To The Moon

$IFAST CORPORATION LTD.(AIY.SI)$ Slightly more than a year ago, iFAST Corporation Limited (SGX: AIY) was flying high on a raft of good news.

Stock markets were ebullient, resulting in strong cash inflows that boosted the fintech company’s assets under administration (AUA) to an all-time high of S$16.1 billion for the first quarter of 2021 (1Q2021).

Back then, the group had also reported a sparkling set of earnings where net profit soared 142.5% year on year to S$8.8 million.

iFAST’s share price was on a tear, too, more than doubling from S$3.03 at the start of 2021 to S$7.53 on 21 May last year.

The share price went on to hit a 52-week high of S$10.10 in September.

Fast forward to today, and iFAST’s share price has more than halved from its peak, closing at S$4.79 recently.

Investors may be wondering if the stock represents a bargain and whether it may be time to relook the company.

Facing stormy weather

iFAST’s business is, to a certain extent, affected by stock market volatility.

When markets are rising, optimistic investors do not think twice about pumping money into investments.

Unfortunately, during its recent fiscal 2022 first quarter (1Q2022) earnings, iFAST remarked that global stock market conditions went from being “very positive” in 1Q2021 to “very poor”.

For context, the group saw net inflows of S$1.28 billion for 1Q2021 along with S$2.2 billion in gross unit trust subscriptions.

These inflows pushed AUA up close to 69% year on year to hit a then-high of S$16.11 billion as of 31 March 2021.

In contrast, 1Q2022 saw net inflows at S$669 million while gross unit trust subscriptions declined year on year to S$1.6 billion.

As a result, AUA dipped from a record high of S$19 billion at the end of 2021 to S$18.63 billion as of 31 March 2022.

The group also reported a sharp 35% year on year fall in net profit to S$5.7 million for its latest quarter.

Balancing out the negatives

It would be unwise, though, to focus solely on the negative news.

There are bright spots that investors should turn their attention to as well.

First off, iFAST’s AUA has still grown from S$16.11 billion as of 1Q2021 to S$18.63 billion at the end of March 2022 despite the worsening market conditions.

Also, iFAST’s net profit of S$5.7 million for 1Q2022 was still higher than the S$3.6 million net profit it chalked up two years ago in 1Q2020.

And while iFAST failed to clinch the Malaysian digital bank licence that it had pitched for last year, the group did manage to purchase a UK digital bank, BFC Bank, for S$73 million and renamed it “iFAST Global Bank”.

For income-seeking investors, they can rejoice as the fintech company has paid out a total dividend of S$0.048 for the fiscal year 2021 (FY2021), up 45.5% year on year from the S$0.033 paid out in FY2020.

For 1Q2022, iFAST has maintained its interim dividend of S$0.01 despite the poorer earnings.

Valuation has declined

For investors who are wondering if iFAST’s stock is cheap, here’s a simple valuation check.

A year ago, shares of iFAST were trading at around 81.6 times trailing 12-month earnings.

Today, this valuation has come down to around 50.5 times earnings, and shares offer a trailing dividend yield of 1%.

Although this may still seem expensive, remember that iFAST’s business model is highly scalable and enjoys strong economies of scale.

Case in point: As iFAST ramped up its revenue and AUA over the past two years, its profit before tax (PBT) margin has jumped from 17% in FY2019 to 31.6% in FY2021.

For 1Q22, PBT margin has declined to 26% but is still elevated from FY2018 (20.7%) and FY2019’s levels.

Catalysts ahead

Notwithstanding the poor market sentiment, iFAST has come up with an ambitious four-year plan to take its business to the next level.

Management is working to elevate the group’s business model to a global level with a vision of being a top wealth management player.

It also plans to build scale and achieve its long-term target of S$100 billion in AUA by 2028.

Investors can also look forward to Hong Kong being a key contributor to the group from FY2023 onwards after it clinched the eMPF contract.

Get Smart: Braving rough waters

Current market sentiment remains poor, leaving iFAST mired in rough seas.

However, the group has a target to achieve profitability for iFAST Global Bank by 2024.

Its Hong Kong division should also see a boost in profitability starting next year.

Investors have to brave the tough conditions for now and in time to come, the sun should shine once again on the group.

@koolgal@HelenJanet@SR050321@Venus_M@MSing@StarLuck

@TigerEvents@CaptainTiger@TigerStars