Once a hot stock, iFast has lost close to half of its market capitalisation this year alone.
However, we are beginning to see a slight relive. In recent days, iFAST has made a comeback, climbing 27% from its recent low. This is due to two key factors: its half-year results and recent developments with its eMPF project (A pension fund system in Hong Kong).
If you’re unfamiliar with iFAST, here’s a quick review. (with some updates)
What is iFAST?
iFast Corporation is a wealth management fintech platform that serves three four main business areas:
- Business-to-Consumer (B2C): FSMOne.com (previously “Fundsupermart”), a multi-product online wealth management platform that provides DIY investors access to a myriad of investment products. (AUA: S$5.44 billion)
- Business-to-Business (B2B): Provide financial products to over 540 financial advisories (FA) companies, financial institutions, and banks. (AUA: S$12.24 billion)
- Emerging Fintech Solutions / Business-to-Business-to-Consumer (B2B2C) Model: Equip its B2B clients and business partners with B2C Fintech capabilities along with customised Fintech solutions.
- (Newly added) iFAST Global Bank: A fully licensed UK-based bank (formerly known as BFC Bank Limited) that offers banking services to individuals, businesses, and financial institutions. (Alvin had previously covered some key points for investors.)
Overall, iFast (SGX: AIY) provides access to over 16,000 investment products. This includes 10,500 funds, 1,600 bonds, stocks, and ETFs listed on the Singapore, Hong Kong, and US stock exchanges. It also offers services such as portfolio management, investment seminars, Fintech solutions, and investment administration and transaction services.
Positive 1H2022 results?
The first leg of the push came with the announcement of its 1H2022 results.
“iFAST Corp: Tough 1H2022 Market Conditions and One-Off Impairment Impacted Profitability; Expects Revenue and Profitability to Reach New Highs in 2023”.
The headline pretty much says it all.
TLDR, 1H2022 wasn’t spectacular, but the outlook continues to be promising moving forward.
Drop in AUA
The first sign of weakness is a 5.1% drop in assets under administration (AUA) quarter on quarter. This reduction is due to a decrease in the value of investment products as well as a slower increase in net inflows in 1H2022 compared to 1H2021.
Net revenue basis, iFAST had actually grown 13.3% year on year in 2Q2022. This is the inverse of what we saw for its AUM. The primary reason for this was the inclusion of S$3.92 million from iFAST Global Bank in the United Kingdom, which iFAST acquired at the end of March 2022.
Removing this segment, iFAST actually saw a minor revenue loss.
Nevertheless, iFAST overall revenue appears to be stable, keeping in line with the revenue generated during the peak of favourable investment sentiment in 2021.
Of course, stabilisation may not be a good thing for growth investors; the growth rate has reduced drastically, which is likely why the iFAST share price has fallen so much lately.
But hey, given the current circumstances, maintaining the revenue generated at the peak of the investment boom in 2021 is a respectable performance.
Profit Before Tax Margin down
More bad news: Profit Before Tax Margin has also decreased.
This is firstly due to the fact that its banking business is still incurring losses. But we can’t really blame it either. Even after eliminating the banking part, 1H2022 PBT Margin fell to 21.9%.
Impairment
Another piece of bad news (last one).
On 23 July 2022, iFAST associate company iFAST India Holdings announced that it would discontinue its onshore platform service business in India and switch to focus on offering global Fintech solutions. This follows in the wake of the Securities and Exchange Board of India’s announcement that pool accounts will no longer be used for mutual fund transactions.
With this restructuring, iFAST Corp has provided a one-time estimated impairment allowance of S$5.2 million. And as a consequence, it had to record a net loss of S$2.69 million in 2Q2022.
iFast’s Outlook
Well, that is quite a number of bad news. Overall, 2022 is not a fantastic year for iFAST (but also not a very bad one). The group is anticipating an increase in overall revenue but a net loss due to the impairment charge for the India business, operational losses for iFAST Global Bank, and an increase in overall operating expenses.
Beyond 2022, the firm expects accelerated growth momentum, with revenue and profitability reaching new highs as the ePension division (a recap of this segment is provided in the next part) begins to contribute more significantly from 3Q2023 onwards.
iFast’s Guidance and what to expect
The following is iFast target guidance published on 23 April 2022, which conservatively projected the contribution from the ePension project would commence in 4Q2023.
When compared to iFAST’s FY2021 net revenue, the guidance of HKD280 million from its Hong Kong business represents 43% of that figure. A similar trend can be seen for its Profit before tax too. These figures simply highlight how profitable this business will be for iFAST in the future.
This then takes us to the second factor for the iFAST share appreciation.
Hong Kong Mandatory Provident Fund’s news
Before that, here is a recap of the eMPF platform from our previous article.
iFAST, on 30 January 2021, announced that the Mandatory Provident Fund Schemes Authority (“MPFA”) of Hong Kong has awarded PCCW Solutions with the contract for the design, build and operation of the eMPF platform.
The MPF is a mandatory saving plan similar to Singapore’s CPF, and the eMPF platform intends to standardise, streamline, and automate the MPF scheme administration operations to reduce fees and provide a largely paperless experience in the MPF System.
Being PCCW Solutions’ prime subcontractor would mean that iFAST could get a cut of the income fee, which DBS estimates to be in excess of $10 million.
This second leg of the rally is more speculative, prompting SGX to query iFAST about any odd trading activity.
In its response, the company notes that on 15 August 2022, an editorial was published in the South China Morning Post that gave information for trustees to be onboarded onto the Hong Kong Mandatory Provident Fund’s electronic platform.
Essentially, this is the first time the pension authority, the Mandatory Provident Fund Schemes Authority (MPFA), has provided a rough timeline for the transition to eMPF. Starting with five companies that will join the eMPF platform between June and August of next year and ending with the larger providers by 2025.
This announcement may have piqued the attention of investors because it offers a rough timeframe for when iFAST’s top and bottom lines will grow; hence its share price jumped.
Conclusion
Both the 1H2022 results announcement and news about the onboarding of trustees onto the eMPF have generated some attention in the stock, which may be why iFAST has rebounded 27 % from its low.
Yes, its 1H2022 results were not stellar, but they did bring some relief to investors who were expecting worse.
The Hong Kong Mandatory Provident Fund is also excellent news. However, it is not new. The reason why this news has stirred up interest was probably due to a more concrete timeline provided by the authority.
Overall, we are beginning to see more positive development for iFAST over the last month; if this trend continues, we may see improved performance in the future.