SINGAPORE (July 3): CGS-CIMB Securities is reiterating its “add” call and target price on fintech operator iFAST at $1.65. This gives the stock a 17.2% upside from its $1.41 cent close on Tuesday, say analysts Andrea Choong and Caleb Pang in a July 1 note.
Their move is based on a sum of parts valuation pegged to 26x the price-to-earnings forecast for FY21F and a $100 million minimum paid up capital for its digital wholesale banking (DWB) license.
iFAST confirmed on June 18 that it has proceeded to the next stage of assessment for a DWB license. It is the only DWB applicant listed on the Singapore Exchange (SGX).
It is joined by eight other DWB applicants and five digital full bank (DFB) applicants, the Monetary Authority of Singapore (MAS) announced. These companies comprise Chinese players looking to break into Singapore’s banking scene.
iFAST appears unfazed and believes it has “more than a 1 in 3 probability” of being awarded the license for its status as a homegrown player and operating track record in handling cash through its wealth business.
The company intends to reach out to small and medium sized enterprises (SMEs) with good credit ratings, upon commencement of its lending operations.
For this, it plans to extend lower-quantum loans to smaller SMEs – a segment it says is presently underserved by banks, due to its perceived riskiness and limited operating track record.
Meanwhile, it is looking to raise $80 million in capital through internal sources, borrowings and equity raisings, to fund the 65% stake in its consortium with China-based Yillion Group and Hande Group.
Yillion Group operates one of four digital banks in China while Hande Group, is dubbed the superpower’s fastest growing and leading fintech company.
For now, iFast is seeing revenue growth from stock broking, particularly in US equities, which has mitigated the 7% q-o-q decline securities daily average value traded on SGX.
Meanwhile, the digitalisation push from Covid-19 has boosted its net assets under administration (AUA) inflows by 224% y-o-y in 1Q20 to $590 million. Account openings have also increased in this time.
“We remain positive on [iFast] as it is a profitable fintech player, has a proven track record of growing its AUA, and has strong levels of recurring revenue (>80% of income),” stress Choong and Pang.
As at 10.31am, shares of iFast was down a cent or 0.69% to $1.44.
