IFAST CORPORATION LTD. (SGX:AIY)
iFast Corporation - Too Fast, Too Furious
- iFast (SGX:AIY)’s collaborations with top-tier digital players in bidding for high-profile government contracts and licenses entrench its franchise value in the region.
- We up FY20-22F EPS for higher stock trading volumes and lower opex from government grant. iFast has outperformed the FSSTI by c.117% since Jun.
- At 35x FY21F P/E, we think SG digital bank license optimism and HK digital pension system bid have been priced in. Downgrade iFast to HOLD.
Share price up 24% since HK digital pension system news
- iFast's share price has risen c.24% since the announcement of being shortlisted as 1 of 2 reported consortium finalists to digitise and centralise Hong Kong’s (HK) pension system (e-MPF) in Aug 20. The PCCW-led consortium (includes iFast and possibly several other parties) is vying with Ping An Insurance’s OneConnect for the project.
- The HK government is committing HK$3.4bn in public funding for e-MPF development, and its operator will receive fees based on the system’s total MPF assets (c.S$177bn). Bloomberg reports that the current bids are c.20-35bp in fees, or c.S$353m-600m in revenue per year. Shareholding details have not been disclosed, but we think it is reasonable to consider iFast would hold a 10-30% stake in the consortium in our scenario analysis.
- Using the mid-range point of c.28bp in fees, a successful bid could add c.S$4m-11m in yearly net profit to iFast, increasing EPS by 1-4Scts.
Adding a feather to its multi-asset cap in Malaysia
- In Aug 20, iFast obtained approval-in-principle from Malaysia’s (MY) Securities Commission to commence stockbroking operations in early-2021 — it already has stockbroking businesses in Singapore (SG) and HK. Stockbroking has not traditionally been a key growth driver for iFast given lower margins (i.e. 8bp per trade) and stiff competition (ultra-low/zero fees) in this space. We think a c.6-9-month operational ramp-up period should be expected prior to meaningful earnings contribution, but elevated trading volumes across the region (due to extended work-from-home initiatives) should offset this.
- In Singapore, the daily average securities trading volume rose 40% y-o-y to 1.7bn in Jul 20 while monthly traded volumes on Bursa Malaysia rose 389% y-o-y to 237bn units in Aug 20.
- Recall that iFast's 1H20 net revenues jumped 23% y-o-y on stronger trading activity amongst retail investors – a trend we expect to continue as workers stay home.
Expect greater AUA growth in Malaysia from stockbroking operations.
Extended Jobs Support Scheme (JSS) helpful in offsetting higher opex.
- See PDF report attached for complete analysis.
Downgrade to HOLD as market exuberance prices in e-MPF and DWB
- See iFast Share Price; iFast Target Price; iFast Analyst Reports; iFast Dividend History; iFast Announcements; iFast Latest News.
- Now trading at 35x FY21F P/E, we opine that market exuberance has substantially priced in iFast's potential win of the e-MPF bid in HK and the digital wholesale banking (DWB) licence in Singapore; the projected announcement timeline for both prospects are by end-20. As such, we downgrade iFast from Add to HOLD, but with a higher SOP-based Target Price of S$2.44 as we factor in incremental stockbroking revenue growth from sustained trading volumes and the scaling up of MY operations, as well as the extension of government jobs support aid in FY20-21F.
- Our Target Price is pegged to 1 s.d. above its 5-year mean at 30.6x FY21F P/E and includes minimal book value of a DWB licence operator of S$100m.
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
2020-08-28
SGX Stock
Analyst Report
2.44
DOWN
1.850
