iFAST Corporation - RHB Invest 2016-08-01: A Weak 1H16, Cloudy Outlook Ahead

IFAST CORPORATION LTD. AIY.SI

iFAST Corporation - A Weak 1H16, Cloudy Outlook Ahead

As highlighted earlier, we expect iFAST’s 1H16 China expansion costs and adverse financial conditions to drag on NPAT. It also recorded poor performances in its Hong Kong and Singapore units.
Going forward, we expect the weak market sentiment and its expansion costs to continue to negatively impact its earnings.
Due to its disappointing 1H16, coupled with a weaker outlook ahead, we slash our FY16F NPAT by 54%. Thus, our DCF-backed TP falls to SGD0.88 (from SGD1.17, 5% downside).

iFAST Corp’s (iFAST) China unit booked a higher loss of SGD1.56m in 1H16, and the downtrend will likely continue into 2H16 due to the ramping up of operations there.
Gross revenue from China rose SGD0.24m, from SGD0.05m following an agreement with a Chinese online media company to launch transactional capabilities for its customers.
To date, its China unit has signed up more than 20 fund houses, with over 1,000 funds on the platform.

We expect earnings from Hong Kong, Malaysia and main market Singapore to stay weak, unless trade volumes and market sentiment greatly improves. This was as 1H16 NPAT from Hong Kong/Singapore plunged 92.1%/32% YoY respectively, mainly on the weak sentiment in the global financial markets and the sharp sell-down in the China/Hong Kong, as well as initial operating losses incurred post the Winfield Securities HK acquisition.
Its Malaysia unit continues to turn around slowly and steadily. Bonds subscription continues to grow steadily.
iFAST received formal approval to be a Central Depository (CDP) agent in July. Subscription to bonds increased 110% QoQ to SGD28.46m from SGD13.55m, and management remains upbeat on the continued growth of this segment.

We cut our FY16 NPAT estimate by 54% as we expect the glum sentiment on the financial markets and continued start-up costs in China to continue dragging on the group’s earnings.
As a result, we also cut our DCF-backed TP from SGD1.17 to SGD0.88, implying a FY17F 27x P/E.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-01

RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.88 Down 1.17