SINGAPORE (July 31): UOB KayHian is keeping iFAST Corp at “hold” with target price of $1.08, saying positives have been priced in at current levels although it remains optimistic of the group’s outlook on an expanded suite of services and recovering market sentiment.
While UOB is optimistic on iFAST’s growth outlook given its expanded suite of investment products and China venture, the brokerage believes its current valuation of 34.6x 2017F PE if fair.
In a retail report on Monday, analyst Thai Wei Ying says iFAST’s 1H17 earnings exceeded UOB’s expectations, coming in at 59% of its full-year estimates for 2017. 1H17 earnings of $4.2 million increased 76% y-o-y from a low base as net revenue growth outpaced operating expense growth. Cost was well managed with 1H17 staff costs grew a mere 3.3% y-o-y and other operating expenses increased 9% y-o-y.
As of 1H17, iFAST’s assets under administration (AUA) rose 21.1% y-o-y to $6.81 billion on a broadened range of investment products. All core markets reported strong growth, with Singapore up 16% y-o-y, Hong Kong up 27% y-o-y and Malaysia up 47% y-o-y.
Near term, Thai believes the bulk of the AUA contribution will continue to stem from unit trusts as new products take time to ramp up. As of June 30, bonds/ETF/stocks contributed only 7.2% to AUA versus 5.9% at June 30.
Meanwhile, iFAST’s China operations are still in the early stages of expansion and UOB expects it to be loss-making this year.
“We hold the view that it might take 3-4 years before its China operations can break even. As of 1H17, the group had signed up more than 55 fund houses, with over 2,200 funds on its platform,” says Thai.
As of June, iFAST remained in a debt-free position with cash balance at $25.7 million. The group has declared an interim dividend of 0.68 cent per share for 2Q17, equivalent to 54.6% of the group’s net profit, excluding China.
“Adjust 2017-19F earnings upwards by up to 14% to account for higher AUA growth assumptions and lower operating expense assumptions given good cost management,” says Thai.
UOB is suggesting an entry price of 95 cents.
Update: Shares in iFAST closed 2 cents higher at $1.07 on Monday.
