IFAST CORPORATION LTD.
AIY.SI
Managing a volatile market
- Market volatility poses risk to AUA trends; iFAST has introduced initiatives to avoid a hard landing
- Sensitivity analysis reveals that for every 1% decline in AUA, earnings will be lowered by 2%
- Earnings cut by 4-12% over FY15-17F assuming slower AUA growth
- Maintain BUY; TP reduced to S$1.55; revising assumptions
Unlikely to be spared in this volatile market.
- AUA growth poses risks in a volatile market. Note that iFAST’s AUA declined by 38% during the Global Financial Crisis (GFC) due to redemptions. Similar trends are highly likely in the near term, prompting us to trim our AUA growth assumptions for iFAST to 15% for FY15 and 10% for FY16F, while maintaining growth of 20% for FY17F. This has resulted in our earnings forecasts being reduced by 4-12% over the same period.
- With these assumptions, we arrive at our revised base case with a TP of S$1.55.
New initiatives to mitigate hard landing but near-term sentiment may stay weak.
- iFAST has laid down several new initiatives in the past year. These are gradually being rolled out and will eventually contribute to stronger AUA growth over time. Meanwhile, imputing weak sentiments, our sensitivity analysis indicates that for every 1% decline in AUA, earnings will fall by about 2%.
- Our bear-case scenario, where we assumed AUA growth of 5% for FY15 and -15% for FY16F, leads us to a bear-case TP of S$1.17, which is close to its recent low of S$1.16.
Maintain BUY, TP lowered to S$1.55.
- We use the Dividend Discount Model (DDM) as the valuation methodology for iFAST, given that it is a cash-led business, supplemented by a relatively high dividend payout.
- We arrive at our TP of S$1.55, after imputing a terminal growth rate of 4% and a 60% dividend payout ratio, and assuming AUA growth of 15% and 10% for FY15 and FY16 respectively.
LIM Sue Lin | LING Lee Keng | http://www.dbsvickers.com/ DBS Securities 2015-09-09
1.55
Down
1.75
