iFast released fantastic 1Q24 results that showed it grew its 1Q24 earnings by nearly 5 times, mainly from better contributions from iFast’s ePension business unit, as well as improvements in its core wealth management platform business.
Here, we review iFast’s 1Q24 financials, look at the key current and future drivers, and understand iFast’s mid term plans. We also look at iFast’s current valuation to determine whether it is a good time to buy iFast’s stock.
Review of 1Q24 financials
In 1Q2024, iFast’s net profit increased by 387% YoY to S$14.5 million, on the back of a 59% increase in gross revenue to S$86.0 million, and an 87% increase in net revenue to S$58.1 million.
The increase in profitability was driven by contributions from the ePension division, as well as improvements in the Group’s core wealth management platform business.
iFast did not commit to a definitive forecast, commenting that on an overall basis and barring unforeseen circumstances, it expects 2024 to see robust growth rates in revenues and profitability compared to 2023. For the first interim dividend for 1Q24, iFast provided for a dividend of 1.30 cents per share (1Q23: 1.00 cents per share).
Looking at the geographical segmentation, it’s evident that the Hong Kong segment, which includes ePension, was the exceptional performer, while Singapore also showed improvement. However, Malaysia and China do not look like they have improved.
Key current and future drivers
iFast‘s 1Q24 performance is tracking well as compared to prior years, being poised to exceed FY23 in every key measure. Here we look at the three key current and future drivers that would enable this outcome.
1) Growth in Asset Under Administration
iFast achieved an Asset Under Administration (AUA) of $10 billion in Dec 2019 and more than doubled this amount in just over 4 years to $21 billion.
At the end of 1Q24, the AUA had grown by 16.0% YoY. In contrast, the MSCI AC Asia ex Japan index increased 4.3% YoY as at the end of March 2024.
iFast attributed this milestone to efforts in improving the range and depth of products and services. This has enabled our platform businesses to achieve robust growth despite volatilities in the Asian financial markets in 2019.
2) iFast Global Bank
iFast Global Bank arose from iFast’s acquisition of an 85% stake in UK-based BFC Bank for £40 million (S$73.4 million). The acquisition was completed in April 2023.
During the reported quarter, iFast Global Bank’s customer deposit amounts grew 444% QoQ to S$515 million. iFAST Global Bank adopts a conservative stance in terms of its balance sheet strategy, with the vast majority of the client deposits being held as cash or in short duration investment grade bonds and sovereign bonds (average duration of 0.94 years), and money market funds.
iFast believes the bank will breakeven in FY24 and play a major role in the growth of iFast in the medium to long term as its offerings are in line with longer-term trends such as digital banking and wealth management capabilities
3) ePension
The ePension provides a wide range of pension administration services and white-labelled solutions for scheme sponsors, trustees and other institutions to have seamless digital access, management and processing of pension scheme transactions.
The ePension division in Hong Kong will be an important growth driver in 2024 and 2025, while the overall wealth management platform is expected to continue to show healthy progress.
The ePension division was the primary revenue driver for Hong Kong business in 1Q2024. As the onboarding schedule for selected trustees has been finalised, the ePension division is now in the final preparation stages to ensure smooth onboarding activities and operations.
Alignment with iFast’s Three-Year Plan
iFast has built an ecosystem for itself by expanding its original Platform capabilities with Digital Bank Capabilities and having strong relationships with Product Providers as well as its Distribution network.
It has 860,000 customer accounts across five markets, namely Singapore, Hong Kong, Malaysia, China and the UK. It also serves 680 companies and nearly 13k wealth advisors uses iFAST’s B2B Platforms
Looking ahead, iFast expects the ePension division in Hong Kong as well as iFast Global Bank to be important growth drivers in 2024 and 2025, and also expects its overall wealth management platform to continue to show healthy progress.
iFast has a three-year plan with the following objectives:
1) Progress as a Global Digital Banking and Wealth Management Fintech Platform with a global business model. With a global digital bank as part of the iFast’s ecosystem, continue to work on increasing the scale and quality of it’s wealth management platforms, servicing customers from all over the world from several countries. iFast targets AUA of S$100 billion by 2028-2030.
2) Accelerate growth in Hong Kong and deliver on ePension Services. Substantially accelerate the growth of iFast’s overall Hong Kong business as it effectively executes its ePension business in Hong Kong and continues to improve on its existing platform capabilities.
3) Develop innovative fintech services that are complementary to digital banking and wealth management platforms. These include payment related services and a bond market place targeting individual investors from around the world (Bondsupermart).
Current valuation
iFast currently trades at $7.55, having gone up by 13% in the last 5 days, and has a current market cap of $2.25 billion. By aggressively extrapolating their 1Q24 revenue and profits and assuming it will hold throughout the year, we land at an extrapolated revenue of $300 million and profit of $68 million.
This would put the valuation ratio of iFast at 7.5 times Price to Sales and 33 times Price to Earnings (P/E). Assuming the dividend payout for next three quarters is the same as 1Q24’s 1.3cents, the yield would be approximately 0.7%.
Is it a good time to buy then?
iFast’s all time high share price was almost $10 in Sept 2021, since then it fell to a low of around $3.6 in November 2022 which makes it a double bagger for someone who would have bought then.
While a 33 times P/E ratio seems lofty, it depends on the revenue growth and earnings potential. iFast’s business model has an operating leverage advantage as seen in 1Q24 where profits quintupled on the back of revenues increasing by 59%. If this trajectory can be achieved again in the next few years, this will make iFast look cheap.
For investors, it depends on the perspective and level of confidence. iFast was non-committal in its forecast for the rest of the year but demonstrated that it was on track with its three year plan. At the very least, the company has had a proven track record thus far.
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