Results First Take: 2Q22 results hit by impairment and higher costs
- 2Q22 revenue affected by tough market condition; AUA declined 5.1% q-o-q, +0.8% y-o-y
- Net loss of S$2.7m, dragged by S$5.2m impairment charges on India platform business and higher costs
- Temporary pause in operating leverage; expect revenue and profitability to reach new highs in 2023
- HOLD call with TP and earnings estimate under review
2Q22 revenue affected by tough market condition.
Net revenue grew 13.3% y-o-y ( +6% q-o-q) to S$29.9m in 2Q22. 2Q22 net revenue included an initial contribution of S$3.9m from iFAST Global Bank in UK. Excluding this, net revenue eased 1.6% y-o-y and 7.9% q-o-q. A broad decline in the value of investment products has offset positive net inflows of S$0.59bn and S$1.26bn in 2Q22 and 1H2022 respectively. Overall, 1H22 revenue accounts for 45% of our full year numbers, slightly below expectations. A second interim of 1.10 Scts was declared for 2Q22, similar to 2Q21.
Net loss of S$2.7m, dragged by S$5.2m impairment charges on India platform business and higher costs.
iFAST India Holdings, a 41.5% owned associate company of the group, has decided to exit its onshore platform service business in India and pivot to focus on providing global Fintech solutions. The Securities and Exchange Board of India (SEBI) has announced the discontinuation of the usage of pool account for mutual fund transactions with effect from 1st July 2022. This new regulation has undermined the ability of iFAST India to provide efficient online platform services to its clients.
With the restructuring of the India business, the group has provided a one-time impairment allowance of about S$5.2m. Coupled with higher operating expenses and initial operating losses for iFAST Global Bank, the group reported a net loss of S$2.7m in 2Q22.
Excluding the impairment loss, 1H22 pretax profit of c.S$11m accounts for c.38% of out full year numbers, below ours and consensus forecasts.
Temporary pause in operating leverage; expect revenue and profitability to reach new highs in 2023.
Operating expenses are increasing even as revenue growth moderates in 2022, as the group prepares for the ePension business which will become operational from 2023, and to contribute more significantly from 3Q23 onwards, vs its guidance in April of contribution in 4Q23. iFAST is also positioning itself for opportunities arising from a more globalised wealth management and digital banking business model. The group will continue to invest and prepare for its next phase of growth under its Four-Year Plan.
AUA declined 5.1% q-o-q, +0.8% y-o-y.
The group’s assets under administration (AUA) declined 5.1% q-o-q to S$17.68 bn as at 30 June 2022 but rose 0.8% on a y-o-y basis. In 1Q22, AUA eased 2% q-o-q but surged 15.6% y-o-y.
HOLD call with TP and earnings estimate under review. We have a HOLD call with TP of S$5.42 under review. We would have to adjust our earnings estimate to account for the impairment loss and higher operating expenses. More updates post the 2Q22 results briefing on Monday morning.