On the morning of December 18, 2023, China’s largest marketing and sales Software as a Service (SaaS) provider, MaiFushi (02556.HK), made waves in the financial markets by announcing its first major refinancing initiative since its stock market debut earlier this yearThis announcement came as a surprise to many investors, as it marked a significant shift in the company’s financial strategy.

MaiFushi disclosed its intention to place up to one million new shares at a discount of approximately 0.45% to six independent third-party investorsThe net proceeds from this share placement are expected to amount to about HKD 109.5 millionThis proactive measure appears to be a strategic response to the current economic landscape, seeking to bolster the company's financial stability and fund ongoing growth initiatives amidst increasing market competition.

Following the announcement, the stock initially surged by over 6% in early trading, a clear sign of investor optimism

However, this bullish sentiment quickly waned, leading to a sharp decline later in the day, which culminated in a closing drop of 3.98%. This volatility reflects the cautious sentiment that often accompanies significant corporate financing activities, especially in the turbulent context of today's financial markets.

Since its listing in May 2023, MaiFushi has enjoyed a robust trajectory in stock performance, accumulating a market capitalization of HKD 24.95 billion, making it the third-largest player in the SaaS sector in Hong Kong, only trailing behind the likes of Kingsoft (03888.HK) and Kingdee International (00268.HK). Notably, MaiFushi’s valuation has significantly outstripped that of previously popular SaaS stocks such as Weimob Group (02013.HK) and Horizon Technology (01860.HK), showcasing its strong position in a competitive landscape.

The rationale behind this recent share placement is twofold: to strengthen the financial framework of the company and to inject long-term capital into its expansion and growth plans

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The intended use of the capital aligns closely with MaiFushi's strategy to enhance its artificial intelligence (AI) technology capabilities, particularly to further secure its position as a digital leader empowered by AI.

Specifically, the funds raised will be directed toward research and development in AI-driven marketing and sales solutions, including training the Tforce large model aimed at the marketing domainThis initiative also includes the construction of a smart agency platform and the commercial application of intelligent agents in various contextsAdditionally, some capital will be allocated to operational funding and general corporate purposes.

MaiFushi has established itself as a frontrunner in the industry by providing modular marketing and sales SaaS solutions through its Marketingforce platformThis innovative approach offers flexibility for development, iteration, and customization, making it applicable across various sectors including finance, automotive, retail, and education

This expansive applicability is largely attributable to the company's repository of 240 standardized modules, which can be flexibly bundled for sale.

The Chinese marketing SaaS market is widely regarded as a burgeoning arena with immense growth potentialIn recent years, the rise of generative AI has invigorated market players, filling them with anticipation for the future of marketing SaaSAnalysts predict that the industry restructuring driven by AI will yield groundbreaking advancements in the capabilities of SaaS software and services, transforming them from merely auxiliary tools into powerful creative instruments.

Several Chinese SaaS companies have leveraged AI technology to capture significant market winsFor instance, Kingdee International has seen remarkable revenue growth from its cloud services, aided by its AI technology that powers the Kingdee Cloud modelsSimilarly, Meitu (01357.HK) has been hailed as one of the first companies to monetize generative AI, utilizing its technology across different scenarios to drive continuous user growth.

MaiFushi is equally eager to capture a slice of the AI market, which has led to increased investments in AI talent and technologies

The company recently introduced the Tforce marketing large model, which integrates AI technology with practical application scenarios.

The Tforce model harnesses deep learning, advanced incremental pre-training techniques, and robust data analysis capabilities to empower clients across the entire marketing and sales chainIn a display of its potential, during this year's mid-year shopping festival, Tforce AI secured contracts amounting to over HKD 140 million, showcasing its effectiveness and demand in the market.

During the company’s mid-year performance announcement, the management emphasized the widespread integration of AI technologies into their marketing solutionsMaiFushi's CFO, Ma Jin, highlighted that extensive use of AI has enabled the company to reduce sales, administrative, and research and development expenses, resulting in a notable improvement in profit margins.

Despite these advancements, MaiFushi has been grappling with significant financial hurdles, as evidenced by its substantial losses earlier this year

The challenges faced by many SaaS companies in China's rapidly evolving market have fostered an environment of high investment, lofty growth expectations, and resurging lossesMaiFushi's situation is emblematic of the broader industry trend, where many firms still struggle to identify a clear path to profitability.

Over the past few years, the share of research and development expenses in MaiFushi's total revenue has ranged from 14% to 20%, highlighting its persistent commitment to enhancing core technologiesHowever, the company has yet to achieve profitability, reporting losses of HKD 820 million in the first half of 2024 — a staggering 1,111% increase year-on-year, largely attributed to fluctuations in the fair value of convertible and redeemable preferred shares.

There exists a silver lining, however, as the adjusted net profit for the first half of 2024 registered at HKD 47.7 million, marking a promising turnaround