Brokers’ take: CGS-CIMB downgrades iFast to ‘hold’, lowers target on Q2 loss
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Sharanya Pillai
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CGS-CIMB has downgraded its “add” call on fintech player iFast Corp to a “hold”, while lowering its target price to S$4, from S$7.60. This comes as the company fell into the red for Q2 ended June.
In a Tuesday (Jul 26) note, analyst Andrea Choong noted that the loss arose from heftier operating expenses and a S$5.2 million impairment charge from the India business. iFast had to exit its onshore platform service business in India due to a regulatory change barring the use of pool accounts for mutual fund transactions from Jul 1.
But even adjusting for the impairment, iFast would still report a weaker Q2 operating profit of S$2.3 million, down 73 per cent year on year, Choong said. The company was weighed down by heavier IT spending, technology security services, operating costs for its Hong Kong ePension project and transaction costs for the acquisition of its UK-based bank.
“Losses in China widened further to S$1.9 million in Q2 (down 32 per cent year on year) as poor market performance impacted investment sentiment,” Choong added.
While iFast’s UK banking foray boosted net revenue by S$3.9 million, the core trading platform business took a hit, with earnings declining 1 per cent year on year amid weak sentiment and market volatility.
In lowering the target price, Choong factored in reduced core earnings, on the back of lower assumptions for assets under administration. She also raised operating expense estimates and included the one-off impairment expense.
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Looking ahead, iFast’s bank is expected to post about S$4 million in start-up losses in FY2022 and break even 2 years after that. Consumer remittance remains the key revenue contributor, said Choong, while noting that iFast is looking to offer online account opening and multicurrency deposits next.
She reckons that any earnings upside from FY2023 to FY2025 will depend on the ramp-up of iFast’s ePension project, where the company offers pension operation and administration services, with a focus on Hong Kong schemes. Contributions from ePension may begin in the third quarter of FY2023, barring delays, said Choong.
Shares of iFast were trading at S$3.82 on Tuesday as at 10:30am, up 1.3 per cent.
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