iFAST Corporation - UOB Kay Hian 2021-07-25: 2Q21 Robust Recurring Revenue Growth As AUA Pushes Records


iFAST Corporation - 2Q21 Robust Recurring Revenue Growth As AUA Pushes Records

  • The faster-than-expected AUA growth for iFAST (SGX:AIY) continues to hit record levels, helping the fintech firm achieve greater operating scale. Overall AUA has grown to S$17.54b, driven mainly by the Singapore market and new subscription into unit trusts. Net inflows of client assets will continue to support AUA growth in 2H21.
  • We remain positive on iFAST amid the strong momentum going forward. Maintain BUY with a higher target price of S$11.50.

iFAST's 2Q21 Results

Robust AUA growth exceeds expectations.

  • Growth in assets under administration (AUA) for iFAST Corporation (SGX:AIY) has been robust, continuing to register new record levels. See iFAST's announcements. Group AUA reached S$17.54b as at 30 Jun 21, growing 57.3% y-o-y and 8.9% q-o-q (31 Dec 20: S$14.45b).
  • The Singapore market remains as the main growth driver for the group, constituting S$12.2b in AUA (+63.1% y-o-y; +9.9% q-o-q), supported by the higher client base across both the business-to-business (B2B) and business-to-consumer (B2C) divisions.
  • In terms of products, the AUA of unit trusts grew to a record S$12.87b (+48.7% y-o-y; +8.7% q-o-q), accounting for 73.3% of overall AUA.

Net inflows of client assets indicate sustainability.

  • Going forward, iFAST's AUA growth in 2H21 is expected to remain stable, supported by the continued strength in net inflows of S$2.122b in 1H21 (2020: S$3.16b; 1H20: S$1.247b).

Operating leverage scaling up, dividend raised.

  • Profitability for iFAST continued to outpace operating expenses.
  • iFAST's second interim dividend was raised by 46.7% to S$0.011 per share.

Positive momentum on AUA growth likely to remain.

  • iFAST has proven it is able to capture management industry.

Gross and operating margins continue to improve.

  • As iFAST achieves higher AUA, it will benefit from increased operating scalability, translating to higher net revenue margin and earnings profitability.
  • A percentage of AUA and net revenue/recurring net revenue were held at a steady average of 0.733%/0.599% across 2017-19, before dipping to 0.723%/0.502% in 2020-1H21 due to the surge in trading income as a result of market volatility. This compares to the steady decrease in operating expenses as a percentage of group AUA fell from 0.625% in 2017 to 0.471% in 1H21, as initial ramp-up and major development costs have been incurred in key markets prior to 2020.

Several new growth avenues in Malaysia...

  • The recent launch of the Malaysian stockbroking service on the FSMOne.com investment platform has helped strengthened the iFAST’s position as a multi-asset Koperasi Angkatan Tentera Malaysia, THZ Alliance and Mr. Lee Thiam Wah, as well as international partner Yillion Fintech.

…and Hong Kong.

  • Discussions remain ongoing on preparatory works for the successful tender of the eMPF Platform project in Hong Kong. The project has a 2-year implementation period to be completed by end-22, and a 7-year operation/maintenance period thereafter. iFAST will be the prime subcontractor for the project, and the scope includes MPF scheme operation services, transformation services and user delivery services.
  • iFAST targets to provide more details on the eMPF Platform project by end-21.

iFAST - Earnings Revision

  • We have raised our iFAST's 2021 AUA estimate by 4.3% from S$16.89b to S$17.63b in staff costs of 19.1% across 2023-30 to 16%, which resulted in the increase in net profit CAGR from 22.6% to 25.8% across 2023-30.

iFAST - Valuation & Recommendation

Clement Ho UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-07-25
SGX Stock Analyst Report BUY MAINTAIN BUY 11.50 UP 7.960