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

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).
  • Maintain NEUTRAL.

Still ramping up in China. 

  • 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.

Poor performance from Hong Kong and Singapore. 

  • 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.

Maintain NEUTRAL. 

  • 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