Citi Research has discontinued its coverage of iFast, more than two years after going against consensus calls and issuing “sell” on what was then Singapore’s best-performing stock.
Citi Research analyst Tan Yong Hong’s last report, from October 2023, maintains the house’s “sell” call and $3.70 target price, reiterating that the wealth management platform’s underlying core business remains soft.
Tan has also warned of “high risk” when trading iFast shares, a label that has stuck since the Mainboard-listed company announced plans to acquire a loss-making UK bank in January 2022.
iFast triggered four regulator queries between August 2020 and January 2021 for its share price surges. Citi was the first to sound alarm bells for iFast’s share price, which had swelled from $1 in January 2020 to $10 in September 2021.
In July 2021, iFast reported earnings of $7.02 million for 2QFY2021, a drop of 20% q-o-q and the first quarterly dip since 1QFY2019.
But its share price moved higher, reaching a 52-week high of $10.10 prior to its 3QFY2021 results in October. But iFast’s 3QFY2021 results missed consensus estimates due to slowing assets under administration (AUA) growth momentum and ongoing pressure on its platform margins.
See also: 'Is it time to revisit iFast?' UBS nearly doubles its target price to $10 on Hong Kong growth
Then, Tan’s target price for iFast was still $7.50, even with a “sell” call. He warned that iFast’s share price had risen more than 800% since mid-2020.
He also believed the market was pricing in too much upside from iFast’s involvement in Hong Kong’s mandatory ePension platform project. “We estimate the market has priced in about $3 upside from this project, but our bottom-up approach suggests just 90 cents.”
2022
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When iFast announced plans to raise $75 million and acquire the loss-making BFC Bank in January 2022, Citi baulked, citing high risk due to share price volatility. “The acquisition will be immediately dilutive to earnings per share (EPS), as BFC Bank is loss-making and fundraising via debt/capital raise is required.”
A week later, iFast Corporation raised $105 million via an oversubscribed placement of 14 million new ordinary shares to institutional and accredited investors. As expected, its share price faltered, falling below $7 for the first time since May 2021.
On Jan 27, 2022, Citi trimmed their target price to $6.20, which it maintained even as iFast’s FY2021 patmi missed consensus estimates the following month.
Citi continued cutting its target price on iFast, reaching $4.20 in April 2022. The company’s core business is valued at $3.10 per share, and its Hong Kong eMPF platform is valued at $1.10, said Tan.
Shares in iFast fell some 6% after its 1QFY2022 earnings were released. The counter had reached $5 on Apr 26, 2022.
Citi lowered its share price forecast yet again in July 2022 to $3.80, ahead of iFast’s 1HFY2022 results. “We continue to be a seller of iFast given: rising competition in the online brokerage [space] leading to pressure on platform margins and slowing AUA growth momentum; near-term earnings uncertainty after acquiring the loss-making BFC Bank [in the UK]; and further mergers and acquisitions (M&A), in particular, funded via the equity market and its associated execution risks.”
Citi analysts added: “While we are fundamentally positive on the wealth management outlook and iFast’s business model as a fintech disruptor, we think share prices are fully valued.”
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iFast sank into the red in 2QFY2022 with a $2.69 million net loss, owing to a one-off $5.2 million impairment when associate company iFast India Holdings decided to exit its onshore platform service business.
That said, the company returned to the black the following quarter. Even so, Tan kept his “sell” call and $3.80 fair value.
2023
In January 2023, iFast announced an eight-month delay for the Hong Kong eMPF project, owing to a labour shortage. This caused CGS-CIMB Research’s Andrea Choong to downgrade the stock to “reduce” with a lower target price of $3.50 in February 2023.
With the downgrade and fair value slash, Choong beat long-time bears Citi, which would trim their target price to $3.70 in March.
While iFast said it expects to see contributions from the division in 4QFY2023, Choong wrote that FY2024 “could be a more realistic timeline” given tight labour market conditions in Hong Kong.
However, iFast bounced back quicker than expected. Compared to net losses after tax of $2.7 million incurred in 2QFY2022, iFast posted net profit after tax of $3.6 million in 2QFY2023, up 20.7% q-o-q. In 3QFY2023, net profit after tax surged 308.4% y-o-y to $8.52 million.
iFast also reported an earlier and higher-than-expected contribution from the ePension division in 3Q2023, a quarter earlier than guided.
Since the release of the 9MFY2023 results, shares of the Mainboard-listed company have recovered to levels last seen in December 2021.
iFast shares started 2022 at $5.81, before news of its Hong Kong project delays weighed the stock to lows of around $4.16 in May 2023. Shares in iFast reached a 52-week high of $8.51 at the start of December 2023, and are now trading around $7.58.
This has not gone unnoticed. UBS analysts Aakash Rawat and Benjamin Tan nearly doubled their target price for iFast to $10 in November 2023 from $6.50 previously.
In a Nov 27 note titled “Is it time to revisit iFast?”, Rawat and Tan said investors are likely to start pricing in the expected acceleration in earnings per share growth, given the earlier-than-expected contribution from the ePension division in Hong Kong.
“We believe this could continue to be a catalyst for the re-rating of the stock,” said the UBS analysts. “We expect upcoming positive catalysts at the 4QFY2023 results in February 2024, where management is expected to provide updated guidance to the Hong Kong business and we believe are likely to raise it.”
iFast has yet to announce when it will release its results for FY2023. The company reported its FY2022 results on Feb 14, 2023 and announced the date on Jan 30, 2023, a week after the Lunar New Year on Jan 22, 2023.
As at 9.27am, shares in iFast are trading 9 cents lower, or 1.17% down, at $7.60.
