iFAST Corporation - A Challenging FY17 Ahead
- We expect costs to continue dragging down iFAST’s profitability moving forward, even though its new investment product categories are faring relatively well.
- Furthermore, the fees it charges would likely remain level next year. The company’s FY16 results were weak, mainly due to a soft 1H16.
- Also, its performance was mainly dragged down by start-up costs for its China business, which we had previously highlighted.
- As iFAST’s outlook remains cloudy, we maintain NEUTRAL with a lower DCF-backed TP of SGD0.79 (from SGD0.88, 1% upside).
China unit may likely continue to incur expenses.
- iFAST’s business in China made a loss of SGD3.61M in FY16. Management does not expect the China unit to be profitable in 2017. At the same time, it also does not expect the losses to increase significantly as well.
- The company may likely continue to look towards having more tie-ups with funds as well has having more in-house advisory training in store. Due to smaller margins, it estimates that it needs over SGD1bn in assets under administration (AUA) in order to break even.
Singapore unit still the stronghold.
- Although its AUA stands at 72.4%, revenue dipped by 1.7% YoY in FY16.
- Management expects to re-launch its stock trading capabilities for its FSM One platform in 2Q17, with direct links to the Singapore Exchange. The platform would enable access to the broad range of wealth products that iFAST offers.
- Capex may also likely be higher (SGD6- 7m) next year to improve fintech capabilities and widen product offerings.
Maintain NEUTRAL with a lower DCF-backed TP of SGD0.79.
- Going forward, we do expect iFAST’s China losses to continue dragging down the group’s profitability even though its new investment product categories are faring relatively well.
- With the outlook still cloudy and challenging, we maintain NEUTRAL with a lower DCF-backed TP of SGD0.79.