iFAST Corporation Ltd: Expansion plans gaining traction October 31, 2016

PSR Recommendation: BUYStatus: MaintainedTarget Price: 1.275
  • 3Q16 Net revenue increased 5.3% y-o-y to S$10.68mn owing to increase in AUA following the recovery after Brexit
  • New businesses to support AUA growth
  • Singapore stockbroking business to launch by 4Q16/1Q17
  • 3Q16 Revenue/PATMI met 103.3%/96.5% of our 3Q16 estimations
  • Maintain “BUY” with unchanged target price of S$1.275\

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Contributions from new business will boost Singapore AUA. The Singapore business is targeting to launch the stockbroking business at the end of 2016/early 2017. With the inclusion of stockbroking, iFAST’s Singapore business will have a “full suite” of products on its wealth management platform comprising funds, bonds, ETFs and stocks. The long term focus will be to grow the AUA from this platform.

B2B platform strategy in Hong Kong. The Hong Kong business has launched its stock broking capabilities for the B2B platform. By broadening the range of services with the inclusion of stockbroking on the platform, iFAST seeks to enhance the ability of FIs (“Financial Institutions”) to service Hong Kong and offshore China investors and develop stickiness with the FIs.

Malaysia AUA grew 9.3% q-o-q and 53.5% y-o-y. Strong growth in customer accounts and AUA continued to contribute to the increase in net revenue. We believe that the launch of insurance products distribution on its B2C platform in 3Q16 could be well received.

China Business gaining traction. iFAST is continuing its ‘platform-cum-IFA incubator’ strategy and is ramping up efforts to increase sign ups with Chinese internet companies with well-established online client base, as well as financial services companies. In 3Q16, the Chinese business has signed up 35 Fund Houses with over 1,400 funds on the platform, a strong improvement from 20 Fund Houses with over 1,000 funds in 2Q16. With the recent RMB initiatives announced by MAS in November 2015, we believe that iFAST could potentially benefit from cross border activities such as RMB bond issues in Singapore by corporates in Tianjin, Chongqing and Suzhou and direct investments in Singapore and ASEAN region by equity investment funds in these 3 cities.

Maintain “Buy” with unchanged target price of S$1.275, based on 25x PER on an estimated 5.1 cents FY17F EPS.  We used FY17F EPS because FY16F earnings do not reflect the potential growth from China and India operations. This implies an upside of 53.2% (including dividends) from its last traded price.

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Jeremy Teong
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy covers primarily the Banking and Finance sector. He has 6 years’ experience in equities related dealing and research roles.

He graduated with Bachelors of Mechanical Engineering from Nanyang Technological University.

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