Huayuan Securities has initiated coverage on OSL GROUP (00863) with a "Buy" rating, recognizing it as Hong Kong's leading licensed digital asset trading and payment platform. The company has built a diversified ecosystem encompassing brokerage, payment services, and exchange operations, with its payment arm (OSL Pay) emerging as a new growth driver—contributing 29% of revenue within just two months of its launch in the first half of the year.

**Company Background** OSL GROUP is the only listed virtual asset exchange in Hong Kong specializing in digital asset trading and payments, and the first licensed platform to operate at scale in the region. Through strategic acquisitions, OSL has secured key licenses across over 10 jurisdictions, including Hong Kong, Japan, Australia, the EU (Italy), and Bermuda, with plans to expand further.

**Business Performance** OSL has established a digital asset ecosystem spanning brokerage, payments, asset management, exchange services, and institutional solutions. Currently, revenue is primarily driven by brokerage and payment services: - **Brokerage**: Offers OTC and RFQ services with deep liquidity for institutional and professional investors, contributing ~50% of H1 revenue. - **Payments (OSL Pay)**: Provides fiat on/off-ramp services for Web3 wallets, generating 29% of group revenue within two months of launch. - **Asset Management**: Supports tokenized funds with distribution, custody, and tech services. - **Exchange**: Facilitates spot trading for 20+ virtual assets, earning transaction fees. - **Institutional Services**: Leverages upgraded Type 1 licensing to enable virtual asset trading via integrated accounts.

**Market Opportunity** Favorable conditions include monetary policy easing, clearer global regulations, and growing institutional participation. OSL stands out as a rare investment opportunity in the digital asset space, benefiting from: - Fed rate cuts injecting liquidity. - Regulatory clarity in the EU, U.S., and Hong Kong. - Traditional financial institutions allocating capital to digital assets.

**Competitive Advantages** OSL is transitioning into a comprehensive digital asset financial infrastructure provider, backed by: 1. **Payment Growth**: OSL Pay and BizPay as synergistic revenue engines. 2. **Competitive Fee Structure**. 3. **Global Compliance Network**: Licenses in key markets and expansion plans for the Middle East and Indonesia. 4. **Security & Liquidity**: Direct banking access via Hong Kong’s VATP license and partnerships with 50+ liquidity providers.

**Valuation & Rating** Huayuan forecasts 2025–2027 non-IFRS revenue of HKD 467M/764M/1.22B (119%/64%/60% YoY growth), with PS multiples of 26x/16x/10x. Comparable peers include Coinbase (COIN.O), Interactive Brokers (IBKR.O), Robinhood (HOOD.O), Nasdaq (NDAQ.O), and PayPal (PYPL.O). Given OSL’s 89% 2024–2026E revenue CAGR and transformative potential, the "Buy" rating is warranted.

**Risks**: Cross-market comparability, crypto volatility, and macroeconomic uncertainties.