iFAST Corp
Price target: DBS Group Research “buy” $3.96

Still a ‘buy’ despite not winning a licence

iFAST Corp may have failed to clinch the coveted digital wholesale bank (DWB) licence in Singapore, but the internet-based investment product distribution platform company is still rated a “buy” with an unchanged target price of $3.96 by DBS Group Research, thanks to its expanding range of products and services.

“We continue to expect iFAST’s assets under administration (AUA) growth to outpace the industry growth even without a digital bank licence,” DBS analyst Ling Lee Keng writes in her Dec 7 note.

On Dec 4, Singapore awarded two DWB licences to Ant Group and a consortium comprising Greenland Financial Holdings, Linklogis Hong Kong and Beijing Cooperative Equity Investment Fund Management.

The consortium led by iFAST, comprising Yillion Group and Hande Group, did not obtain the DWB licence, although it was shortlisted in June.

Despite the setback, DBS notes that iFAST is now reaping the fruits of its labour in the last few years. The company now enjoys operating leverage from its scalable online-based business model, adds Ling, who expects its AUA to grow at a three-year CAGR of 18%, compared to the industry’s 12%.

“The strong results in the last few quarters are testament to this shift,” says Ling. — Jeffrey Tan


Price target: RHB “buy” $3.16 

Sector top pick with 2Q rebound and active capital recycling

CapitaLand remains RHB’s sector top pick as the developer’s portfolio operations across various asset classes rebounded from a 2QFY2020 ended June trough, says analyst Vijay Natarajan, who has a “buy” call and $3.16 target price.

During 3QFY2020 ended September, retail operations across markets bounced back, with improvements seen in tenant sales and shopper traffic. Overall occupancy for CapitaLand’s lodging assets also improved to around 50% in the same quarter with a 22% q-o-q increase in revenue per available room (RevPAR). Fund management fee income for 3QFY2020 rose 2% q-o-q to $71.1 million, though it was down 18% y-o-y. As such, Natarajan says he expects a strong 2HFY2020 vs 1HFY2020 and estimates a 48% y-o-y rise in FY2021 earnings. He notes that CapitaLand’s annual target of $3 billion in divestments has also been achieved this year despite the pandemic. For example, on Dec 1, CapitaLand announced the sale of three Japanese malls — La Park Mizue, Vivit Minami-Funabashi and Coop Kobe Nishinomiya Higashi — for JPY21.99 billion ($283.6 million) at a slight premium to book value, netting the group an estimated net gain of some $6.4 million.

CapitaLand has also formed a joint venture with Mitsui & Co to develop and operate a logistics project in Greater Tokyo, which marks its maiden foray into Japan’s logistics sector. The project is expected to be completed by 4Q2022.

On Nov 16, CapitaLand announced plans to ramp up investments in China to $5 billion from $1.5 billion with a focus on business parks, data centres, and logistic assets. “These moves reiterate its strategy of divesting non-core assets (mainly retail) and to recycle the capital into new economy assets,” says Natarajan. 

CapitaLand is enjoying strong residential sales across its various markets of Singapore, China and Vietnam.

More recently, on Dec 7, CapitaLand announced the formation of a programmatic joint venture to acquire and develop a freehold land parcel in Austin, Texas, which will be developed into a multi-family project totalling US$300 ($416.1 million). According to Natarajan, multi-family as an asset class is holding up well, with CapitaLand’s existing portfolio of 16 assets acquired in 2018 registering a committed occupancy of 95%.

“We believe such assets in the mid to long term have the potential to be spun off as a standalone REIT or divested into Ascott REIT. With this new investment, CapitaLand’s asset under management in the US stands at $4.7 billion, or about 5% of its total,” he adds.

He has, however, lowered his FY2020 earnings estimates by 10% due to prolonged weakness in the hospitality portfolio and higher-than-expected rent rebates. — Felicia Tan


Price target: DBS Group Research “buy” US$228

Digital full bank licence to ‘accelerate growth’ of SeaMoney

DBS Group Research analyst Sachin Mittal has maintained his “buy” call on Sea as he believes its digital full bank (DFB) licence recently awarded by Singapore could accelerate its growth across Asean.

“Its licence award seems ideal because Sea has a trio of digital services; Garena (digital entertainment), Shopee (ecommerce) and SeaMoney (digital financial services). Obtaining the licence to operate as a fully-fledged digital bank would allow them to cater to the users it acquired through its three core business segments while offering banking services to the underserved segments and small and medium businesses in Singapore,” he writes in a Dec 7 report.  

As such, Mittal has upped Sea’s target price to US$228 ($304.41) from US$204 previously, as he inputs a higher valuation of US$22 for digital financial services, from US$2 earlier. He is giving a fair value of US$83 (previously US$80) for the gaming business, to be more closely aligned with peer valuation. Sea’s in-house developed game, Free Fire, continues to enjoy popularity, and has benefited from more players playing during the recent lockdowns.

Potential catalysts that could contribute to Sea’s share price include the growth in e-commerce adjusted revenue as well as sustained growth in profits in the gaming business.

With more cash collected from its profitable and growing gaming business, Sea will be able to turn this into an advantage as it buttresses its position in the e-commerce market where cash burn is ongoing across the markets.

“We expect the e-commerce and DFS segments to continue to report adjusted Ebitda losses in FY2020/2021 due to the intense competition,” he adds.

Nevertheless, there are possible downsides, warns Mittal. “Our projections could be at risk if Free Fire slows down next year and if Sea is unable to develop a pipeline of new games. For e-commerce, cross-border revenue could disappoint due to regulatory issues.” — Felicia Tan