ePension project progressing as planned
- The MPFA reaffirmed that the ePension project is progressing as planned. As such, we raise our projection of ePension’s FY23-25F contribution to iFAST.
- ORSO is the next earnings contributor to look forward to from 1Q25F. iFAST has secured firm indications of interest from several parties.
- Upgrade to Hold with a higher TP of S$4.90. Risk-off sentiment continues to weigh on trading volumes. ORSO progress could be an upside risk.
2Q23: Improving core wealth mgmt. biz; banking still loss-making
iFAST recorded PATMI of S$3.6m in 2Q23 (+21% qoq, vs. a loss in 2Q22). This was in line with our S$3.4m estimate but 45% below Bloomberg consensus’ S$6.5m. 1H23 formed 32%/29% of our/Bloomberg consensus FY23F estimates. The stronger qoq performance was due to improving trends in its core wealth management platform business as market conditions stabilised. iFAST’s banking segment continued to be loss-making in 2Q23. iFAST declared 1.1 Scts DPS for 2Q23, bringing 1H23 DPS to 2.1 Scts (stable yoy).
Firm indication from MPFA that ePension is progressing as planned
The first key positive from iFAST’s 2Q23 results is the confirmation that its ePension project is progressing as planned. According to the Mandatory Provident Fund Authority (MPFA) on its website, the software development of the ePension platform was largely completed in Jun 23. The platform will now enter the testing phase, with an end-2023 target completion. Migration of MPF accounts will commence in 2Q24F, and the MPFA targets for the platform to be fully operational in 2025, as it guided previously. This is a positive development, especially as MPFA had in Feb 23 announced delays in implementation.
Secondly, iFAST’s assets under administration (AUA) rose a steady 4% qoq (+6% yoy) to S$18.8bn at end-2Q23. Quarterly net inflows of S$543m in 2Q23 (+65% qoq, -8% yoy) were the strongest since 3Q22. Swift progress in migrating MPF accounts is an upside risk.
Banking operations could still take time to ramp up
On the flip side, we expect iFAST’s banking division to remain loss-making in 2H23F as it ramps up its product suite (1H23: S$4.4m loss, FY22: S$5.9m loss). While management expects this segment to break even in FY24F, we think this may take some time as the losses have yet to narrow. iFAST guides for contributions from Occupational Retirement Scheme Ordinance (ORSO) to positively contribute from 1Q25F onwards. Revenue from this project will be based on AUA, though this will depend on the pace of sign-ups by the trustees/partners. We understand from iFAST it has secured firm indications of interest
from several parties. Operational delays in starting up its ORSO project is a downside risk.
Upgrade to Hold with higher TP on stronger ePension contributions
We upgrade our call to a Hold from Reduce given the positive indication from MPFA that the ePension implementation is on track. We raise our DCF-based TP to S$4.90 as we raise FY23-25F ePension contribution assumptions. Our projections still include a c.30% discount to management’s guidance to account for potential operational bumps. Without integration issues (and the discount), our scenario analysis (Fig. 4) computes a S$5.60 TP.