IFAST CORPORATION LTD.
AIY.SI
iFast Corporation - China Start-Up Costs Hurting Bottomline
- A weaker-than-expected 1Q16 on overall market weakness and China start-up costs have dragged down iFast’s 1Q16 profits by 58.4% YoY.
- Going forward, we expect the improving market conditions, especially in April, to contribute positively to earnings.
- However, we do expect China costs to continue to be a drag on profitability. As a result, we reduce our FY16 NPAT estimates by 13% after adjusting for higher China start-up costs. This leads to a lower DCF-backed SGD1.17 TP (from SGD1.27, 3% downside).
- Maintain NEUTRAL.
Facing higher costs, China likely to remain unprofitable.
- iFast Corp (iFast) soft-launched its China business in March. It has also signed an agreement with an online media company in the East Asian nation to launch funds transaction capabilities.
- However, its cost base is likely to continue to expand and ought to continue to be a drag on profitability.
Weaker-than-expected 1Q16.
- Despite expecting a weaker 1Q16 previously, due to the sharp decline in global equity markets in the Jan-Mar 2016 period, iFast’s 1Q profit fell by 58.4%. This was more than we expected. This was also partially due to the start-up costs for its China business.
Expanding its suites of products.
- iFast is to launch an integrated wealth management platform, which includes stock transactional capabilities, in mid- 2016 for the Hong Kong market.
- Subscriptions of bonds in Singapore have also increased by 15% QoQ.
Key risks.
- A market downturn and China execution risks.
Maintain NEUTRAL with a DCF-backed SGD1.17 TP (from SGD1.27).
- We lower our FY16 NPAT estimates by 13%, which leads to a lower DCF-backed SGD1.17 TP. This is implies 24.3x FY16F P/E.
- Maintain NEUTRAL while we wait to see how iFast’s new growth initiatives pan out in such challenging times.
Jarick Seet
RHB Research
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http://www.rhbinvest.com.sg/
2016-04-29
RHB Research
SGX Stock
Analyst Report
1.17
Down
1.27
