iFAST's share price has gone up sharply after its recent results. We find out what is driving investor optimism and the catalysts that may bring iFAST to the next level.
The share price of iFAST Corporation Limited has gone up sharply in the past month.
Since iFAST released its third quarter 2023 (3Q 2023) earnings in late October, its share price has leapt 53% to close at S$8.47 on 1 December 2023.
Year-to-date, iFAST’s share price has risen by more than 40% and the stock is currently trading close to its 52-week high.
Investors may be curious to know what is driving the surge in iFAST’s share price and whether the momentum can continue.
Let us find out more about potential catalysts iFAST’s investors can look out for.
What is driving the surge in iFAST’s share price
iFAST recently released its third quarter 2023 (3Q 2023) earnings and reported solid increases for both its top and bottom lines.
Net revenue climbed 38.7% year on year to S$41.7 million.
With total operating expenses increasing by just 11% year on year, iFAST’s operating profit more than tripled year on year to S$11.2 million.
Net profit more than quadrupled year on year to reach S$8.5 million.
For the first nine months of 2023 (9M 2023), net profit surged from S$5.1 million to S$15.1 million but this included a S$5.2 million impairment charge in 9M 2022 for iFAST India.
Excluding this item, net profit would still have surged by 46.1% year on year.
Meanwhile, iFAST also saw positive net inflows of S$751 million in 3Q 2023 which helped to drive its assets under administration (AUA) to a new all-time high of S$19.12 billion as of 30 September 2023.
An interim dividend of S$0.013 was declared and paid, similar to what was paid out a year ago.
Apart from the strong results, there are several catalysts that investors of iFAST can keep a lookout for.
#1 – The Hong Kong ePension business
Back in January 2021, iFAST announced that the Hong Kong Mandatory Provident Fund (MPF) Scheme (had awarded PCCW Solutions a contract to design, build and operate the eMPF platform.
iFAST was one of the subcontractors for this tender and the group had diligently worked on this project for more than two years after it was awarded.
Fast forward to 3Q 2023, and the group’s Hong Kong ePension division has made its maiden one-month contribution, helping to drive up the profits for iFAST’s Hong Kong division.
Hong Kong reported a net profit of S$6.8 million for 3Q 2023, more than three times higher than the S$2.1 million it reported in the prior year.
iFAST has reiterated its guidance on the eMPF project as per the slide below.
Looking at 2024 and 2025, the profit before tax (PBT) targets are significantly higher than what the Hong Kong division is earning currently.
After factoring in corporate taxation of 16.5% and the exchange rate of 1 SGD = 5.85 HKD, 2024’s net profit still translates to around S$35.7 million assuming a PBT of HK$250 million.
For context, 9M 2023’s net profit for iFAST’s Hong Kong division was just S$10.8 million.
Even when annualised based on 3Q 2023’s net profit, the division would have reported S$17.5 million.
Management expects 2024 to show “robust growth” in revenue and profitability as compared with 2023, and this ePension contract is one of the key reasons.
#2 – The launch of ORSO ePension services
In June this year, iFAST announced that its Hong Kong subsidiary has launched ORSO ePension Services, a digital pension solution for the country’s Occupational Retirement Schemes Ordinance (ORSO) Pension scheme.
This is another feather in the fintech’s cap and is in line with the group’s three-year plan to substantially accelerate the business growth of its Hong Kong division.
Details are limited at this point but management expects ORSO to make a sizable contribution to Hong Kong’s AUA from 1Q 2025 onwards.
Revenue and profitability of iFAST’s Hong Kong division may be further supported by ORSO ePension Services.
#3 – UK digital bank
Back in January 2022, iFAST purchased an 85% stake in a digital bank in the UK for around S$73 million, funded by internal cash and a private placement of shares at S$7.50 per share.
The bank has since been renamed iFAST Global Bank (iGB).
Since the acquisition, iGB has been incurring losses with 9M 2023’s loss at S$6 million, nearly double the losses incurred in the same period last year.
There are encouraging signs, however, that the digital bank may be edging closer to breaking even.
Customer deposits have grown by more than double to S$232.09 million as of 30 September 2023 compared with just S$96.55 million nine months ago.
Management expects iGB to be loss-making for the remainder of 2023 and into 2024 but believes that it will play a major role in the group’s growth beyond 2025.
iGB launched its digital personal banking platform in April this year and is marketing the product actively to acquire customers.
Product enhancements are planned for 2024 and its digital transaction banking sub-division, which targets corporate customers, continues to see growth in onboarded customers.
Should iGB break even sooner than expected, it could provide a boost to iFAST’s overall profits.
What would Beansprout do?
It appears that iFAST has quite a few things going for its business in the next few years.
The ramping up of its eMPF project and contribution from ORSO could help to boost the profit contribution from iFAST’s Hong Kong business.
We will also be looking out for signs that iGB could break even sooner than expected.
However, with the recent surge in the fintech’s share price, analysts appear to be more cautious about cautious about potential further upside.
The consensus share price target is S$6.62 as of 12 December 2023, below the current market price of iFAST.
As such, we would look out for entry points that offer better risk-reward to tap on the long-term growth potential of iFAST.
If you are keen to understand more about iFAST, you can watch a replay of the recent SIAS Corporate Connect, where we discussed the company's recent developments and upcoming plans.
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