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With Hong Kong contribution expected in 2HFY2023, CGS-CIMB upgrades iFast to 'hold' with 40% higher TP

Jovi Ho
·3-min read

iFast’s 1HFY2023 results were released on July 25. Over the past five days, its shares have risen 79 cents, or 16.42%.

Analysts are eyeing a turnaround for iFast Corporation following patmi of $3.6 million in 2QFY2023 ended June, 21% higher q-o-q, compared to a $2.7 million loss this time last year.

The stronger q-o-q performance was due to improving trends in its core wealth management platform business as market conditions stabilised. iFast declared 1.1 cents distribution per share (DPS) for 2QFY2023, bringing 1HFY2023 DPS to 2.1 cents, unchanged y-o-y.

In a July 27 note, CGS-CIMB Research analyst Andrea Choong upgrades iFast to “hold” from “reduce”, with a higher target price of $4.90 from $3.50 previously.

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Choong anchors her optimistic note on iFast’s confirmation that the ePension (eMPF) project in Hong Kong is progressing as planned.

According to the Mandatory Provident Fund Authority (MPFA), the software development of the ePension platform was largely completed in June. The platform will now enter the testing phase, with a target to complete by year-end.

Migration of MPF accounts will commence in 2Q2024, and the MPFA targets for the platform to be fully operational in 2025, as it guided previously.

The Hong Kong Occupational Retirement Schemes Ordinance (ORSO) and eMPF are retirement schemes in Hong Kong. The ORSO is voluntary while MPF is mandatory for all employees aged 18 and 64.

“This is a positive development, especially as MPFA had in February announced delays in implementation,” writes Choong. “Secondly, iFast’s assets under administration (AUA) rose a steady 4% q-o-q and 6% y-o-y to $18.8 billion at end-2QFY2023. Quarterly net inflows of $543 million in 2QFY2023, up 65% q-o-q but down 8% y-o-y.”

Mixed trends across markets

That said, any further delay in the ePension project will lead to a material de-rating, warns Citi Research analyst Tan Yong Hong. This is given that core business remains soft and the UK banking operations remain loss-making.

In a July 25 note, Tan maintains “sell” on iFast with a target price of $3.70, unchanged from his previous report on March 6.

Management expects iFast’s banking division, which came about from their acquisition of a UK digital bank in early-2022, to break even in FY2024. Tan thinks this may take some time as the losses have yet to narrow.

Dubbed iFast Global Bank, the banking operations marked a $2.2 million loss in 2QFY2023, a $4.4 million loss in 1HFY2023 and a $5.9 million loss in FY2022.

During the quarter, iFast’s China business widened its loss by 4.4% q-o-q, while AUA fell 1.2% q-o-q to RMB1.96 billion ($366 million).

‘Fully valued’

Meanwhile, DBS Group Research analysts think iFast is “fully valued” and should reach a target price of $3.92.

iFast’s 1HFY2023 results are in line, write DBS’s analysts, with 2QFY2023 net profit improving q-o-q.

Compared to management’s view that the banking division will break even in FY2024, DBS thinks meaningful contribution is only expected beyond 2025.

DBS is expecting a better 2HFY2023 for iFast, with gradual contribution from the ePension division. “The expected improvements will come about as the ePension division in Hong Kong starts to contribute more significantly, and as the core wealth management platform business continues to progress.”

DBS is not changing its projection of 15% y-o-y growth in AUA for FY2023 and FY2024.

Shares in iFast closed 14 cents higher, or 2.56% up, at $5.60 on July 28. iFast’s 1HFY2023 results were released on July 25; compared to the past five days, its shares closed 79 cents higher, or 16.42% up.

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