IFAST CORPORATION (IFAST SP) - UOB Kay Hian 2017-07-31: Strong 1H17 Earnings But Positives Priced In

IFAST CORPORATION (IFAST SP) - UOB Kay Hian 2017-07-31: Strong 1H17 Earnings But Positives Priced In IFAST CORPORATION LTD. AIY.SI

IFAST CORPORATION (IFAST SP) - Strong 1H17 Earnings But Positives Priced In

  • iFAST reported a strong set of 1H17 earnings (+76% yoy), on the back of positive AUA growth from all core markets. 
  • While we remain optimistic of the group’s outlook on an expanded suite of services and recovering market sentiment, we believe positives have been priced in at current level. 
  • Maintain HOLD, with a higher DCF based target price of S$1.08. Entry price: S$0.95 



VALUATION


Maintain HOLD with higher DCF-based target price of S$1.08. 

  • While we are optimistic on iFAST’s growth outlook given its expanded suite of investment products and China venture, we believe its current valuation of 34.6x 2017F PE reflects that.
  • iFAST is now is trading at a 12% premium to its closest peer comparable Hargreaves Lansdown (31x), a UK-based investment platform services company and a 33% premium to Charles Schwab (26x), a US investment service company. 
  • Entry price: S$0.95.


INVESTMENT HIGHLIGHTS


1H17 earnings exceeded our expectations. 

  • 1H17 earnings exceeded expectation, coming in at 59% of our full-year estimates for 2017. 1H17 earnings of S$4.2m increased 76% yoy from a low base as net revenue growth (+23% yoy) outpaced operating expense growth. 
  • Cost was well managed, where 1H17 staff costs grew a mere 3.3% yoy and other operating expenses increased 9% yoy.

AUA charted good momentum. 

  • As of 1H17, assets under administration (AUA) rose 21.1% yoy to S$6.81b on a broadened range of investment products. 
  • All core markets reported strong growth, with Singapore up 16% yoy, Hong Kong up 27%yoy, and Malaysia up 47% yoy.

New products will take time to ramp up. 

  • In the near term, we believe the bulk of the AUA contribution will continue to stem from unit trusts as new products take time to ramp up. 
  • As of 30 Jun 17, bonds/ETF/stocks contributed only 7.2% to AUA (vs 30 June 16: 5.9% of AUA).

China operations is still early stage. 

  • Its China operations is still in the early stages of expansion and we expect it to be loss-making this year. 
  • We hold the view that it might take 3-4 years before its China operations can break even. As of 1H17, the group had signed up more than 55 fund houses, with over 2,200 funds on its platform.

Strong cash position, clean balance sheet. 

  • As of Jun 17, iFAST remained in a debt-free position with cash balance at S$25.7m. The group has declared an interim dividend of 0.68 S cents per share for 2Q17, equivalent to 54.6% of the Group’s net profit (ex China)
  • Adjust 2017-19F earnings upwards by up to 14% to account for higher AUA growth assumptions and lower operating expense assumptions given good cost management.




Thai Wei Ying UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-31
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.08 Up 1.020



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