iFAST Corporation Limited (SGX: AIY) has just released its fiscal 2021 third quarter (3Q2021) earnings.
The group’s assets under administration (AUA) growth once again hit a new all-time high of S$18.38 billion, up 46.1% year on year.
More importantly, it also provided an update on its recent electronic mandatory provident fund (eMPF) contract in Hong Kong which will be “very material” to its business.
The group shared more details of the expected growth in its Hong Kong business and also unveiled a surprise five-year plan to take the business to the next level.
Here are five things that investors should know about iFAST’s latest earnings.
1. Healthy financial growth
The fintech company continued its streak of strong financial numbers.
For 3Q2021, iFAST’s net revenue grew by 32.6% year on year to S$30.3 million.
Operating profit improved by 22.4% year on year to S$9.1 million while net profit jumped by 23.3% year on year to S$7.6 million.
For the first nine months of 2021 (9M2021), net revenue increased by 38.1% year on year while operating profit surged by 59.2% year on year to S$27.8 million.
Net profit soared by 63.6% year on year to S$23.4 million.
Free cash flow for 9M2021 remained healthy at S$15.1 million, though it was down from the prior year’s S$21.7 million.
The group maintained a debt-free balance sheet with cash and investments of S$54.4 million as of 30 September 2021.
2. Less reliance on unit trusts
When iFAST started, its platform relied heavily on unit trusts.
Two years ago, unit trusts made up 83% of its AUA while stocks and exchange-traded funds (ETFs) took up a mere 5.5%.
By September 2020, unit trusts as a percentage of AUA had declined to 76.6%.
The proportion declined even further a year later with unit trusts making up 73.1% of AUA.
Stocks and ETFs, on the other hand, saw their contribution triple from September 2019 to hit 16.8%.
This shift is good news for investors as it shows that the group is diversifying its AUA composition as time goes by.
3. Hong Kong contribution greatly increased
As mentioned, iFAST unveiled more details of the eMPF contract along with estimates for net revenue and profit before tax (PBT) margins for its Hong Kong division.
Target net revenue will be HKD 800 million and HKD 1.2 billion for the years 2024 and 2025, respectively.
PBT margins for 2024 and 2025 are projected to be 15% and 33%, respectively.
After applying the exchange and tax rates, net profit is estimated at S$17.4 million for 2024 and S$57.3 million for 2025.
In contrast, annualised net profit for its Hong Kong division currently stands at just S$8.4 million.
This means that Hong Kong could potentially contribute almost seven times the net profit that it is generating now.
The eMPF contract is indeed a game-changer for iFAST and will significantly boost its recurring income.
4. Five-year plan formulated
Aside from the stellar estimates for the eMPF, iFAST also surprised the market by disclosing a comprehensive five-year plan to grow its business.
The plan, made up of four strategic pillars, should be viewed together with the group’s target of achieving S$100 billion in AUA by 2028.
As a first step, iFAST will continue to work on getting “bigger and better” by continually scaling up and improving the quality of its platform.
Secondly, it will leverage the eMPF contract to accelerate the growth of its Hong Kong division. The third pillar involves pursuing more licences in different jurisdictions.
To round it off, strategic investments will be made to acquire additional fintech capabilities to advance the group’s ambition to become a global player in the wealth management industry.
5. Dividend continues to rise
Income-seeking investors will be happy to know that iFAST has, once again, raised its quarterly dividend.
The company declared a third interim dividend of S$0.013, up 62.5% year on year from the S$0.008 paid in the prior year.
It’s also higher than the previous quarter’s dividend of S$0.011.
For 9M2021, the total dividend of S$0.034 has already exceeded 2020’s full-year dividend of S$0.033.
Get Smart: Going from strength to strength
iFAST continues to benefit from client inflows as more people adopt online habits.
The announcement of a five-year plan was a pleasant surprise as it shows the group’s commitment to growing in a steady, sustained manner.
The eMPF contract is expected to contribute significantly to earnings, but in the interim, there will be execution risks that need to be monitored.
Overall, iFAST is moving in the right direction and investors should stay tuned for more catalysts from the group.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.