IFAST CORPORATION LTD.
AIY.SI
iFAST Corporation - Encouraging 1Q17 Lifts Outlook
- With a more positive outlook, we upgrade iFAST to a BUY (from Neutral).
- It started off 1Q17 with a blast, with NPAT rising YoY by 61%. AUA also reached a record high of SGD6.46bn, following the bullish market sentiment.
- Though the share price has declined rapidly ( > 60% from its peak last year), we feel that this may have bottomed, as 1Q points to a better FY17F.
- iFAST has also been busy broadening the range of products and services over the past two years. We thus upgrade our FY17F earnings by 14%, which lifts our DCF-backed TP to SGD0.88 (from SGD0.79, 47% upside).
Positive 1Q17 in line with bullish market sentiment.
- iFAST Corp (iFAST) started off 1Q17 with a blast, with NPAT up 61% YoY.
- Its 1Q17 NPAT would have more than doubled to SGD2.95m, if not for its China operations, which have been a drag due to their start-up phase. However, we feel that the worst may be over for iFAST if such market conditions can maintain or continue.
- In addition, assets under administration (AUA) also reached a record high of a total of SGD6.46bn, with all three core markets of the group hitting record high AUA, following the bullish market sentiment.
Broadening range of products for more opportunities.
- Over the last two years, iFAST has been busy broadening the range of products and services as an investment platform, as it believes it needs to position itself well for the potential growth opportunities and changes in Asia’s wealth management industry. The full benefits from these efforts – coupled with its improved IT solutions and focus on transparent pricing, research and information for its clients – would likely be realised in the coming years.
China operations would likely continue to incur more expenses
- China operations would likely continue to incur more expenses, after widening its losses to SGD0.94m in 1Q17, as it remains in the early stages of building the iFAST brand among potential clients and investment practitioners in the country’s wealth management industry.
- The China operations have continuously increased the range of fund house partners and the funds they carry on the platform. As at 31 Mar, the China business has signed up over 55 fund houses, with over 2,100 funds on its platform.
- We do not expect its China operations to be profitable in 2017 and would likely continue to incur more expenses as they ramp up. The China business is likely to continue to tie up with more funds, as well as have more in-house advisory training.
- Due to smaller margins, the management estimates that AUA need to be more than SGD1bn in order to break even.
Potential bottoming out; upgrade to BUY with higher DCF-backed TP of SGD0.88.
- Going forward, we expect the China operations losses to continue to drag down profitability despite new investment product categories faring relatively well.
- We think iFAST’s share price decline of over 60% from its peak may have bottomed, with a more positive outlook ahead. As such, we lift our call to BUY and upgrade FY17F earnings by 14%, which increases our DCF- backed TP to SGD0.88 (WACC: 6.5%,TG: 2%).
Jarick Seet
RHB Invest
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http://www.rhbinvest.com.sg/
2017-04-28
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