Jovi Ho Published on Fri, Sep 10, 2021
With its share price more than quadrupling over the past year, iFast Corporation’s stellar performance on the Mainboard of the Singapore Exchange is plain for all to see.
From a 52-week low of $2.03 in September 2020, iFast reached a high of $9.65 just before its 2QFY2021 results in late July.
Hence, it comes as no surprise that the wealth management FinTech company has been named best performing stock in the banking and investment services sector at this year’s Billion Dollar Club awards, organised by The Edge Singapore.
In addition, it has been named the company in this sector with the best weighted return on equity and the overall sector winner.
Last year, iFast was recognised for achieving the best returns to shareholders in the financial sector at the Centurion Club awards, also by The Edge Singapore. Held together with the BDC, the Centurion Club recognises companies with a market value of below $1 billion.
In short, iFast has not only moved into the big league but the company has also romped past many other existing large caps.
iFast’s growth is more remarkable given how most other companies are struggling with the ongoing pandemic. Still, co-founder, chairman and CEO Lim Chung Chun believes digital businesses like iFast will see even greater growth and be valued even higher.
“The stellar performance of our share price shows that some of our shareholders are recognising the potential of iFast to embrace digital changes and benefit from these changes, which is expected to continue at an accelerated pace in the next five to 10 years,” says Lim to The Edge Singapore.
Lim believes that iFast’s meteoric rise is no flash in the pan. Pointing to global digital brands like Netflix and Spotify, he believes that the FinTech sector still has a long way to go — and grow.
“If we take a closer look at the financial sector, that has not happened in a big way. In fact, we are still in the early stages of leveraging the power of the internet to reach out to people within the same country and across borders,” adds Lim, who was head of research at ING Barings Securities in the 1990s.
Lim started the company in 2000 after being bitten by the entrepreneurial bug and sensing that an online platform to distribute financial products is the way to upend the comfortable incumbents back then.
Despite the growth chalked up over some two decades, Lim thinks that iFast — with a market capitalisation of some $2.44 billion — is still in its “start-up” phase. “If we look at this from the perspective of an emerging business model, whereby a company is based in one country and can increasingly tap into potential [growth] from across the world, iFast is perhaps just at the start-up phase of a truly global business.”
With a price-to-earnings ratio of some 87 times, iFast’s shareholders are clearly optimistic and for good reason, says Lim. “We believe some investors are increasingly recognising our potential and as a result, we are seeing a more premium valuation for iFast.”
Granted, the financial industry is understandably cautious about rapid changes, but Lim believes even the most staunchly conservative quarters of the financial services industry will soon embrace digitalisation. “The highly regulated nature of the financial industry has resulted in traditional financial institutions not being able to operate a truly global business model.”
A FinTech company that can take advantage of the internet could chart a growth trajectory wildly different from “the way things are looked at historically”, argues Lim.
iFast’s most recent set of results, while eye-watering by all means, marked a relatively measured quarter for the company.
The company posted its fifth consecutive quarter of record assets under administration (AUA), with net profit increasing 94.0% y-o-y in 1HFY2021 ended June. However, the company’s management acknowledged that trading activity was “subdued” that quarter.
Nevertheless, Lim is unfazed. “We see this as fluctuation that is likely to happen from time to time, especially when comparing quarter-to-quarter results due to volatility in the financial market,” he says to The Edge Singapore. “Markets and investor sentiment do not keep going up in one straight line.”
Lim notes that the quarter follows a “very solid” 1QFY2021. “Year on year, the 2QFY2021 results are still far more robust across key metrics of revenues and profits. It is also important to highlight that the company’s AUA, as well as the recurring net revenue, still grew to a record high in 2QFY2021, supported by strong net inflows from investors across different products.”
The company’s AUA is indeed impressive, registering a growth of 57.3% y-o-y and 21.4% year-to-date to reach a record high of $17.54 billion as at June 30. Supported by increasing AUA, the company’s recurring net revenue increased 39.2% y-o-y in 2QFY2021 and 34.3% y-o-y in 1HFY2021.
“What is key to us is that the overall longterm growth that we are striving to build does not get diminished,” Lim adds. “If investors were to look at how things are going to change for the group in the longer term, we believe that will bring about a very different perspective on how to look at our performance.”
Since starting here with the launch of Fundsupermart.com to provide self-directed investors access to unit trust investments, iFast has expanded to Hong Kong, Malaysia, China and India. Fundsupermart.com has since been renamed FSMOne.com to reflect the wide range of investment products on its platform.
iFast was first to disrupt the stockbroking industry’s commission structure by offering stocks and ETFs at 0.12% upon its stockbroking launch in 2016, before further slashing the commission fee to 0.08% in 2018. Today, Singapore investors can enjoy a flat $8.80 commission rate on SGX-listed stocks and ETFs.
“Singapore is sometimes seen as a saturated market,” says Lim, “but there are areas in the wealth management industry where we see tremendous opportunities across all the key products of funds, stocks, ETFs, bonds and managed portfolios.”
iFast also has ambitious plans overseas. On July 31, iFast announced that it had finalised and signed the prime subcontractor contract for the pension project in Hong Kong, which aims to standardise, streamline and automate processes while lowering fees and going paperless.
According to Lim, this deal in Hong Kong is going to have “a very material financial impact” for his company’s Hong Kong business starting from FY2023, when the project is deployed and up and running. “We aim to, by the end of the year, provide some guidance on the potential growth of our group’s overall Hong Kong business for 2023/2024 and beyond.”
In addition, iFast has led a consortium to apply for a digital bank licence in Malaysia, with a reported 40 applicants vying for up to five licences, to be issued by 1Q2022.
The consortium’s Malaysian partners include Koperasi Angkatan Tentera Malaysia, one of the largest co-operatives in Malaysia; THZ Alliance, a private investment holding company founded by YM Tengku Dato Dr Hishammudin Zaizi, the first cousin of the Sultan of Selangor; and Lee Thiam Wah, founder and major shareholder of 99 Speed Mart, a homegrown grocery chain with 1,900 retail outlets.
The other non-domestic partner of the consortium is Yillion Fintech, which provides core banking technology and capabilities for Yillion Bank, one of the four digital banks in China. If successful, iFast will own a 40% stake in the digital bank.
“We see banking as the core layer of financial services, where having a bank account is always the first prerequisite for a customer to gain access to any form of financial services,” says Lim. “By having the ability to open bank accounts for customers, iFast can be involved right from the first step of the customer journey.”
Although just 8% of Malaysia’s population remains unbanked, Lim believes financial inclusion means more than just owning a bank account. “In terms of demographics, Malaysia has a much larger population and there is a sizeable proportion living in rural areas. We think digital banking is even more crucial for such customers.”
Hence, iFast is targeting the Bottom 40% (B40) of Malaysia’s population by household income, who are “underserved by the incumbent banks”. “We aim to offer solutions that will provide immediate benefits to the B40 segment, such as free life insurance, interest-free loans for daily necessities, and micro-investments and insurance.”
As iFast crosses 21 years in business, Lim is confident in the road ahead. “Given the way the business world is transforming and the potential for the FinTech industry, we feel that we still have a very long runway ahead.”
Lim hopes iFast’s shareholders share his vision. “See our business in the context of not just the quarterly results in the short term, but where we can be in the next 10 years and beyond. iFast’s top management team is firmly committed to seeing through the exciting longterm potential, and has interests that are very well-aligned with shareholders.”
Photos: Albert Chua/The Edge Singapore