Broker's take: DBS raises iFast TP to S$6.40 on strong earnings projections

EVEN with iFast's ongoing rally that sparked a query from the Singapore Exchange earlier this month, DBS Group Research thinks the wealth management platform's share price has room to run further.

The research house has bullishly raised its target price on the counter to S$6.40 from S$3.96, on belief that there is more room for growth in iFast's total assets under administration (AUA).

This comes after iFast's share price surged as much as 72 per cent to S$5.04 on Thursday, which makes it one of the few counters with a market capitalisation of above S$1 billion to register such strong gains in less than a month.

In a Thursday report, DBS analyst Ling Lee Keng attributes the sharp rise in iFast's share price to its anticipated contract win for Hong Kong's pension fund project, for which the firm was earlier reported to be one of two finalists shortlisted.

While there are no details on the potential contract, Ms Ling believes it could contribute more than S$10 million to the firm's bottomline in the medium term - more than 50 per cent of projected earnings for FY2020 - assuming that it receives a 3-5 per cent cut of the fee income.

DBS's current earnings forecasts have yet to factor in this potential win. The research house is anticipating earnings growth of 41 per cent for FY2021 and another 30 per cent in FY2022, even without the contract.

In her report, Ms Ling opines that iFast's strong AUA growth for FY2020, along with the overall digitalisation trend accelerated by Covid-19, has also served as contributing factors to the firm's "stellar share price performance".

"AUA for iFast grew at a two-year compound annual growth rate (FY 2018-2020) of 34 per cent, vs 10 per cent from FY2017-2019 for the industry. With the expanding range of products and services, coupled with the boost from Covid-19 that helped to accelerate the rate of digital adoption, we expect AUA to grow by 30 per cent in FY2021 and 20 per cent in FY2022F," she noted.

In the analyst's view, the company is well-positioned to capture more market share in Singapore as the current AUA level remains low at about 10 per cent of its current S$128 billion in AUM of the collective investment schemes, which is in retail investment funds.

She also sees ample opportunities for the company in China, where iFast is in the early stages of building its brand among potential clients and investment practitioners in the wealth management space.

"We are more optimistic on iFast given its scalable business model and drive towards digitalisation to propel the group to greater heights," said Ms Ling.

The company is expected to announce its FY2020 results after market close on Feb 5. DBS is projecting Q4 revenue and net earnings to grow year on year by 48 per cent and 115 per cent respectively on the back of strong AUA growth momentum.

Shares of iFast closed S$0.47 or 9.3 per cent higher at S$5.51 on Friday.