Executive Summary / Key Takeaways

• TOP Financial Group Limited is actively reorienting its strategy towards geographic diversification and expanding its service portfolio to counteract recent revenue contraction and a net loss in fiscal year 2025.
• The company leverages a robust, third-party licensed technological infrastructure, including Esunny and Longbridge Whale platforms, to deliver efficient trading solutions and plans to introduce new services such as CFD trading, asset management, and trust services.
• Despite operating in an intensely competitive landscape against larger, more technologically advanced rivals like Futu Holdings and Interactive Brokers , TOP aims to carve out its niche through localized expertise and a client-centric approach within the broader Asian financial markets.
• Recent financial performance for fiscal year 2025 shows a significant 58.60% decline in total revenues to $3.33 million and a net loss of $6.0 million, primarily driven by an economic slowdown in Hong Kong and the termination of its OTC derivative business, though its nascent loan business demonstrated strong growth.
• Key investment considerations include managing substantial customer concentration, adapting to evolving regulatory oversight from China, and addressing identified material weaknesses in internal controls, alongside the strategic execution of its diversification initiatives.

TOP Financial's Ambition in a Dynamic Market

TOP Financial Group Limited (NASDAQ:TOP) operates as an online brokerage firm based in Hong Kong, specializing in a comprehensive suite of trading services for local and overseas equities, futures, and options products. The company's overarching strategy is to expand its footprint across Southeast Asian investor communities and globally, diversifying its product offerings and enhancing value-added services. This ambition unfolds within a financial services industry characterized by intense competition, rapid technological evolution, and significant geopolitical influences.

The market for online brokerage services is highly fragmented, with established global players and agile fintech innovators vying for market share. TOP's foundational strength lies in providing reliable trading platforms, a user-friendly interface, and dedicated 24-hour customer support, which are critical in attracting and retaining its predominantly high-volume, high-frequency institutional and individual investor base. The company's strategic responses to these market dynamics are crucial for its sustained growth and profitability.

A Decade of Evolution: From Hong Kong Roots to Global Aspirations

TOP Financial Group's journey began in 2015 with the establishment of Zhong Yang Securities Limited (ZYSL) in Hong Kong, quickly securing licenses for dealing in securities and futures contracts by 2016. This early foundation was bolstered by the incorporation of Zhong Yang Capital Limited (ZYCL) in 2016, expanding into advising on securities, futures, and asset management by 2018. The introduction of margin financing services in 2019 further diversified its offerings.

A pivotal corporate reorganization in March 2020 saw TOP Financial Group Limited (TFGL) emerge as the Cayman Islands-incorporated holding company. This period also marked the company's entry into proprietary trading of US and HK stocks. Strategic expansion continued with the formation of WIN100 TECH Limited in May 2021 for Fintech development and IT support, and the company's successful initial public offering (IPO) on Nasdaq in June 2022, followed by its rebranding to TOP Financial Group Limited in July 2022. Recent strategic moves include the acquisition of TOP 500 SEC PTY LTD in Australia in April 2023, the launch of Winrich Finance Limited's loan business in Hong Kong in September 2023, and the acquisition of a Capital Markets Services (CMS) license in Singapore in June 2025. These initiatives underscore a clear strategic intent to diversify geographically and expand its service offerings, aiming to mitigate macroeconomic risks and capture new growth opportunities. A significant development in July 2025 saw Chairwoman Ms. Junli Yang consolidate her voting power to 94.86% through the conversion of Class A to Class B Ordinary Shares, centralizing control over the company's strategic direction.

Technological Edge: Powering Precision and Performance

At the core of TOP Financial Group's operational capabilities are its sophisticated, third-party licensed trading platforms: Esunny for futures trading and Longbridge for stock trading. These platforms are accessible via mobile applications, desktop software, and websites, designed to empower clients with a seamless, efficient, and secure trading environment. WIN100 TECH further enhances these capabilities by providing Fintech development and IT support, utilizing internally developed proprietary investment management software.

A key technological differentiator is the licensed software from Ms. Junli Yang, which integrates algorithm trading, order analytics, risk control, and technical monitoring, designed for compatibility with various vendors' APIs. The Esunny Morning Star Futures and Options System, developed by Zhengzhou Esunny Information Technology Co., Ltd., is a leading system for futures and derivatives, supporting over 1,000 derivatives on major global exchanges. Its advanced architecture ensures system stability and offers timely market information, indicator analysis, multiple-account support, and an open-source platform for high-end investors. Similarly, Longbridge Whale, a cloud-native Internet securities trading solution by Longbridge Technology Hong Kong Co., Ltd., boasts reliability, security, and efficiency. It provides comprehensive front, middle, and back-office systems, supports account opening in over 200 countries, offers real-time risk control within 5 milliseconds for critical transactions, and unifies buying power across multiple currencies.

