Following iFast Corporation’s 1HFY2022 results ended June, CGS-CIMB Research analyst Andrea Choong has slashed her target price on iFast to $4 from $7.60 previously. Choong also downgraded iFast to "hold" from "add" in a July 26 note.
Meanwhile, DBS Group Research has cut their target price by nearly 25% to $4.08 from $5.42 previously.
2022 will be a year of higher costs and slower growth in revenue for iFast, writes DBS analyst Ling Lee Keng. Ling maintains her “hold” call on iFast in a July 26 note.
iFast reported a net loss of $2.69 million for 2QFY2022 ended June, owing to a one-off impairment from its India business. This extends a decline for the wealth management platform company; net profit had declined 34.9% y-o-y to $5.74 million in 1QFY2022.
On a half-year basis, iFast reported net profit of $3.04 million in 1HFY2022, though this was still down 80.8% y-o-y.
Writes Ling: “The tough market conditions, coupled with higher operating expenses and initial operating losses for iFast Global Bank, together with the $5.2 million impairment charges for the India platform business, has led to a net loss…. 2022 will be a year of higher costs, as the group prepares to launch the ePension business in Hong Kong while the UK bank is still incurring losses, at least till 2024.”
At the end of March, iFast completed its acquisition of the UK-based iFast Global Bank Limited (formerly known as BFC Bank Limited). Management expects it to turn profitable in FY2024. Attributable loss from the bank in 2QFY2022 stood at $0.952 million and full-year attributable losses guided at $4 million.
iFast says it is currently working to restructure the business consistent with the group’s wealth management focus, and will provide an update at either the results release of 3QFY2022 (due September 2022) or 4QFY2022 results (due February 2023).
Ling also points to a lack of near-term catalysts, as iFast’s bid for a digital bank licence in Malaysia is likely off the table. “There was no update on the bidding on the digital bank licence in Malaysia, and the management stated that it is fair to assume that it was not successful.”
See also: Citi expects earnings downgrade after iFast's 2QFY2022 results this week, lowers TP
The group’s assets under administration (AUA) declined 5.1% q-o-q to $17.68 billion as at June 30, 2022 but rose 0.8% on a y-o-y basis. In 1QFY2022, AUA had eased 2% q-o-q but surged 15.6% y-o-y.
Meanwhile, Citi Research has long panned iFast’s share price potential. In a July 26 note, analysts Tan Yong Hong and Tian Yafei reiterate “sell” on iFast with a target price of $3.80.
Ahead of iFast’s 1HFY2022 results, Tan and Tian had cut their target price from $4.20 in a July 19 note, extending their slashing of iFast’s fair value from $7.50 last October.
Tan and Tian value iFast on a “two-stage dividend discount model”. “The first stage is based on a discount of our dividends forecast to the present value. The second stage calculates the terminal value based on a Gordon growth model. We assume sustainable return on equity (ROE) of 23%, terminal growth rate of 2.0% and a cost of equity (COE) of 10.4%.”
For the second interim dividend for 2Q2022, iFast has declared a dividend of 1.10 cents per ordinary share, unchanged from this time last year.
That said, Tan and Tian note that iFast has offered no official dividend policy. “iFast will maintain absolute dividends in FY2022 using FY2021 levels, and will start to raise dividend per share (DPS) in line with growth in profitability from FY2023. Dividend payout ratio stood at 42-34% in FY2021/22.”
As at 10.15am, shares in iFast are trading 2 cents higher, or 0.53% up, at $3.79.
