iFAST Corporation’s rapid growth of asset and wealth management in Asia have led UOB Kay Hian analyst Clement Ho to initiate “buy” on the company and a target price of $3.34.
See also: iFAST triggers second SGX query in three months as share price surge over 8%
“The high proportion (>80%) of unmanaged assets in Asia continues to fuel industry AUM growth well into 2030, with CAGR estimated at high single digits over the next decade. This supports our thesis that iFAST’s assets under administration (AUA) is undergoing a structural growth trend,” he says in an Oct 13 report.
Ho also cites iFAST’s captive customer base in the business-to-business (B2B) segment as a positive for the counter, and that the company’s strong dividend growth may present an upside surprise.
As such, Ho expects distribution per share (DPS) of 5.9 cents and 6.4 cents for FY2020 and FY2021 respectively, which represents 76% and 75% of iFAST’s earnings. This is higher than Bloomberg consensus estimates of 4.7 cents and 5.3 cents for FY2020 and FY2021 respectively.
Ho also sees multiple catalysts ahead for iFAST including bids for one of Singapore’s three digital banking licences that the Monetary Authority of Singapore (MAS) seeks to issue, as well as iFAST’s bid to digitalise Hong Kong’s retirement fund system.
“We expect operating expenses to grow in the near term should iFAST secure these bids, with earnings accretion within three years of commencement,” says Ho.
“We believe the elevated valuation is justified, given that: a) Asia’s wealth management industry is undergoing a sustainable record growth phase; and b) earnings for iFAST are beginning to scale up from operating leverage on higher revenues and a slower growth in expenses. iFAST currently trades at 33.9x forward price-to-earnings (PE) initiatives that would expand its revenue stream,” he adds.
Shares in iFAST closed 3 cents higher or 1.0% up, at $2.94 on Oct 15.