For investors, this robust technological infrastructure translates into a competitive moat by enabling low-latency trade execution, comprehensive market access, and advanced analytical tools, which are critical for high-volume traders. The company's continuous investment in IT infrastructure, including hardware and software updates, regular stress tests, and an emergency backup plan, aims to ensure platform stability and reliability. This commitment to technological enhancement is vital for maintaining operational efficiency, fostering customer satisfaction, and supporting the company's strategic expansion into new product offerings and markets.

Financial Performance: Responding to Headwinds and Cultivating New Avenues

TOP Financial Group's financial performance in fiscal year 2025 reflects a period of significant transition and market challenges. Total revenues decreased by 58.60% to $3.33 million from $8.04 million in fiscal year 2024, following a 17.10% decrease in fiscal year 2024 from $9.70 million in fiscal year 2023. This decline culminated in a net loss of $6.0 million for fiscal year 2025, a stark contrast to the net income of $1.1 million in fiscal year 2024 and $3.4 million in fiscal year 2023.

The primary drivers for the fiscal year 2025 revenue contraction included a substantial 46.10% decrease in futures brokerage commissions to $1.83 million, which now represents 55% of total revenues. This was largely due to a 51% reduction in futures contract volume, from 2.27 million trades in fiscal year 2024 to 1.11 million in fiscal year 2025, despite a slight increase in the average commission rate. Trading solution service fees also saw a significant 70.50% decline to $0.806 million, attributed to reduced customer demand amidst an underperforming Hong Kong stock market. The company also incurred a proprietary trading loss of $1.42 million in fiscal year 2025, a reversal from a $0.122 million gain in fiscal year 2024, primarily due to volatile US stock market conditions. Furthermore, the termination of the OTC derivative business in fiscal year 2025, while generating $0.146 million in trading gains, led to a $1.5 million compensation expense for customers, impacting overall profitability.

Conversely, the nascent loan business, launched in fiscal year 2024, emerged as a strong growth area, with interest income surging by 251.48% to $0.833 million in fiscal year 2025, accounting for 25% of total revenues. This growth was fueled by an expansion of disbursed loans from $4.0 million in fiscal year 2024 to $8.3 million in fiscal year 2025. Operating expenses saw notable shifts: compensation and benefits increased by 28.30% to $1.75 million due to headcount expansion in new regional offices, while professional fees decreased by 67.90% to $0.587 million as IPO-related expenses from fiscal year 2024 subsided. A significant allowance for expected credit loss of $2.68 million was recorded in fiscal year 2025, mainly against long-aging customer receivables, alongside a $0.256 million impairment on a long-term investment.

From a liquidity perspective, the company's total cash, cash equivalents, and restricted cash decreased substantially from $38.7 million as of March 31, 2024, to $15.2 million as of March 31, 2025. This was primarily driven by $14.5 million used in operating activities and $9.4 million in investing activities.

Despite this, management believes its current cash position and anticipated operational cash flows will be sufficient for general corporate purposes for at least the next 12 months. The company's reliance on dividends from its operating subsidiaries for funding, coupled with potential restrictions from future debt, highlights a key structural consideration for investors.

Competitive Arena: Differentiating in a Crowded Market

TOP Financial Group operates within an intensely competitive financial services and online brokerage industry, competing directly with established players like Futu Holdings (FUTU), Up Fintech Holding (TIGR), and Interactive Brokers (IBKR). While TOP offers a comprehensive suite of futures and equities brokerage services, its competitive standing is shaped by a blend of localized strengths and areas requiring further development.

TOP's primary competitive advantages stem from its established regulatory licenses in Hong Kong, its focus on personalized client services, and its robust, third-party licensed technology platforms. These platforms, particularly Esunny and Longbridge Whale, provide low-latency trading and a wide range of products, which are crucial for its high-volume institutional and individual investors. However, TOP's smaller scale and potential technological gaps present vulnerabilities when compared to rivals. Futu Holdings, for instance, is recognized for its rapid digital innovation and user-friendly app, often leading in user engagement tools and faster platform updates. Interactive Brokers excels in advanced technological capabilities, offering sophisticated trading algorithms and a global reach that caters to professional traders with superior efficiency. Up Fintech Holding differentiates itself with cost-effective platforms and educational resources, appealing to a broader retail audience.

TOP's strategy to diversify its business activities and expand into new product offerings like CFD trading, asset management, and trust services is a direct response to these competitive pressures. By enhancing its multi-asset trading capabilities and expanding its customer base to include retail investors, TOP aims to leverage its localized expertise and strong client relationships to maintain market share. The company's customer concentration, with its top five customers accounting for 49% of total revenues in fiscal year 2025, underscores a vulnerability that diversification efforts seek to address. While stringent regulatory requirements and high capital needs act as barriers to entry, benefiting TOP, larger rivals with greater resources may still pose significant challenges in terms of scale and continuous innovation.

