What Value Investing with Sven Carlin, Ph.D. said in this video:
- Geopoliticsneutrallong-termThe host discusses two Chinese government interventions into lending and collection practices. He believes that over the long term this should promote a healthier, more compliant industry, but the current business model may be broken by the new regulations, leaving the loan facilitation sector facing survival questions and a far more complex operating environment—an inherent risk of doing business in China.Source
- OtherneutralThe host cites Qudian (now High Templar Tech) as a cautionary example: after its lending business model was destroyed by regulation, it became practically a zombie company with lots of cash, and management is likely to siphon out the cash via low-price buybacks, posing a risk similar to the capital allocation question facing QFIN.Source
- QFINneutrallong-termThe host finds QFIN extremely cheap, with $3.6B in equity versus a $728M market cap, a P/E of 1.3 and P/B of 0.3, but believes Chinese government interventions into lending and collection may have broken the business model, and management's past capital allocation (including a loss on convertible-funded buybacks) was a mistake. He considers it too crazy to buy, with the long-term outlook dependent on industry compliance and management's capital allocation.Source