Hong Kong contribution prompts higher target prices for iFast

The company has set a 10-year target to raise AUA to $100 billion by 2028

Analysts are generally positive following iFast Corp's 3QFY2023 earnings, given its improving operating metrics.

On Oct 25, iFast reported earnings of $8.52 million, up 308.4% y-o-y. Revenue in the same period was up 23.8% y-o-y to $66.22 million, with key contributions from its ePension project in Hong Kong. The company's core wealth management platforms generated growth as well.

In line with its tradition of paying out quarterly dividends, iFast has declared an interim dividend of 1.3 cents per share, held steady from this time last year.

On the back of a strong 3QFY2023, Ling Lee Keng of DBS Group Research projects iFast to report a better 4QFY2023, thanks to stronger contribution from Hong Kong given a full quarter of operations, versus just one quarter in 3Q.

"Costs could remain high, but this should be accompanied by a higher revenue contribution," writes Ling in her Oct 27 report.

From an earlier call of "fully valued", Ling has upgraded her call to "hold", along with a higher target price of $6.95, from just $3.92 previously, as she raised her earnings forecast for the current FY2023 and coming FY2024 by 4% and 44% respectively.

Similarly, Andrea Choong of CGS-CIMB has raised her target price to $5.90 from $4.90, thanks to Hong Kong, while keeping her “hold” call.

"The commencement of ePension contributions was the key positive feature of 3Q23 earnings, and effectively kick-starts seven years of project fees," writes Choong in her Oct 27 note, adding that Hong Kong is on track to generate $17 million in profit before tax for the current FY2023.

Assets under administration surged to a record of more than $19 billion as at Sept 30. In the most recent 3QFY2023, iFast managed to generate net inflows of $751 million, an improvement over $559 million in the preceding 2QFY2023 and $329 million in 1QFY2023.

The company has set a 10-year target to raise AUA to $100 billion by 2028. Ling notes that iFast's AUA has been growing at a CAGR of 12.6% between FY2015-2022, as it adds new products and services on its platforms.

While Ling has assumed a "conservative" long-term AUA growth of 15%, the $100 billion AUA target by 2028 should require more than just organic growth and would likely involve acquisitions, says Ling.

UOB Kay Hian's Heidi Mo and John Cheong have trimmed their FY2023 earnings projection to take into account lower-than-expected contributions from Hong Kong.

However, they have increased their target price for the counter, which they rate "hold", from $4.81 to $6.56, as they now use a new valuation multiple of 23x FY2025, which is pegged to 1 sd below iFast's historical mean, down from 0.5 sd, to reflect a more reasonable valuation and steady earnings state from Hong Kong.

Citi Research, which has a long-held contrarian view on this stock, remains cautious on iFast.

"We highlight that more than half of earnings is driven by Hong Kong project fees and underlying core business remains soft," states analyst Tan Yong Hong, who has kept his "sell" call and $3.70 target price.




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