Hot stock: iFast rises 4.4%; targets slashed after Q4 earnings miss

SHARES of AIY advanced 4.4 per cent on Wednesday (Feb 16), following the wealth management platform's release of its fourth quarter and full-year net profit results earlier this week.

As at 10.49 am, the counter climbed as much as 6.6 per cent to hit S$6.49 after some 0.8 million shares were traded.

It later pared some gains to close at S$6.36, up 4.4 per cent or S$0.27 with about 1.5 million shares changing hands.

No married deals were recorded throughout the day, according to ShareInvestor data.

Analysts have notably lowered their target prices on iFast as its latest set of results underperformed both brokerage and consensus estimates.

DBS Group Research and CGS-CIMB retained their respective "buy" and "add" calls on the stock. Jefferies reiterated its "hold" recommendation and Citi continues to rate iFast at "sell".

DBS analyst Ling Lee Keng said the lower target of S$10.85 compared to S$11.37 previously comes after factoring in the dilution from iFast's recent share placement.

While the group's latest set of Q4 financials resulted in 5.7 per cent earnings miss in DBS's full-year forecasts, Ling remains positive on the group's assets under administration (AUA) and longer-term earnings prospects.

"Though some initial startup losses are expected from the new initiatives, we maintain our positive view on iFast on the back of the strong growth momentum ahead, propelled by the Hong Kong business from 2024 onwards," she said.

Unlike Ling - who thinks iFast is well poised to capture more market share in its key market Singapore - CGS-CIMB analyst Andrea Choong sees the group's year-on-year AUA growth trending lower at 20 per cent for FY2022, versus the 31 per cent growth reported for FY2021.

The research house has cut its target price on the stock to S$9.70 from S$12.50 previously.

In Choong's view, AUA is headed towards a "more normalised steady state of growth". This has resulted in CGS-CIMB lowering earnings per share estimates for FY2022 to FY2023 by 20 per cent to 28 per cent.

iFast's ePension project in Hong Kong will instead serve as the company's key earnings driver going forward, said the analyst, with contributions expected to commence in FY2023 and potential for profit-before-tax margins to come in stronger than anticipated.

Also noting a slowdown in AUA growth over the last fiscal year, Jefferies analyst Krishna Guha recalls iFast's AUA as the initial reason for ascribing "sky-high" multiples to the company, whose FY2021 earnings missed the research house's forecast by 6 per cent.

Guha has reduced his FY2022 estimates by about 12 per cent to result in a lower target price of S$6.30 from S$8 previously. He remains "hold" on the stock due to its near-term slowdown and still-steep multiples.

Likewise, Citi attributes iFast's full-year earnings miss to slowing AUA growth momentum on top of lower sequential net platform margins.

The research house has cut its FY2022 to FY2024 forecasts for the group by 14 to 15 per cent to account for lower net platform margins of 60 basis points (bp) from 66 bp previously, resulting in a target price of S$5.20 as compared to S$6.20 earlier.

Its earnings projections for FY2022 to FY2023 are now 17 per cent and 13 per cent behind consensus, respectively - but remain in line at the net revenue level after adding contributions from the group's recently acquired BFC Bank.

READ MORE:

• Brokers' take: Citi cuts iFast TP on dilutive M&A, possible Q4 earnings miss
• iFast prices private placement at top end of range; raises S$105m
• What is BFC Bank and why is iFast buying it?