IFAST CORPORATION LTD. (SGX:AIY)
iFAST Corporation - AUA Growth To Continue Even Without A Digital Bank Licence
- Continued AUA growth expected for iFAST despite not winning a digital bank licence
- Near term catalysts include bid for the Hong Kong pension scheme project, which may contribute significantly to bottom line
- Approval for securities dealing in Malaysia could further enhance its revenue stream
- Buy iFAST on near term price weakness; c.30% drop in iFAST's share price unwarranted.
Not successful in bid for digital bank licence.
- The consortium led by iFAST Corporation (SGX:AIY), comprising Yillion Group and Hande Group, was not among the successful applicants awarded digital wholesale bank (DWB) licences by the Monetary Authority of Singapore (MAS). Instead, two DWB licences were awarded to Ant Group as well as a consortium comprising Greenland Financial Holdings, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management.
Our Take on iFAST
Other catalysts still in place.
- iFAST's share price has performed very well, surging close to 300% year-to-date partly due to market expectations of the company winning a digital bank licence. Although this has not materialised, there are other catalysts still in place including growing digitalisation amid the COVID-19 pandemic and bid for the Hong Kong pension scheme project.
- Furthermore, without the DWB licence iFAST’s balance sheet should not be too stretched. iFAST had planned to fund the S$80-100m capital needed for a DWB licence via a combination of cash, equity and debt financing.
Continued AUA growth expected even without a DWB licence.
- We expect iFAST to expand its range of products and services, even though it was not successful in winning the DWB licence. In recent years, iFAST’s AUA growth has outpaced industry growth. With its expansion of product range both in depth and in breadth, coupled with the launch of the FSMOne in Singapore in FY16, iFAST’s AUA grew at a 3-year compound annual growth rate (CAGR) (FY16-FY19) of 18% (vs 12% in FY16-FY18 for the industry).
- Given iFAST’s scalable business model, we expect growth to continue to outpace the industry.
Other catalysts include bid for the Hong Kong pension scheme project.
- iFAST is part of one of the two consortiums in the race to digitalise the Hong Kong retirement funds system called Mandatory Provident Fund Schemes Authority (MPFA), paving the way to lower fees for more than four million savers. One of the finalists is a consortium led by Oneconnect Financial Technology, backed by Ping An Insurance Group working with a French technology partner Atos. The other player is a group led by PCCW with iFAST as the technology partner. The award of the contract should be announced soon.
MPFA win could contribute significantly to earnings.
- There are no details yet on potential contract. We assume that iFAST could get a cut of fee income. As at June 2020, MPFA had net assets worth HK$967.8bn. Based on a 20-basis point calculation, this works out to c.HK$2bn (S$357m) annually.
- Assuming iFAST gets a 3-5% cut of the fee income, contribution to bottom line could be in excess of S$10m.
Malaysian approval for securities dealing could further enhanced its revenue stream.
- This service is expected to be launched by early 2021. iFAST Malaysia currently offers unit trusts, bonds, managed portfolios and insurance products to wealth advisers and do-it-yourself (DIY) clients, via its iFAST Business-to-Business (B2B) platform and its FSMOne.com Business-to-Consumer (B2C) platform respectively.
- Using Singapore as an example, we could see similar growth trend in Malaysia. Though stocks and exchange traded funds (ETFs) still account for a small percentage of iFAST’s total AUA currently, contribution has been growing in recent quarters.
- In terms of product breakdown by AUA, stocks and ETFs accounted for 9.5% of total iFASTs AUA as at end-2Q20 (vs only 5% a year ago).
Buy on weakness; steep drop in iFAST's share price unwarranted.
- iFAST's share price has shed c.30% in reaction to the loss of the DWB licence bid. However, we remain positive on iFAST and expect 15% AUA growth in FY20F and FY21F respectively.
- As at 30 September 2020, iFAST's AUA grew 25.9% year-to-date and 33.3% y-o-y.
- See iFAST Share Price; iFAST Target Price; iFAST Analyst Reports; iFAST Dividend History; iFAST Announcements; iFAST Latest News.
- Maintain BUY.
Lee Keng LING
DBS Group Research
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https://www.dbsvickers.com/
2020-12-07
SGX Stock
Analyst Report
3.960
SAME
3.960
