Brokers’ take: DBS downgrades iFast to ‘fully valued’ amid reduced earnings estimates
Janice Tan
DBS Group Research downgraded its call on iFast Corporation from “hold” to “fully valued” as a result of reduced earnings estimates and a pushback in revenue recognition.
This is due to projected increases in operating costs resulting from the eight-month delay in building the Hong Kong Pension platform due to manpower shortage. This is expected to negatively impact iFast’s bottom line.
DBS also foresees share price weakness for iFast in the near term, especially after its recent rebound in late 2022. The brokerage said the rebound could be due to optimism at the time that market sentiment could improve going forward.
In a report on Tuesday (Jan 17), analyst Ling Lee Keng slashed the mainboard-listed fintech company’s target price to S$3.98 from S$4 upon reduced earnings estimates for FY2023 and FY2024 by 3-26 per cent, due to the delay.
Based on the analyst’s observations, the company’s operating costs – which are expected to continue to increase due to the delay – have already risen 19.5 per cent year on year as at the third quarter of FY2022.
Given the higher costs and slowdown in revenue, Ling projects the group to achieve the benefit of operating leverage only in 2024 when the ePension project is expected to start contributing to iFast’s financials.
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She also cautioned that iFast’s operations are vulnerable to changes in laws and regulations as well as market sentiment.
Nonetheless, Ling maintains that iFast has already provided a buffer for the delay, as its third quarter and nine-month results presentation announcement for FY2022 was based on the expectation that operations of the ePension division will begin in Q4 this year.
There is no change to DBS’ growth assumptions for iFast’s assets under administration, which are 15 per cent each for FY2023 and FY2024.
“We would prefer to re-visit this stock again when we have more clarity on the development of the ePension project,” said Ling.
iFast’s shares closed 1.3 per cent or S$0.07 lower at S$5.29 on Tuesday.
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