iFast reported “strong” results with net profit for 4QFY2023 ended Dec 31, 2023 some 10% ahead of consensus and some 50% ahead of UBS’s estimates, write Rawat and Tan.
iFast posted a 917% y-o-y increase in 4QFY2023 net profit at $13.18 million, and a 340% y-o-y increase in its full-year net profit at $28.27 million.
iFast is one of the builders of the Hong Kong mandatory ePension platform project. “The beat against UBS’s [expectations] was driven by higher than expected ePension contribution, which we estimate to be around $11 million in profit before tax (PBT). This was well ahead of UBS’s estimates of $5.5 million,” say Rawat and Tan.
Inclusive of iFast’s unit trust business, its overall operations in Hong Kong posted 195% higher PBT of $23.8 million in FY2023, driven by the initial contributions from the ePension division.
See also: 'Is it time to revisit iFast?' UBS nearly doubles its target price to $10 on Hong Kong growth
That said, management has lowered its 2023-2025 targets for Hong Kong revenue while maintaining its PBT targets, a move driven by more conservative growth assumptions for the core wealth management business. iFast first shared these targets in April 2022.
Based on UBS’s calculations, this suggests new ePension PBT contributions of $33.5 million and $75.5 million in 2024 and 2025 respectively. “We also think this is conservative and leaves room for upside risk to our estimates,” say Rawat and Tan.
Stronger-than-expected AUA growth
Meanwhile, assets under administration (AUA) grew 4% q-o-q to $19.8 billion, beating UBS’s forecast of $19.4 billion. This was driven evenly by net inflows of $333 million and improvements in market valuations.
Banking losses from iFast’s UK-based digital bank widened q-o-q driven by higher interest expense on the back of continued strong growth in deposits, which grew 55% q-o-q, following the launch of the Digital Transaction Banking (DTB) and Digital Personal Banking (DPB) divisions a few quarters ago.
Management expects the bank to break even by 4QFY2024, a slight delay from the original guidance of 3QFY2024.
‘Sharp pickup in net profit’
To UBS, iFast’s FY2024 earnings per share (EPS) is broadly unchanged, but the analysts raise FY2025 EPS by 3%, driven by a higher ePension contribution in Hong Kong.
iFast is trading at 39x forward P/E, say Rawat and Tan. “We continue to expect a sharp pickup in net profit led by contribution from the ePension division, driving our expectation of a 53% FY2024-2026 EPS CAGR.”
As at 1.41pm, shares in iFast are trading 50 cents higher, or 6.3% up, at $8.43.
