DBS Group Research Ling Lee Keng has kept her “buy” call on iFast Corporation with a higher target price of $10.88 from $10.23, as she sees the group benefiting from Asia’s rising wealth population.
In Ling’s view, iFast’s current assets under administration (AUA) only accounts for a “small share” of the wealth management business.
“The total addressable market (TAM) for wealth management platforms in Singapore is substantial and projected to grow significantly in the coming years,” the analyst writes in her March 10. “As of 2023, Singapore's wealth management sector recorded over 10% y-o-y growth in assets under management (AUM) to $5.4 trillion, with a five-year compounded annual growth rate (CAGR) of around 10%, according to data from [the] Monetary Authority of Singapore (MAS)”.
In contrast, iFast’s overall AUA as at the end of 2024 stood at $25.01 billion, representing less than 1% of the total AUM in Singapore’s wealth management sector.
iFast’s overall AUA as at the same period also accounts for about 17% of the collective investment schemes (CIS) market sub segment. The sub segment, which includes products such as unit trusts, exchange-traded funds (ETFs) and mutual funds, grew by 15% y-o-y in 2023 to an AUM of $146 billion.
With this, Ling sees room for iFast to grow with the group holding a market share of 60% within Singapore’s wealth management platform market. Competition is also less likely with “evident” high barriers to entry based on the entrance of three competitors over the past decade. iFast’s other competitors in this space include PhillipCapital’s POEMS platform and GROW.
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iFast has to be expecting to see strong AUA growth as well, as the company unveiled its target to reach $100 billion in AUA by 2028 to 2030, ahead of Ling’s “conservative” estimate of a long-term AUA growth of 20%.
“AUA for iFast has grown at a CAGR of 20% between FY2014 – FY2024, as the group continues to add new products and services on its platforms,” she writes.
She adds that to reach an AUA of $100 billion, iFast is likely to require inorganic growth drivers such as mergers and acquisitions (M&As). “Nevertheless, we believe a 20% growth rate per annum is achievable”.
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iFast’s digital bank a valuation catalyst
iFast’s UK-based digital bank, iFast Global Bank (IGB), is also deemed to be a valuation catalyst, in Ling’s view.
The digital bank has “demonstrated significant growth potential” through its achieving profitability within three years upon iFast’s acquisition as well as improving metrics.
IGB reported a net profit of $0.3 million in the 4QFY2024, marking a “notable turnaround” from a loss of $2.57 million in the 4QFY2023. iFast acquired an 85% stake in UK-based BFC Bank for GBP25 million or $45.9 million in January 2022.
“The acquisition allows iFast to tap into new revenue sources, such as interest from banking products (loans, deposits) and digital banking fees, in addition to its existing wealth management and investment related revenue streams,” says Ling.
“The scalable nature of the digital bank allows iFast to grow its client base without the same level of infrastructure costs associated with traditional banking models, further enhancing profitability, positioning it as a leading digital financial platform,” she adds.
As at the end of 2024, IGB’s customer deposit also passed $1.01 billion, up by 182.6% y-o-y. In the same quarter, gross revenue increased by 163.7% y-o-y to $17.2 million, with net revenue rising 136.4% to $7.7 million, Ling notes.
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While IGB has no direct peers in the UK, Ling, referring to its closer peers including Monzo Bank, Starling Bank, Atom Bank, Revolut and Wise, is valuing IGB at between $250 million to $1 billion. “Given that IGB is still relatively small currently and disclosure details are still limited, our valuation is based on parameters such as customer deposits, revenue, and profitability.”
Finally, Ling sees iFast as a gateway to Hong Kong’s retirement market through the city’s electronic Mandatory Provident Fund (eMPF) and Occupational Retirement Scheme Ordinance (ORSO) retirement schemes.
These are projected to drive iFast’s revenue by close to 50% in FY2025 and FY2026. The group is also expected to see its earnings grow by 20% from its Hong Kong business.
“Long-term operational contracts for the eMPF project will ensure a steady revenue stream, with stronger growth anticipated in 2H2025. Similar opportunities in Macau are also being explored,” says Ling.
Ling’s new target price now combines the discounted cashflow (DCF) and sum-of-the-parts (SOTP) valuation to better account for the potential of IGB.
“Our previous DCF model only considered the bank's top-line revenue, overlooking potential the bank can offer as part of the ecosystem,” she writes, adding that the DCF model is kept for iFast’s current wealth management business.
Shares in iFast closed 11 cents lower or 1.42% down at $7.64 on March 12.
