iFAST Corporation - CGS-CIMB Research 2022-10-28: Weak Markets & Start-Up Losses

iFAST Corporation - Weak Markets & Start-Up Losses

  • iFAST announced core net profit of S$2.1m in 3Q22 (-73% y-o-y, 2Q22: S$2.7m loss). This was 33% and 37% below our and consensus estimates respectively. The miss was primarily due to weaker trading volumes (and thus transaction and service fees) and recurring revenue (e.g. trailer fees) on the back of a decline in its AUA. Heftier start-up losses from its banking operations in the U.K. as iFAST closed physical branches of its consumer remittance business while it exits the wholesale currency business also contributed to the miss.
  • iFAST declared interim dividend of S$0.013 – unchanged y-o-y. See iFAST's dividend history.
  • Although AUA declined for the third consecutive quarter to S$17bn (-4% q-o-q, -8% y-o-y) due to redemptions and sharp declines in equity and bond markets, the bright spot was that net inflows stabilised q-o-q at S$599m in 3Q22 (-31% y-o-y) as gross unit trust subscriptions picked up 4% q-o-q (-16% y-o-y) – a possible indication of an inflection point. We highlight that ~40% of the net AUA decline in 3Q22 comprised ~S$300k owing to iFAST’s exit of its onshore business in India.
  • iFAST’s earnings performance is turning out as management had guided for – flattish revenue growth and a substantial decline in profitability in FY22F largely due to the write-down of its onshore business in India and start-up losses of its banking operations (which is now guided to slightly exceed ~S$4m in FY22F) as it exits businesses that do not adhere (and unprofitable) to its overall wealth management strategy.
  • iFAST is now in the process of offering digital transaction banking and personal banking services. With Hong Kong’s Mandatory Provident Fund announcing that it will start onboarding trustees beginning Jun 23, iFAST (SGX:AIY) now guides for ePension contributions to begin in 3Q23F (vs 4Q23F previously). Management aims to provide updates to the target guidance in early-FY23F.
  • We cut FY22-24F earnings forecast for iFAST by ~2-23% to reflect weaker trading volumes amid market volatility and raise our tax assumptions (unprofitable UK business does not reduce tax charge) and lower our target price for iFAST to S$3.80 on the back of lower core earnings, roll over to FY23F rate a higher risk-free rate of 2.5% in our DCF assumptions.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

Andrea CHOONG CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.80 DOWN 4.000

Previous report by CGS-CIMB:
2022-07-26 iFAST Corporation - Taking A Hit From Impairments & Opex

Target prices by 2 other brokers at iFAST Target Prices.
Listing of broker reports at iFAST Analyst Report.

Relevant links:
iFAST Share Price History,
iFAST Announcements,
iFAST Dividends & Corp Actions,
iFAST News Articles


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