The Business Times

iFast aiming to expand its global reach amid rise in profits

Uma Devi
Published Mon, Jul 26, 2021 · 02:11 PM

ONLINE brokerage iFast Corporation's AIY  : AIY 0%chief executive Lim Chung Chun is confident his company will continue to deliver “healthy growth” this year, after reporting another quarter of blistering year-on-year gains in earnings and dividends.

To do this, Mr Lim is positioning iFast to ride the growth of digital banking, and the growing importance of the Internet in delivering financial services.

He points out that streaming service Netflix is able to garner customers from all over the world, and have the ability to "cross borders" by setting up shop in only a few countries but extending its reach across the globe.

"That hasn't happened in the financial sector, and we're still in the early stage. Traditional financial institutions have not been able to run a global business model," said Mr Lim, during iFast’s Q2 2021 earnings call on Monday.

"But my take is that if you have a fintech company that is able to have a business model that takes advantage of trends like the Internet and more, potential growth rates should be different from historical ones."

He said iFast will continue to prioritise efficiency in its business model, through streamlining different parts of the process, such as the fund management settlement.

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Meanwhile, iFast will also continue to deepen its access into key financial markets globally. 

On July 23, the company announced the incorporation of iFast Securities US Corporation. "The intention is essentially for us to have a direct link to the US exchange. We intend to put in an application for trading membership on the US exchange in the same way that we have done for the Singapore and Hong Kong markets," said Mr Lim.

He added that the US is a "key segment" of its stockbroking business, and that its move to forge a direct link to that market will give the company an advantage over its peers in the long run.

Mr Lim is already delivering results that have investors taking notice of the company. 

In a bourse filing last Friday, iFast reported net profit of S$7 million for Q2 ended June 30, 2021, a 55 per cent increase from S$4.5 million for the same period last year. 

Revenue for the quarter rose 31.7 per cent to S$50.8 million, as assets under administration rose 57.3 per cent to a new record level of S$17.54 billion.

The company plans to pay a second interim dividend of 1.1 Singapore cents per share for the quarter under review, 46.7 per cent higher than the dividend of 0.75 cent per share for the corresponding quarter last year.

While iFast has not yet guided for an actual dividend figure for the year, Mr Lim said he hopes that the next two quarters will have a "similar percentage increase" on a year-on-year basis.

Some analysts expressed skepticism about iFast’s earnings momentum though. In particular, the company’s Q2 2021 net profit was down 20.4 per cent on a quarter-on-quarter basis, while its revenue fell 8.2 per cent. 

The company attributed this to reduced trading activity, in tandem with the generally more cautious sentiment in financial markets. Mr Lim said this slowdown was not unique to iFast, and that other financial institutions are likely to report similar q-o-q weakness in their trading income. 

But iFast is focused on expanding its underlying business. For instance, the company said that discussions with industry players are ongoing in Hong Kong as part of the group's preparatory work for the eMPF platform project.

iFast is also leading a consortium to submit an application for a digital bank licence in Malaysia. The results are expected to be announced in Q1 next year.

Over the past one year, in the wake of strong earnings growth, iFast shares have trebled in value. At its current value, the stock is trading at more than 80 times earnings, according to Bloomberg data.

Stephen Chen, a shareholder of iFast, told The Business Times that while the stock is “quite expensive” at current levels, iFast’s chief executive has done a good job of building the company. “It’s definitely expensive, but I think that there will  be a pretty decent premium attributed to it,” he said.

Mr Chen added that a key attraction of the company for investors is that it has gone for a “much bigger total picture” by diversifying its product line to include insurance, unit trusts and bonds.

Mr Lim is taking the market’s adulation in his stride. A former analyst who describes himself as a "value investor at heart", he sees the "premium valuations" garnered by iFast as investors simply recognising its potential to keep growing fast over the next few years. .

Shares in iFast closed at S$8.84 on Monday, down 3.7 per cent or S$0.34.

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