Last week, iFast posted its fifth consecutive quarter of record AUA, growing 57.3% y-o-y and 8.9% q-o-q, with net profit increasing 94.0% y-o-y in 1HFY2021 ended June.
“The faster-than-expected AUA growth for iFast continues to hit record levels, helping the fintech firm achieve greater operating scale. Overall AUA has grown to $17.54 billion, driven mainly by the Singapore market and new subscription into unit trusts,” writes Ho.
See: iFast Corp posts fifth consecutive quarter of record AUA, 1H21 net profit up 94%
Ho adds that net inflows of client assets will continue to support AUA growth in 2HFY2021. “We remain positive on iFast amid the strong momentum going forward.”
Operating leverage is scaling up, notes Ho, with dividend raised. For 2QFY2021, net revenue rose 32.0% y-o-y to $26.2 million, while EBIT and PATMI scaled up at a faster pace of 46.0% and 55.0% to $8.4 million and $7.0 million respectively.
Correspondingly, the EBIT margin (based on net revenue) and PATMI margin expanded to 32.2% (+3.1ppt y-o-y) and 13.8% (+2.1ppt y-o-y). The positive operating leverage is expected to be maintained going forward as AUA continues to grow, given that the increase in net revenue generated will outpace operating expenses. Second interim dividend per share (DPS) was raised by 46.7% to $0.011.
iFast is also looking at several new growth avenues in Malaysia and Hong Kong, notes Ho.
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See also: CGS-CIMB downgrades iFast Corp on first quarterly profit dip since 1Q19
The recent launch of the Malaysian stockbroking service on the FSMOne.com investment platform has helped strengthen the group’s position as a multi-asset investment platform to move towards the objective of a holistic fintech platform, writes Ho.
Additionally, iFast led a consortium which submitted its bid for a Malaysia digital bank licence. Results for the five new licenses are anticipated to be released by Bank Negara Malaysia in 1Q2022. iFast will own a 40% stake in the partnership, which includes Malaysian partners Koperasi Angkatan Tentera Malaysia, THZ Alliance and Mr. Lee Thiam Wah, as well as international partner Yillion Fintech.
Meanwhile, discussions remain ongoing on preparatory works for the successful tender of the eMPF Platform project in Hong Kong. The project has a two-year implementation period to be completed by end-2022, and a seven-year operation/maintenance period thereafter.
iFast will be the prime subcontractor for the project, and the scope includes MPF scheme operation services, transformation services and user delivery services. iFast targets to provide more details on the eMPF Platform project by end-2021.
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“As 69% of iFast’s revenue is recurring in nature, we are of the view that free cash flows and the long-term earnings growth are relatively sticky… We note that the 2021 price to earnings (P/E) valuation may appear elevated as iFast is in a high earnings growth phase. The target price implies a 2022F P/E of 73.1 times.”
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DBS Group Research analyst Ling Lee Keng remains similarly bullish. Not only is she keeping her “buy” call, she has a higher target price of $12.10, from $10.55 previously. “We are more optimistic on iFast, given its scalable business model and the drive towards digitalisation to propel the group to greater heights,” writes Ling in her July 27 note.
She adds: “iFast is well-poised to capture more market share in Singapore, where its share is just 10% of the approximately $128 billion in AUM of collective investment schemes in Singapore. We expect AUA to grow by 30% in FY2021F and 20% each in FY2022F and FY2023F, outpacing industry growth of some 10%.”
Ling also points to iFast’s operational leverage, which could drive margins higher. “With its scalable platform business model, iFast has already obtained operating leverage. Since 1QFY2020, growth in profit was substantially higher than growth in revenue. This should drive margins higher going forward.”
As at 12.42pm on July 27, shares in iFast are trading 1 cent lower, or 0.11% down, at $8.83.
Photo: iFast Corporation
