Initiatives in place for longer term growth
- FY21 earnings 5.7% below our estimates, partly due to weak bond, equity & ETF market in HK
- AUA growing at robust pace to hit a record high of S$19bn, +31.5% y-o-y as at end Dec 2021
- Focusing on its Four-Year Plan, including pursuing bond licence; UK Bank targets to achieve profitability starting 2024; eMPF remains the key earnings driver
- BUY, revised TP to S$10.85 to factor share placement
Investment Thesis:
AUA hits another record high; initiatives in place to build a seamless Fintech ecosystem. iFAST reported a record high Assets Under Administration (AUA) of S$19bn, +31.5% y-o-y as at end December 2021. The group has set a Four-Year Plan to enhance its current platform. With the group’s ongoing effort to build a seamless global fintech ecosystem, including adding a digital bank and exploring other Fintech capabilities like pursing a bond licence, we can expect further growth from its overall wealth management platform.
Longer term earnings momentum remains strong; Hong Kong to propel growth from 2024. Though some initial start-up losses are expected from the new initiatives, 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. There is room for AUA to grow further. 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
Valuation:
Maintain BUY with a lower TP of S$10.85, after accounting for dilution from the recent share placement. Our TP is based on the Discounted Cashflow (DCF) valuation method to capture its steadily growing cashflows.
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.