IFAST CORPORATION LTD. (SGX:AIY)
iFAST Corporation - 1Q22 Sequential Slowdown In AUA From Key Market Singapore
- iFAST's AUA declined sequentially to S$18.63b (+15.6% y-o-y, -1.9% q-o-q), as key market Singapore (71% of overall AUA) saw redemptions mainly from the B2C segment due to the volatile global equity and bond markets.
- Management still expects a moderate growth in 2022 net revenue as a whole, but also expects profitability to narrow due to higher opex arising from the new ePension division in Hong Kong.
iFAST's 1Q22 results weaker than expected.
- iFAST (SGX:AIY)'s 1Q22 net revenue of S$28.2m (-1.2% y-o-y) was mainly dragged by a 18.7% decline in non-recurring net revenue, as a result of less trading volume which translated to lower transaction fees. Operating expenses rose 10.4% to S$21.1m due to increased investment and preparation for its next growth phase under its 4-Year Plan. Accordingly, PATMI declined 34.9% y-o-y to S$5.7m.
- The first interim dividend was maintained at S$0.01, representing a 51% payout ratio (1Q21: 31%).
AUA saw a decline in 1Q22.
- Assets Under Administration (AUA) for iFAST declined sequentially to S$18.63b (+15.6% y-o-y, -1.9% q-o-q), as key market Singapore saw redemptions mainly from the B2C segment due to the volatile global equity and bond markets. The negative impact arising from weak market sentiment began in 4Q21 with AUA growth slowing down to +3% (3Q21: +4.8%, 2Q21: +8.9%).
- The decline in its main driver, AUA, is a major contributing factor for us to switch our near-term view on iFAST with a negative bias.
New ePension division to contribute more meaningfully in 2023.
- We are expecting more meaningful contributions stemming from the ePension division starting in 2023. Management has now provided guidance for the division to commence in 2023 compared to 2024 previously, and our penned estimates are lower than the guided targets.
- For 2023 and 2024, we are estimating net revenue contribution of S$25m and S$100m from the ePension division, accounting for 15% and 33% of group net revenue. This is expected to drive the group’s net revenue and operating scalability going forward.
Negative near-term as AUA deteriorates.
- AUA growth has been the reach would provide superior competitive advantage in the Asian region.
Higher operating expenses a near-term pain, but long-term gain.
- Recent corporate developments include the acquisition of UK-based BFC Bank (now renamed as iFAST Global Bank) and the award of the Hong Kong pension project. As a result, iFAST has been increasing its spending on IT and related technology security services to support future growth, as well as additional operating costs on the Hong Kong pension project.
iFAST - Earnings forecast revision & recommendation
- We have adjusted our 2023 and 2024 revenue estimates higher for iFAST based on greater valuation is expected to narrow to 30.2x, supported by a three-year earnings CAGR of 48.7% for 2022-25.
- See
- Share price catalysts:
- Return to growth in AUA.
- Earlier-than-expected contribution from ePension division.
Clement Ho
UOB Kay Hian Research
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https://research.uobkayhian.com/
2022-04-25
SGX Stock
Analyst Report
5.17
DOWN
9.840