Strategic Outlook: Diversification as the Growth Catalyst

TOP Financial Group's forward strategy is firmly rooted in diversification and expansion, aiming to transform recent financial headwinds into future growth. Management anticipates that current expenditures on newly acquired subsidiaries in Singapore and Australia will yield ideal returns, positioning the company for broader market penetration in Southeast Asia. This geographic expansion is complemented by a planned increase in product offerings, including securities and futures from a wider array of global exchanges.

A significant growth driver is the planned launch of Contract for Difference (CFD) products and services in fiscal year 2025. The company expects CFD trading to generate new revenues from commissions, bid-offer spreads, and interest rate differences. Marketing efforts for CFD services will be multi-pronged, utilizing both direct channels like online advertising and industry exhibitions, and indirect channels through partnerships with financial services companies and introducing brokers. The introduction of free-trial demo accounts for CFD trading is a strategic move to educate potential customers and showcase platform capabilities, aiming to convert trials into active trading accounts.

Beyond CFD, TOP is actively establishing trust services, investor relations and marketing services, corporate and fund consultancy, and personalized asset management services in Hong Kong and other jurisdictions. These initiatives are designed to create new revenue streams and cater to the evolving needs of its client base. While the company anticipates an increase in operating costs and expenses as it rolls out these innovative products and services, it believes that a larger trading volume across diversified offerings will ultimately compensate for any potential future pressure to lower commission rates. The company's commitment to continuously improving its technological infrastructure, including regular stress tests and emergency backup plans, is foundational to supporting this ambitious growth roadmap.

Key Risks and Mitigations: A Prudent Path Forward

Investing in TOP Financial Group carries inherent risks that warrant careful consideration. The company's reliance on dividends from its operating subsidiaries for funding exposes it to limitations on cash transfers, particularly given the potential for increased oversight by the Chinese government over Hong Kong-based issuers. Geopolitical tensions and evolving regulatory landscapes in Hong Kong and China introduce significant uncertainty, with the possibility of rapid policy changes impacting operations and the value of Class A Ordinary Shares. The past SEC trading suspension in May 2023 highlights the potential for extreme share price volatility and liquidity issues.

Furthermore, TOP faces intense competition from larger, better-resourced financial institutions, which could lead to pricing pressures and market share erosion. The company's customer concentration, with a substantial portion of revenues derived from its top five clients, presents a vulnerability to changes in their trading activities. Operational risks, including potential failures in its third-party licensed IT systems and cybersecurity threats, could disrupt services and damage its reputation. Critically, the company has identified a material weakness in its internal control over financial reporting, specifically a lack of sufficient competent personnel for US GAAP and SEC reporting, and inadequate formal policies for the CECL process.

To mitigate these risks, TOP is actively pursuing business diversification through acquisitions in Singapore and Australia, aiming to reduce its reliance on any single market or service. The company maintains daily monitoring of its capital levels to ensure compliance with regulatory requirements and offers attractive remuneration packages to retain key responsible officers. Robust IT infrastructure maintenance, including stress tests and emergency backup plans, is in place to enhance system reliability. On the internal control front, TOP has engaged experienced financial consultants, provided additional U.S. GAAP training to its CFO and financial reporting personnel, and is improving financial oversight for complex accounting issues. While these measures are designed to address identified weaknesses, their full effectiveness and the company's ability to adapt to unforeseen challenges remain critical factors for investors to monitor.

Conclusion

TOP Financial Group Limited stands at a pivotal juncture, actively reorienting its business model to foster sustainable growth in a challenging yet opportunity-rich financial landscape. The company's strategic pivot towards geographic diversification and an expanded suite of services, underpinned by a robust technological infrastructure, forms the core of its investment thesis. While recent financial performance reflects the impact of economic slowdowns and strategic adjustments, the significant growth in its loan business and the planned launch of new offerings like CFD trading signal promising avenues for future revenue generation.

Despite facing formidable competition from larger, more agile rivals and inherent risks associated with regulatory complexities and internal control weaknesses, TOP's commitment to localized expertise and continuous technological enhancement provides a foundation for differentiation. The successful execution of its diversification strategy, coupled with effective risk mitigation and a focus on operational excellence, will be paramount in realizing its ambition to become a preferred online trading platform for Asian investors. Investors should closely observe the company's progress in integrating new services, expanding its customer base, and strengthening its internal governance as it strives to unlock long-term value in a dynamic global market.