IFAST CORPORATION LTD. (SGX:AIY)
iFast Corporation - Fierce Competitor In The Digital Race
- We hosted a conference call for investors with iFast Corporation’s CEO to discuss business updates, competition on the ground, and digital bank strategy.
- We see more than a 1 in 3 probability of iFast Corporation obtaining a digital banking licence. Its profitable fintech and wealth business model gives it an edge.
- The potential bank will strategically target SMEs, building a deposit base from its cash-rich wealth franchise. Lending at cheaper rates is its eventual aim.
- Reiterate ADD with Target Price of S$1.65 based on SOP, pegging iFast to 26x FY21F P/E and S$100m paid-up capital for the DWB licence.
Reiterate ADD post conference call with iFast
- We recently hosted iFast Corporation (SGX:AIY) in a conference call with a group of institutional clients. We remain positive on the stock as it is a profitable fintech player, has a proven track record of growing its assets under administration (AUA), and has strong levels of recurring revenue ( > 80% of income).
- Reiterate ADD with unchanged S$1.65 Target Price, based on SOP pegged to 26x FY21F P/E and S$100m minimum paid-up capital for digital wholesale banking (DWB) licence.
We see more than a 1 in 3 probability of obtaining the licence
- Nine digital wholesale bank applicants are shortlisted to contest for three DWB licences. We view this in two parts – the probability of obtaining the licence and the expected value from the licence.
- Management believes that iFast has more than a 1 in 3 probability of being awarded the licence for two reasons –
- Firstly, the group’s status as a homegrown player and its proven operating track record in handling cash through its wealth business. The current mix of applicants mainly comprise a number of Chinese players looking to enter the local banking scene. Note that iFast is the only DWB applicant listed on the SGX.
- Secondly, the group’s proven track record of running a profitable wealth management business powered by fintech gives confidence to it meeting the MAS’s key assessment criteria of managing a prudent and sustainable banking business.
Digital bank to target the SME segment
- Management intends to target SMEs with good credit ratings when it commences lending operations. Its strategy is to extend lower-quantum loans to smaller SMEs - a segment currently underserved by banks given its perceived riskiness and limited operating track record.
- To fund the 65% stake in the consortium with Yillion Group and Hande Group, management plans to raise c.S$80m in capital via a combination of internal sources, borrowings and equity raising.
Threading well through Covid-19
- Despite the 7% q-o-q decline in securities daily average value traded (SDAV) on the SGX, the company is seeing revenue growth from stock broking, specifically US equities.
- Covid-19 has accelerated digitisation and iFast has seen more account openings inflows in 2020. Net inflows in 1Q20 stood at S$590m, up 224% y-o-y.
- See iFast Share Price; iFast Target Price; iFast Analyst Reports; iFast Dividend History; iFast Announcements; iFast Latest News.
- Key re-rating catalyst is the award of a virtual wholesale banking licence.
- Downside risk: sustained losses from its operations in China.
Andrea CHOONG
CGS-CIMB Research
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Caleb PANG Huan Zhong
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-07-01
SGX Stock
Analyst Report
1.650
SAME
1.650
