This is something I would dream to find in the U.S., unfortunately, I found it listed on the Hong Kong stock market. Hong Kong stocks do deserve discounting, but not this much.
It is a mission-critical, SaaS-like business embedded deep inside the day-to-day operations of more than 110,000 merchants in China (the merchants who sell on Taobao, Tmall, JD, Pinduoduo, Douyin, and other apps).
Once installed, it becomes difficult to replace, because a large part of the growth is increasingly coming from existing customers expanding their usage of the platform, rather than simply from constantly acquiring new customers.
The company reported 115% net revenue retention in 2024.
Its higher-value “synergy” products grew revenue by roughly 65% last year, while the total SaaS customer base still expanded by almost 28% to around 113,000 customers.
So you have both -more customers entering the ecosystem and existing customers spending more once they are using the platform.
You can buy the company for roughly 13x my estimate of 2026 adjusted earnings. But even that substantially understates how cheap the underlying business may be. More than half of the company’s market value is represented by cash. Strip out a reasonable portion of that cash, and you may effectively be paying somewhere around 6x forward earnings for the operating business.
But wait! There’s more! The business is also at an inflection point- financially.
Revenue increased 25.6% last year.
and adjusted profit increased by 380%
Gross margins have expanded from approximately 50% in 2021 to almost 74% today.
And the operating leverage is only now beginning to become visible.
The latest guidance suggests adjusted profit to increase again.
That is because this is fundamentally a highly scalable business.
The software has already been built.
Customers largely pay in advance. There is very little physical capital required to support growth. And as more revenue passes through the existing infrastructure, a larger proportion of every incremental renminbi can fall through to profit. This is the point in a SaaS business where the economics can begin to change very quickly.
But wait! There is even MORE!
This company is already the largest player in its niche in China, and still the market itself remains fragmented and relatively underpenetrated.
The company also has no debt, and tons of cash.
And importantly, management has already begun returning some of it! Sharebuybacks- representing just over 3% of the company, during 2026.
The board is also considering an interim dividend.
So the thesis is not dependent purely on multiple expansion, or the market finally noticing the business, or investors finally starting to appreciate that there may be value on the Hong Kong Stock Exchange.
You have a mission-critical software business.
You have recurring, subscription-like revenue.
You have existing customers expanding their spend.
You have new customers still joining the platform at a rapid rate.
You have gross margins approaching 75%.
You have significant operating leverage.
You have a dominant competitive position.
You have billions in cash.
You have almost no financial debt.
And you may be paying only 5-7x forward earnings for the operating business after adjusting for that cash.
There are risks, of course, there always are, but I believe the market has presented us with an opportunity here, and I have certainly acted on that opportunity…
If you want to become a paid subscriber- do so on the Desktop Website- otherwise you pay 30% extra for Apple’s Walled-Garden tax.