $0.63 million for the fiscal year 2020, from $0.18 million for the same period of last year.
  • Earnings per share was $0.13 for the fiscal year 2020, compared to $0.04 for the same period of last year.

Mr. Zhe Wang, Chairman and Chief Executive Officer of the Company, commented, “Despite the setbacks caused by the COVID-19 outbreak, our revenue realized a 62.3% year-over-year growth for a record revenue of approximately $3.25 million and a 12.1% increase in our operating margin for the fiscal year 2020. The growth was primarily driven by the increased demand for our accidental insurance and our successful implementation of a business strategy to grow our liability insurance business. We will continue to focus on developing our life insurance, institutional risks management services, and our Internet insurance platform Needbao to further diversify our revenue sources. Looking ahead, we expect China’s economy will further recover and support our business growth.”

Fiscal Year 2020 Financial Results

Revenue

For the fiscal year 2020, revenue increased by $1.25 million, or 62.3%, to $3.25 million from $2.00 million for the same period of last year. The increase in revenue was primarily attributable to the growth of our business resulting from the increase in the number of our sales professionals and the increase in our marketing activities. We launched aggressive advertising campaigns to attract new customers. We also recruited 168 additional sales professionals to sell insurance products.

Operating Expenses

Third party and related party selling and marketing expenses increased by $0.76 million, or 95.4%, to $1.56 million for the fiscal year 2020 from $0.80 million for the same period of last year. The increase in selling and marketing expenses was attributable to the increase in our marketing activities, the launch of aggressive advertising campaigns, and the increase in the number of sales professionals to sell insurance products.

Third party and related party general and administrative expenses increased by $0.03 million, or 2.6%, to $1.13 million for the fiscal year 2020 from $1.10 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the increased compensation and related benefits expenses and partially offset by the decreased rent and related utilities, professional fees, and travel and entertainment expenses.

Total operating expenses increased by $0.79 million, or 41.6%, to $2.69 million for the fiscal year 2020 from $1.90 million for the same period of last year.

Income from Operations

Income from operations was $0.56 million for the fiscal year 2020, compared to $0.10 million for the same period of last year.

The operating profit margin was 17.2% for the fiscal year 2020, compared to 5.1% for the same period of last year.

Other Income (Expense)

Total other income (expense), primarily includes interest income from notes receivable – related party and bank deposits, interest expense incurred from our third party and related party borrowings, and miscellaneous income, was $0.20 for the fiscal year 2020, compared to $0.31 for the same period of last year.

Income before Income Tax

Income before income tax was $0.76 million for the fiscal year 2020, compared to $0.41 million for the same period of last year.

Income tax expenses was $0.13 million for the fiscal year 2020, compared to $0.24 million for the same period of last year.

Net Income and EPS

Net income was $0.63 million for the fiscal year 2020, compared to $0.18 million for the same period of last year. After deduction of non-controlling interest, net income attributable to TIRX ordinary shareholders was $0.63 million, or earnings per share of $0.13, for the fiscal year 2020, compared to $0.18 million, or earnings per share of $0.04, for the same period of last year.

Financial Conditions

As of October 31, 2020, the Company had cash and cash equivalents of $6.14 million, compared to $6.24 million as of October 31, 2019. Account receivable was $1.25 million as of October 31, 2020, compared to $0.17 million as of October 31, 2019. As of October 31, 2020, the Company had current assets of $9.56 million and current liabilities of $1.29 million, leading to working capital of $8.27 million, compared to current assets, current liabilities, and working capital of $8.09 million, $0.79 million, and $7.30 million, respectively, as of October 31, 2019.

Net cash used in operating activities was $0.05 million for the fiscal year 2020, compared to net cash provided by operating activities of $0.23 million for the same period of last year. Net cash used in investing activities was $3,457 for the fiscal year 2020, compared to net cash provided by investing activities of $0.04 million for the same period of last year. Net cash used in financing activities was $0.48 million for the fiscal year 2020, compared to $0.87 million for the same period of last year.

Recent Developments

The COVID-19 outbreak has caused business disruptions beginning in January 2020 in China. Our business was negatively affected due to various government restrictions put in place to attempt to stop the spread of COVID-19: (i) only 60% of the Company’s employees were able to return to work on and around March 1, 2020, which was one month later than usual after the Spring Festival holiday; the remaining 40% of the Company’s employees returned to work by the end of March 2020; and (ii) the Company’s ability to sign on new customers was hindered because it was difficult for its sales personnel to finalize sales without in-person meetings. Therefore, our revenue for the first half of 2020 decreased as compared to the same period of fiscal 2019. However, as of the date of this press release, the COVID-19 outbreak is generally considered under control in China and we have been able to resume our normal business activities since May 2020. In light of the current circumstances, based on available information, it appears that the negative impact of the COVID-19 outbreak on our business was temporary and mainly contained in the first half of fiscal 2020.

However, the extent to which the COVID-19 pandemic may impact the Company’s business, operations and financial results from this point forward will depend on numerous evolving factors that the Company cannot accurately predict. Those factors include the following: the duration and scope of the pandemic; governmental, business and individuals’ actions in response to the pandemic in the future; and any other further development of the COVID-19 pandemic.

About TIAN RUIXIANG Holdings Ltd

TIAN RUIXIANG Holdings Ltd, headquartered in Beijing, China, is an insurance broker operating in China. It distributes a wide range of insurance products, which are categorized into two major groups: (1) property and casualty insurance, such as automobile insurance, commercial property insurance, liability insurance, accidental insurance; and (2) life insurance, such as individual and group life insurances. For more information, visit the company’s website at http://ir.tianrx.com/

S. Jack Heffernan Ph.Dhttps://www.knightsbridgelaw.com
S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.

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