Ping An's fintech halo is losing its glow

[HONG KONG] A Chinese fintech glow is burning less brightly. Insurance titan Ping An just kicked off plans to take public its OneConnect banking software business in New York. A mooted US$5 billion valuation would be a third less than its most recent funding round last year, taking additional shine off the parent company's efforts to rise above a stodgy industry reputation.

Ping An has cashed in on its tech credentials. The US$215 billion company led by Ma Mingzhe dipped into everything from online loans to Web-based medical consultations. These have helped its shares more than double over the past three years, outperforming rivals such as China Life.

OneConnect reported a nearly US$150 million net loss in the first nine months of 2019, but offers a tantalising pitch to prospective investors. Small and mid-sized Chinese banks and insurers often lack the resources to build their own competitive technology. OneConnect can provide them with artificial intelligence-assisted calls and image-recognition technology to inspect car accidents remotely.

It got swept up in the hype, however. The SoftBank Vision Fund, renowned for its aggressive valuations, joined OneConnect's most recent capital injection. Even at a discounted US$5 billion, it would be valued at 10 times next year's sales, assuming the top line grows at the same pace as in the first nine months of 2019. That would be a hefty premium compared to older software and consulting hybrids. IBM trades at 1.5 times revenue expected by analysts next year, and Accenture at 2.9 times.

Recent Chinese fintech market debuts have been bumpy, too. Micro-lender Qudian went public at US$24 a share and now trades at less than US$5. It also may be difficult for OneConnect to persuade Ping An's rivals to sign up as customers.

The broader problem for Ping An, though, is the knock on its tech perch. Ping An Healthcare and Technology, which runs the Good Doctor app, tanked on its first day of trading last year and remains cheaper than its IPO (initial public offering) price. Lufax, its sprawling fintech outfit valued privately at US$39 billion earlier this year, has had to rethink its business model and public listing plans because of China's crackdown on peer-to-peer lending. It's all making Ping An look more fin than tech.

Ping An Insurance's OneConnect Financial Technology said on Dec 2 that it would sell shares in an initial public offering at between US$12 and US$14 apiece, raising US$468 million at the midpoint of the range and valuing the company at US$4.8 billion.

The company was valued at US$7.5 billion last year following a US$750 million fundraising round.

OneConnect provides technology to small and medium-sized banks and other financial institutions. The company was eyeing a valuation of roughly US$8 billion and an IPO of up to US$1 billion, unnamed sources told Reuters in June. It changed the listing venue to New York from Hong Kong in the hope of achieving a higher valuation, Reuters also reported.

Goldman Sachs, JPMorgan and Morgan Stanley are among the main banks working on the IPO.