iFAST Corporation - CGS-CIMB Research 2021-08-02: Factoring In eMPF Contributions

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IFAST CORPORATION LTD. (SGX:AIY)

iFAST Corporation - Factoring In eMPF Contributions

• iFAST (SGX:AIY) has finalised its prime subcontractor contract for Hong Kong’s eMPF project. It guides for a very material financial impact for ~7 years from FY23F.
• We estimate additional annual net profit of ~S$10m from the project, with further upside if the project is extended (~1- 3 years).
• Upgrade iFAST to ADD as we think that investors will start looking past short-term volume fluctuations and start pricing in longer-term earnings potential.

eMPF prime subcontractor contract with PCCW finalised

• iFAST's announced that it has finalised its contract with PPCW Solutions to be the prime subcontractor for Hong Kong’s eMPF (electronic Mandatory Provident Fund Platform) project under Category C, which includes MPF scheme operation services, transformation services and, user delivery services. This concludes iFAST’s negotiations of the contractual details with PCCW Solutions, which it announced in Jan 21 it would embark on when the latter was revealed as the tender winner of the contract.
• iFAST’s service agreement with PCCW entails a 7-year maintenance period beginning FY23F and is expected to have a very material financial impact during that period. Management aims to provide further growth guidance on the contract by end-21F.

Limited scope for even stronger trading volume growth

• To recap, in 2Q21, iFAST recorded its first quarterly net profit dip since 1Q19 on the back of risk-off sentiment amid financial market volatility, which resulted AUA growth easing across products and geographies. iFAST's share price retraced ~14% from its peak in Jul 21 and now trades a pick-up in China.

We factor in ~S$10m in additional annual net profit from eMPF

• Beyond the above, we now extended by 1-3 years, boosting sequential earnings.

Upgrade to ADD with higher target price of S$12.50, based on DCF

• See
  • iFAST's Share Price,
  • iFAST's Target Price,
  • iFAST's Analyst Reports,
  • iFAST's Dividend History,
  • iFAST's Announcements,
  • iFAST's Latest News.
• We upgrade iFAST to ADD with a target price of S$12.50, based on DCF (risk-free rate: 1.2%, beta: 0.8, market risk premium: 6%, long-term growth rate: 2%, see details in report attached below).
• An upside risk is winning a digital banking licence in Malaysia while a downside risk is widening losses in China.

Andrea CHOONG CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-02

SGX Stock Analyst Report ADD UPGRADE ADD 12.50 UP 8.300