Results Analysis:Hong Kong to leapfrog in 2024

  • 9M2021 results in line; muted 3Q21. 9M21 margins improved y-o-y but 3Q21 flat 
  • Sixth consecutive quarter of record AUA; +46.1% y-o-y and 27.2% YTD to S$18.38bn   
  • Set Five-Year Plan to further grow business; Hong Kong business to leapfrog from 2024  
  • Maintain BUY, with higher TP of S$12.93

Investment Thesis: 

Record high AUA; significant contribution from HK business. Assets Under Administration (AUA) registered a sixth consecutive quarter of a record high as at end-3Q21. We maintain our positive view on iFAST on the back of the strong growth momentum ahead, propelled by the Hong Kong business from 2024 onwards. We expect more room for AUA growth. iFAST is well poised to capture more market share in its key market Singapore, where its share is just 10% of the c.S$128bn in Assets Under Management of the collective investment schemes.

Operational leverage to drive margins higher. With its scalable platform business model, iFAST has already obtained significant operating leverage. Since 1Q20, growth in profit was substantially higher than growth in revenue. This should drive margins higher going forward. Although quarterly numbers could see some fluctuations, we expect the longer trend of margin expansion  to remain intact.

Valuation:

Maintain BUY with a higher TP of S$12.93. Our TP is based on the Discounted Cashflow (DCF) valuation method to capture growth in its steadily growing cashflows. The higher TP of S$12.93 is mainly due to the much higher projections for FY25F from the ePension division. 

Where we differ:

We are more optimistic on iFAST given its scalable business model and drive towards digitalisation to propel the group to greater heights.

Key Risks to Our View:

Its operations are vulnerable to changes in laws and regulations as well as market sentiment.