Brokers' take: iFast remains mostly attractive to analysts after its latest results

DBS and UOB Kay Hian (UOBKH) view the latest Q3 FY21 results and 5-year plan from AIY positively, while Jefferies remains neutral on the counter.

In reports on Tuesday (26 Oct), DBS raised its target price for iFast to S$12.93, while UOBKH's target price is unchanged at S$11.50, with both research houses giving a "buy" call on the stock. Jefferies however remains neutral with an unchanged target price of S$9 and maintaining a "hold" call in a report on Sunday (Oct 24).

Shares of iFast ended down S$0.18 or 1.95 per cent at S$9.03 on Oct 26.

Analysts have noted the faster than expected growth of the wealth management platform's AUA (assets under administration) as a positive momentum for its shares. The confluence of a growing wealth management industry and shift to digitalisation is set to benefit iFast, according to UOBKH analyst Clement Ho.

"This will be driven mainly by China, as financial markets there continue to open and help spur growth in the Asian wealth management industry," said Ho.

In particular, Hong Kong appears to be a growth engine that will accelerate the business from 2024, according to DBS analyst Lee Keng Ling. The company has set revenue targets for the Hong Kong business that forecasts profit before tax of S$20.7 million in 2024 and S$60.3 million in 2025.

"With its scalable platform business model, iFast has already obtained significant operating leverage. Since Q1 2020, growth in profit was substantially higher than growth in revenue. This should drive margins higher going forward," said Lee.

There is also a potential catalyst for iFast, a potential digital bank licence in Malaysia which could be awarded in Q1 2022. The platform will own a 40 per cent stake in the consortium leading the bid that includes Malaysian partners, THZ Alliance and Chinese fintech firm Yillion Fintech.

iFast also announced a 5-year plan, which has also been viewed positively by analysts, with plans to hit assets under administration of S$100 billion by 2028, accelerate the Hong Kong business through recurring fees, pursue more financial licences and achieve a "truly global business model".

"We believe the market would be appreciative of the 5-year plan and new potential growth driver of HK e-MPF (e-Mandatory Provident Fund) business," said Krishna Guha, analyst at Jefferies Singapore.

Still iFast is vulnerable to changes in laws and regulations, notes DBS's Lee, as well as market sentiments. Then there are concerns over growth slowdown, competition and margin erosion, said Jefferies' Krishna. There is also the steep valuation the platform is currently at right now, at 65 times 12-month forward price to earnings ratio compared to peers at 31 times.

Read more:

• iFast Q3 net profit up 23.3% to S$7.6m; group unveils 5-year plan
• iFast eyes growth in Hong Kong, targets more licences in bid to scale abroad
• iFast unit iGM's assets under administration crosses S$1 billion mark