IFAST CORPORATION LTD. (SGX:AIY)
iFAST Corporation - 4Q21 Continued AUA Growth Led To Operating Scalability
- AUA continued to scale up to a record S$19.0b (31.5% y-o-y, +3.4% q-o-q), helping iFAST (SGX:AIY) achieve greater operating scale. Net inflows of client assets remained healthy. iFAST remains committed to its AUA target of S$100b by 2028, implying a CAGR of 27% over the next six years.
- We have incorporated changes to our model following the BFC Bank acquisition and HK eMPF guidance from management.
iFAST's 4Q21 results underperform; dividend raised.
- iFAST's 4Q21 net revenue and PATMI rose to S$28.2m (+16% y-o-y) and S$7.2m (+5.5% y-o-y), which brought 2021 net revenue to S$113.2m (+31.9%) and net profit to S$30.6m (+44.8%). This was slightly below our expectations as contribution from recurring net revenue of 69.9% was lower than our estimated 73.5% (2020: 70.3%), as negative market sentiment dampened transaction volumes.
- iFAST proposed a higher fourth and final dividend of S$0.014 (+40% y-o-y), which brought full-year dividend to S$0.048 (2020: S$0.033), representing a 43.2% payout ratio.
Positive operational leverage still at play.
- While there has been a steady downward trend in iFAST's PATMI margins over the four quarters of 2021 from 15.9% in 1Q to 13.2% in 4Q, we note that it is primarily due to market effects (trading frequency higher amid improved market sentiment), rather than any competitive element leading to margin pressure.
- Nevertheless, we are not concerned at this stage as iFAST's full-year PATMI margin in 2021 was 1.7ppt higher at 14.2% compared with 2020, and this was led by the continued rise in AUA to record levels, leading to improved operational leverage.
Singapore remains the core market, unit trusts driving growth.
- Assets under S$0.76b in 4Q21. This brought 2021 net inflows to S$3.75b, 19% higher than 2020 (1H21: S$2.12b).
Recent acquisition of UK-based BFC Bank to dampen near-term earnings.
- iFAST expects start-up losses at BFC Bank (BFC) to continue in the first couple of years before synergies can be reaped from the acquisition. We have assumed that BFC will continue its burn rate and incur additional overheads of S$1.5m/year in 2022-23, before achieving breakeven in 2025. This translates to our estimated annual loss of S$6m (vs S$4m loss management guidance) for 2022-23 and tapering towards a S$3m loss in 2024 (vs management guidance for breakeven).
- Based on the 85% stake, this constitutes 15-16% of our 2022-23 net profit estimates for iFAST.
Hong Kong eMPF project starting to contribute to bottom line.
- While iFAST did not provide any six-month delay on project implementation from May 23 to Nov 23. Investors should note that the eMPF project will not add to overall AUA, but will grow service fee.
Further potential catalyst in 1Q22.
iFAST - Revision of earnings foreacast
- Our revenue estimates for iFAST in 2022-24 have changed 92.3x and 76.8x. However, we remain sanguine post-2024 when valuations narrow to 37.6x, supported by a three-year earnings CAGR of 24.5% for 2024-27.
- See
- Catalysts:
- Stronger-than-expected AUA growth.
- Award of Malaysian digital banking licence.
Clement Ho
UOB Kay Hian Research
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https://research.uobkayhian.com/
2022-02-17
SGX Stock
Analyst Report
9.84
UP
9.750
