IFAST Corporation (IFAST SP) - DBS Research 2017-07-31: A Strong Set Of 1H17 Results

IFAST Corporation (IFAST SP) - DBS Vickers 2017-07-31: A Strong Set Of 1H17 Results IFAST CORPORATION LTD. AIY.SI

IFAST Corporation (IFAST SP) - A Strong Set Of 1H17 Results

  • iFast's 1H17 results above expectations, boosted by positive market sentiment and a broader range of products.
  • AUA increased 21% y-o-y to S$6.81bn, a record high.
  • Raised earnings forecasts by 26% for FY17F and 28% for FY18F.
  • Maintain BUY, Target Price raised to S$1.26.

What’s New 

Positive market sentiment and a broader range of products boosted sales and profitability. 

  • iFAST’s revenue and profitability improved significantly; net revenue increased 21.5% y-o-y to S$23.1m in 1H17, while net profit rose 76.1% y-o-y to S$4.2m. 
  • Positive market sentiment and a broader range of products boosted sales and profitability. The 1H17 earnings account for 64% of our full-year forecasts. 
  • A second interim DPS of 0.68 Scts, equivalent to about 54.6% payout ratio, has been proposed.

AUA increased 21% y-o-y to S$6.81bn, a record high.

  • iFAST’s Assets Under Administration (AUA) increased 21.1% y-o-y to hit a record high of S$6.81bn as at 30 June 2017. 
  • The core markets in the group all hit record high AUA levels: Singapore’s AUA (+15.9% y-o-y), Hong Kong’s AUA (+27.2% y-o-y), and Malaysia’s AUA (+46.6% y-o-y).

Singapore remains key contributor. 

  • Singapore’s AUA grew 15.9% y-o-y to a record high of S$4.73bn as at 30 June 2017. Sales came from the investment products distributed via both the B2C business division (via the new FSMOne account, which offers access to unit trusts, bonds, stocks, ETFs and robo-advisory portfolios), and B2B business division. 
  • In June 2017, the Singapore operation launched SGX trading capabilities on its B2C platform, and on its B2B platform in July 2017.

Hong Kong experiencing good growth momentum. 

  • Hong Kong’s AUA grew 27.2% y-o-y (+7.5% q-o-q) to hit a record high of S$1.51bn as at 30 June 2017. Improved market sentiment, especially in the local Hong Kong market, and the increased range and depth of the products and services distributed, contributed to the significant improvement in AUA, sales and revenue.
  • Following a couple of years of difficult market conditions, the Hong Kong operation has been experiencing good growth momentum in both its B2B and B2C segments, with sales in unit trusts and bonds both growing strongly.

Malaysia in sweet spot, after breakeven two years ago.

  • Malaysia’s AUA grew 46.6% y-o-y (+12.7% q-o-q) to hit a record high of S$465.8m as at 30 June 2017. 
  • Similar to the Group’s Singapore and Hong Kong operations, the Malaysia operation has been working towards enhancing its range of investment products and services, and has expanded its investment product range to include robo-advisory portfolios in May 2017, and bonds in April 2017.

China offers huge potential but still in ramp-up phase with high operating costs. 

  • China remains in the early stages of building. As the China operation continues to ramp up its activities in China with additional head-counts and a new office in Shanghai, we continue to expect iFAST to incur higher expenses.

Valuation and recommendation 

Raised FY17F AUA growth to 15% from 8%; FY18F to 8% from 5%. 

  • We have raised the AUA growth for FY17F to 15%, after taking into consideration the 21% y-o-y growth in 1H17, and 8% for FY18F. As such, we are now expecting revenue growth of 22% and 11% for FY17F and FY18F respectively, on the back of the broadening range and depth of investment products and services.
  • Share price for iFAST has surged 80% since our upgrade in end-April 2017, after a strong set of 1Q17 results. It continued to do well, delivering another set of positive results in 2Q17.
  • Despite the higher operating expenses, especially in China which is in a start-up phase, we believe that iFAST can now reap the fruits of labour, on its consistent efforts to broaden the range and depth of its investment products and services in the last few years. 
  • iFAST offers investors a unique investment proposition as a direct proxy for the wealth management industry as well as a platform into digital finance, and is a beneficiary of disruptive technology

LING Lee Keng DBS Vickers | LIM Sue Lin DBS Vickers | http://www.dbsvickers.com/ 2017-07-31
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.26 Up 0.940