 Good day fellow investors. We are continuing with the analysis of interesting Chinese stock picks. China is a great market to invest in growth. There are some risks but nevertheless in the long term should bring very very relatively safe rewards. Especially if you find stocks that have a margin of safety and huge upsides. And that's what I am looking for. Today I'll discuss NOAA Holdings which is a wealth management company in China. They have high network clients and they find investing products for them. They are in the intermediary, they make money out of fees and commissions. I'll discuss expected future earnings, describe the business, analyze the fundamentals, analyze the margin of safety and analyze expected future returns in relation to the risks. Always focus on the risks. So the company overview as I said wealth and asset management services provider in China mostly focused on fixed income 205 branches in China. Almost 165,000 clients, number is still growing at staggering rate. Shares outstanding, American depository shares 60 million. They are branching out in wealth management, asset management and internet financial services. Generating income as I said from commission and fees. What's good about the company SAP Global gave it an investment rating. So it's not a junk Chinese stock. It's rated very well. Long-term rating is stable, very low financial leverage, rapidly growing management business. Small assets under management present a risk, but also opportunity. As assets under management are small, they can grow easier to higher level. So higher revenue and concentration in wealth management, of course, they are still starting the environment. The businesses, they're still just starting. We still have to see a Wall Street in China being built. So there's plenty of time. NOAA owns Gopher asset management, but it manages only $19 billion for now. So if that sector explodes in China, it will be a benefit for NOAA. Quick look at revenues, staggering growth, five-fold growth in the last five years. This is Reminbi. Income from operations, four-fold growth. Net income, also four-fold growth. Basic earnings went up four, four-point something times. So very good company, good margins, stable margins. They are a service, so they take their fees on what they're doing. They are not owning what they're selling. Thus, the risk should be very low. Whatever happens, even if the situation in China deteriorates, they will be stuck with general and administrative expenses, which are around 10% of the company. So they have really a margin of safety in. If things go wrong in China, we can still operate. Our cost will be much, much lower. Thus, there is a margin of safety in the company. Balance sheet, total equity has been constantly growing. So that's why also the good rating. The book value per share is $8.47, which is much lower than $31. So the margin of safety in the book value is pretty far away from the stock price. So we have to focus on growth and cash flows. On the growth side, they have showed growth of 8.5% in the last quarter. However, on a year-to-year basis, the growth is much, much bigger. Nevertheless, for conservative reasons, we will take that NOAAG continues to grow as the market will grow. Expected market growth, wealth management growth in China is expected to grow at about 15% to 20% as the number of high-network individuals increases in China. So future earnings grow, trading earnings per share, 1.58, price of annexation, 19.62. Expected growth of 15% per year. So we can expect earnings to double in five years. And that's the minimum expectations. If the internet businesses they have, the wealth management explodes like it has been the case for the wealth management part and selling fixed income products mostly to form real estate investment, but they are lowering that, then we can expect higher growth. So I think this is the minimum I am looking at. Of course, always look at the safety and the risk first. Let's look at the risk. Growth per year was 46% last year. 15% in the last quarter, 8%. So I think it will be variable, but we can expect higher growth rates than the 15%. But let's say 15% and will be good. So the risks are early stage wealth management market, early stage. So the risks are high, but opportunities are huge. Fixed products related to real estate, those are declining for NOAA, 51% in 2014, 31% and now around 30% in 2016. Biggest risk if there is slowdown in the global or Chinese economy, this stock will get hammered despite the margin of safety in the flexibility of costs. So read the 20F report risk part, it's 20 pages before investing to know exactly what you are going into. There is some part on the financial statement that I don't really like. Government subsidies are 25 million dollars per year or 0.4% per share. That's 25% of earnings. That's very important. If government removes those subsidies, as those companies are making more and more money, we see a hit on earnings. So a risk. Then we have a dual shareholder structure, class A, one vote, class B, the management, four votes. So there is always a possibility for a buyout from the management if things go really well and there you should expect a premium of 40%. So that's always the question. Is the premium, the management buyout risk, like the management had done with previous companies, is it worth the risk? Quick comparison to UPI Holdings, NOAA, 15% growth, UPI 40%, price to book better at UPI dividend, better at UPI margin of safety from book value is better and UPI valuation is better and UPI. Given the risks of a crash in China financial system, I prefer to invest in companies that give me immediate return and where the growth is extremely high. So in this case, when comparing NOAA and UPI, I know NOAA is bigger, but UPI is also growing and perhaps the smaller thing will be an advantage for the growth. So to conclude on NOAA, it is a very good business. It's a very interesting business. It has huge potential. However, on the risk side, I don't know if it's worth it. The risks are of course a slowdown in China, negative sentiment towards such companies. The risk of a management buyout at a smaller premium. So you might want to think about the exposure there. The returns I expected to double in the next five years if the valuation stays the same. The rest for the valuation, I don't know how it will be valued. If it goes up, then the returns will be higher. If it goes down to 10 or 8 where UPI is, then you can expect flat-ish returns over the next 10 years. That depends on government regulations, subsidies, competition. Commercial banks are entering the field. Perhaps they will acquire the companies because a lot of commercial banks in China don't have a wealth management and internet presence. So it's a very interesting, there will be very positive developments as the environment grows. So very interesting company to see, to look at and be exposed if that is your thing. Just a quick comparison with other companies that we have discussed. I'll make this stable for more and more companies. I have just started to discuss a little bit and we can see that NOAA is not that good in comparison to other companies because the risk is pretty high. The book value doesn't mitigate the risk like it does in other companies that I have discussed. Nefzone, Amira. The return is there. However, the risk is a little bit higher. Dig deeper into what's going on in China. If the volatility of NOAA's new customers that was low, the 8% growth over the last quarter returns to 30-40%, that positivity could really push up NOAA's stock price. So very interesting volatile company for traders, for longer-term investors. I would prefer other investments. Thank you for watching. Leave your comments below. Tell me where I'm wrong with NOAA. Do you have some additional info that could add value to this analysis? I'm happy to hear your comments and discuss with you the stock and the environment, wealth environment in China. Thank you for watching. I wish you a great day and I'll see you in the next video.