The main driver is the wealth management platform operator’s Hong Kong operations; as part of a seven-year contract, iFast is onboarding trustees of Hong Kong’s mandatory pension fund to a digital platform.
iFast’s 2QFY2025 net revenue reached $80 million, up 30.4% y-o-y and 18.4% q-o-q, as the onboarding of trustees for the project progresses to include larger trustees by assets under management (AUM).
As a result, net revenue contribution from its Hong Kong business grew 40.1% y-o-y to $40 million in 2QFY2025, translating to 37.9% y-o-y growth in 2QFY2025 patmi.
iFast downplayed this segment’s operations at the release of its 1QFY2025 results in April, lowering its FY2025 Hong Kong profit before tax (PBT) target to HK$380 million ($62.3 million) from HK$500 million, citing a “steeper ramp-up in resources and operating expenses”. This sent iFast shares plunging nearly 12% on April 28, the first trading day after results were released.
See also: iFast slips despite 31.2% higher net profit in 1QFY2025; analysts cut targets
But iFast’s Hong Kong business posted PBT of HK$163.7 million in 1HFY2025, making up 43.1% of the lowered full-year guidance.
CGS International (CGSI) analyst Tay Wee Kuang believes iFast’s Hong Kong PBT will exceed the guidance as revenue picks up in 2HFY2025. Hence, Tay is staying “add” on iFast with a 19.4% higher target price of $9.20.
UBS Global Research’s Aakash Rawat and Benjamin Tan, who issued the street’s highest target price of $10.50 from February 2024 until DBS Group Research surprised with a $10.88 forecast in March, complimented iFast’s earnings beat in all key business segments: core wealth management, ePension in Hong Kong and banking via its UK digital bank.
See also: Hong Leong Asia powers ahead with strong 1HFY2025
The duo at UBS has again updated their price target, raising it from $9 to $9.40, saying: “We think that this solid set of results is key for investors to rebuild confidence following the earnings disappointment and guidance downgrade in 1QFY2025.”
iFast’s banking business, in particular, “continues to make good progress”, say the UBS analysts, with PBT of $0.7 million in its third consecutive quarter of profitability.
In fact, iFast CEO Lim Chung Chun thinks “the sky’s the limit” for iFast Global Bank, which was acquired in 2022. “I’ve always been saying that the least competitive part of the financial sector is actually banking, for the simple reason that the number of new players going into the industry is actually limited.”
DBS Group Holdings, for example, makes more profit than all the local non-bank financial institutions in Singapore put together, adds Lim at a July 28 briefing.
“So, if you have the right business model [and] tap into a segment of the banking sector where the service has not been as well-developed [and] where customers are underserved, then there certainly is a huge level of potential.”
DBS posted a record net profit of $11.4 billion in FY2024. Lim quips: “DBS Bank makes $1 billion a month today, right? I’m not saying we are aiming for $1 billion a month, but I suppose in my lifetime, we can make $1 billion a year from the [iFast Global] Bank.”
DPS, AUA guidance
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iFast pays a quarterly dividend. The company has proposed a second interim dividend of 2 cents per share for 2QFY2025, up from 1.5 cents per share in 1QFY2025.
Lim also expects to declare a full-year dividend of at least 8 cents per share, up 35% y-o-y, which translates to a 26% payout ratio, according to UOB Kay Hian (UOBKH) analysts Heidi Mo and John Cheong.
The UOBKH analysts maintain a “buy” rating on iFast, with a 36% higher target price of $9.92.
iFast’s assets under administration (AUA) climbed to a record $27.2 billion at end-June, up 22% y-o-y and 6% q-o-q. This was driven by record quarterly net inflows of $1.29 billion, up 65% y-o-y and 37% q-o-q.
iFast grew its AUA at 20% CAGR between FY2014 and FY2024, as it approaches its 10- year AUA target of $100 billion by 2028-2030. Reaching this target will “likely require inorganic growth drivers, such as M&As”, according to DBS Group Research’s Ling Lee Keng.
Ling, whose target price had crept from $10.23 on Feb 13 to $10.88 on March 10, walked back her forecast to $9.22 on April 29. Following the release of iFast’s latest results, however, Ling has returned her forecast to $10 with a “buy” call.
iFast’s biggest bull today is Alethiea Capital’s Tiruchelvam, who initiated coverage on July 28 with a “buy” call and $10.50 target price.
Tiruchelvam, who also pens a column for The Edge Singapore, thinks the market is “missing the AUM potential”.
Tiruchelvam points to iFast’s share buyback programme, initiated on April 29. The mandate authorises the repurchase of up to 30,261,783 shares, or some 10% of the company’s issued share capital.
As of May 9, iFast had repurchased 238,400 shares, accounting for less than 1% of its issued share base, at prices ranging from $6.23 to $6.26 per share.
“Share buybacks are interpreted as a signal that management believes the stock is undervalued. This is particularly important in Singapore, where many stocks trade at a discount to book value (e.g. Keppel, ComfortDelGro). Buybacks help boost investor confidence in times of volatility, serving as a buffer to downside pressure,” he writes.
However, iFast’s share buyback has had a muted impact on the share price. According to Tiruchelvam, iFast’s cash flow indicates that they could have another buyback programme next year.
The company has a net cash balance of $1 billion, which amounts to 47% of the enterprise value. He expects free cash flow generation of $164 million in FY2025 and $90 million in FY2026.
