On April 22, wealth management platform iFast Corporation reported record numbers for its net profit, gross unit trust subscription, net inflows of client assets and assets under administration (AUA).
On April 26, the company also announced that it was paying DWS Investments Singapore (DWS) $3 million to take over the fund management business of its seven retail funds in Singapore.
The funds, with assets under management (AUM) of $600 million, will be co-branded under the iFast-DWS banner.
See: iFast enters into a business transfer agreement with DWS Investments Singapore
“While the transaction will not have a material impact on EPS or NAV, it will help the group to make a foray into fund administration, which is adjacent to its current business of online fund distribution,” writes Jefferies equity analyst Krishna Guha in his April 27 note, who has a “buy” call and $7.80 target price.
He says this deal “comes at an interesting moment” and will help iFast grow its fund administration business amid an increasingly complicated operating environment for the asset management industry.
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Krishna estimates that the DWS deal will contribute around $0.6 million to iFast’s earnings. “However, just like the fund distribution business, the real gains kick in as AUM grows the fund administration business and operating leverage kicks in. This will also help iFast to be more embedded within the ecosystem,” he writes.
Similar businesses in the region include Mainstream Group Holdings, which trades at June-2022 PE of 58 times, and the unlisted Unity Fund Services while the top global players are SS&C, State Street IFS and Citco Fund Services.
See also: Record earnings put iFast in strong position for further growth: analysts
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CGS-CIMB analyst Andrea Choong is similarly bullish on this stock given its “robust growth profile”. In her April 23 note, she upgraded the stock from “hold” to “add” and a higher target price of $8, versus $5.67 previously.
Choong sees higher stock and ETF trading volumes amid reaching critical mass in total AUA, which will presumably generate better operating margins. She notes that iFast, which had recorded sequentially higher q-o-q net profit since 2019, will continue on this trend.
Along with its 1QFY2021 numbers, iFast declared an interim dividend per share (DPS) of 1.0 cents, compared to 0.75 cents this time last year. Notably, the company is guiding for a y-o-y rise in dividends this financial year. Choong expects a total of 6.5 cents in FY2021.
In-person AGM
On April 23, iFast Corporation held its annual general meeting (AGM) at the Suntec City Convention Centre. Flanked by company executives, CEO Lim Chung Chun addressed a socially distant group of iFast staff and shareholders in one of the first physical AGMs to be held since Covid-19 brought Singapore to a standstill.
For the most recent 1QFY2021 ended March 30, iFast set new records across net profit, gross unit trust subscription, net inflows of client assets and AUA, starting the year on a “strong note”, says the company.
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Net profit in 1QFY2021 was a record $8.82 million, a surge of 142.5% y-o-y from $3.6 million in 1QFY2020. This was achieved on the back of a 51.4% y-o-y increase in net revenue, and a 43.8% y-o-y increase in gross revenue.
Net inflows of client assets, meanwhile, registered a record $1.28 billion in 1QFY2021, pushing its AUA to a record $16.11 billion as at March 31, representing a y-o-y growth of 68.9%.
At the AGM, Lim notes that there are new competitors in the local stockbroking scene and iFast has answered. Effective from April 5, iFast’s trading platform FSMOne.com has been offering a permanent flat commission rate of $8.80 on Singapore Exchange (SGX) trading in stocks and ETFs to all clients, regardless of their investment amount or AUA in those asset classes.
Lim says that while the competitors are new, their tactics of lower fees are not. He adds: “iFast has been around for 20 years… We have been the market leader all these years, and as a market leader, you get used to having competitors coming in to launch services at lower prices, which is what we did when we started stockbroking here as well a few years ago”.
It seems iFast will not be swayed by the marketing ploys of companies like Tiger Brokers, which has even offered free Tesla and Apple shares to new customers. “You don’t necessarily have to be the lowest, but you will need to ensure that you offer the best overall services,” Lim adds.
