IFAST Corporation - DBS Research 2018-04-30: Wealth Management Fintech Player

IFAST Corporation - DBS Vickers 2018-04-30: Wealth Management Fintech Player IFAST CORPORATION LTD. AIY.SI

IFAST Corporation - Wealth Management Fintech Player

  • Improved revenue and profitability in 1Q18. 
  • Seventh consecutive quarter of record AUA to S$8.07bn; +24.8% y-o-y. 
  • More room for AUA growth; focus on gaining scale as a platform. 
  • Maintain BUY and Target Price: S$1.26.



Focus on building scale.

  • iFAST has made significant progress in the last 2-3 years by broadening the range of investment products and services on its platforms, and laying the infrastructure to kick-start its business in China, a market it believes will be key in the future. The group is now a more integrated wealth management platform, with five key product group – unit trusts, ETFs, bonds, stocks and insurance. This would strengthen its position as a key wealth management Fintech player. 


More room for AUA growth. 

  • Despite a seventh consecutive quarter of record Assets under Administration (AUA) to S$8.07bn (+24.8% y-o-y) as at 31 March 2018, there is still room for growth as the current AUA level remains small relative to the size of the wealth management industry in Singapore and the other Asian markets it operates in. 
  • Improved revenue and profitability in 1Q18, mainly due to an increase in AUA for both B2B business and B2C business in the period, which benefited from new inflows of investments from customers as well as relatively positive market sentiment in the period. 


Valuation: 


Maintain forecast and BUY call, Target Price: S$1.26. 

  • No change to our AUA growth assumption of 8% for FY18F and another 5% for FY19F. 
  • Maintain BUY; Target Price of S$1.26 based on Dividend Discount Model (DDM) valuation methodology, given that it is a cash-led business, supplemented by a relatively high dividend payout ratio of about 60%. 


Key Risks to Our View: 

  • The securities and financial services industry is highly regulated and iFAST is subject to a variety of laws and regulations across the regions it operates in.
  • iFAST’s operations are also vulnerable to market sentiment. 


WHAT’S NEW - Record S$8.07bn AUA drove 53.6 % y-o-y increase in 1Q18 net profit


Improved revenue and profitability in 1Q18.

  • 1Q18 results in line. Both revenue and net profit in 1Q18 accounted for 26% of our FY18F forecasts. On a y-o-y basis, revenue surged 40.1% to S$31.0m while net profit rose 53.6% to S$2.7m. 
  • China is still loss-making. Excluding China, the group would have registered net profit of S$3.9m. The improvement in revenue and profitability was mainly due to an increase in Assets under Administration (AUA) for both B2B business and B2C business in the period, which benefited from new inflows of investments from customers as well as relatively positive market sentiment in the period. 
  • A higher first interim dividend of 0.75Scts (vs 0.68Scts in 1Q17) for 1Q18 was declared.

7th seventh consecutive quarter of record AUA.

  • The group’s AUA grew 24.8% y-o-y to reach a new record of $8.07bn as at 31 March 2018, on its continuing efforts to widen the range of investment products and services and strengthen the financial technology (Fintech) capabilities of its platforms in the various markets in recent years.


AUA geographical breakdown 

  • Singapore operation is still the major contributor to group revenue. The net revenue from the Singapore operation was up 21.5% y-o-y in 1Q18, mainly contributed by significant increases in investment subscription amounts in unit trusts (UTs), exchange-traded funds (ETFs) and stocks in the period.
  • Hong Kong operation continued its efforts to broaden the range and depth of its investment products and services on its platforms, with the launch of Fintech solutions division in October 2017 and the launch of multi-products FSMOne platform in November 2017 to include multiple products and services such as UTs, bonds, stocks, ETFs and managed portfolios (robo-advisory portfolios) via one account.
  • In Malaysia, the significant growth of UT business and AUA contributed to an increase in net revenue of 51.1% y-o-y in 1Q18. The bond business and the robo-advisory portfolio service launched in the second quarter of 2017 also contributed to the increase in revenue in Malaysia, although not significantly in the quarter.
  • China business still remains in the early stages of building the iFAST brand among potential clients and investment practitioners in China’s wealth management industry. For the China onshore business, the China operation is working to expand its network with existing B2B partners in the market. For the China offshore business, it continues to help investors in China invest internationally, especially through the group’s presence in Hong Kong and Singapore.


More room for AUA growth; focus on gaining scale as a platform. 

  • In the medium to long term, iFAST believes that there is still a lot of room for growth in its AUA as the amount remains small relative to the size of the wealth management industry in Singapore and Asia. 
  • Going forward, increasing focus will be channelled towards gaining scale as a platform.


Maintain forecast and BUY call, TP: S$1.26.

  • We maintain our AUA growth assumption of 8% for FY18F and another 5% for FY19F. The expected growth is on the back of the broadening range and depth of investment products and services. 
  • Maintain BUY, Target Price of S$1.26 based on Dividend Discount Model (DDM) valuation methodology, given that it is a cash-led business, supplemented by a relatively high dividend payout ratio of about 60%.





Lee Keng LING DBS Vickers | Sue Lin LIM DBS Vickers | http://www.dbsvickers.com/ 2018-04-30
SGX Stock Analyst Report BUY Maintain BUY 1.260 Same 1.260


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