On October 15, CLSA released a research report and initiated coverage on $Futu Holdings Limited(FUTU.US)$ with a Buy rating and a 12-month price target of $110.

CLSA pointed out in the research report:

• Online broker across the border

  HK's financial sector lags behind in digitalization. With an open ecosystem and first-mover advantage, Futu could be a big winner.
  

• Taking destiny into its own hands

  Its stock ownership plans and business services offer a unique and compliant way to acquire users. Its chatroom is more vibrant and richer in content than competitors'.

• Still a teenager with untapped potential

  Futu is still young with more future opportunities than mature US online brokers.

• Changes to come

  We expect Futu's retail market share gain (24% to 37% in HK in two years) to offset the market cool-down. Futu's clearing license in the US will let it make margin loans and put interest income on par with trading revenue.

CLSA initiates coverage of Futu with BUY with a target based on 20x forward PE; 20x is based on peer multiples, Futu's opportunity, and first-mover advantage.

Investment risks:

Futu's revenue is prone to stock market turnover, velocity, rising-rate cycle, as well as low-fee competition from local rivals. As we anticipate more ADRs' homecoming and inclusion connect scheme, Futu may face rising competition from sharebrokers and trading apps since customers will use onshore capital account to directly participate in HK stock market.