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DBS upgrades iFast to ‘buy’ with higher TP of $9.57 as outlook turns more positive

Felicia Tan
Felicia Tan • 2 min read
DBS upgrades iFast to ‘buy’ with higher TP of $9.57 as outlook turns more positive
iFast's CEO Lim Chung Chun. Photo: iFast
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DBS Group Research analyst Ling Lee Keng has upgraded iFast Corporation to “buy” from “hold” previously as the group’s outlook turns more positive.

“The outlook for the group is improving as the key growth driver for 2024 and 2025 - the ePension division - is progressing well. The group is on track for stronger growth ahead,” Ling writes in her April 26 report.

“Furthermore, the core wealth management platform is also steadily advancing while the net margin continues to improve,” she adds.

On April 25, iFast reported earnings of $14.5 million for the 1QFY2024 ended March 31, nearly five times higher than its 1QFY2023 earnings of $3.0 million.

Revenue also rose by 59.4% y-o-y to $86.0 million mainly due to contributions from the group’s ePension division and growth in its core wealth management platform business.

To Ling, the group’s “scalable” platform business model enables it to grow without a proportionate increase in cost, as she notes its improving operating metrics. During the quarter, iFast’s net margin rose to 18.4% from 17.0% in the 4QFY2023 and 11.0% in FY2023.

See also: Beansprout initiates ‘buy’ call on KIT with TP of 59 cents

Referring to iFast’s three-year plan to grow its assets under administration (AUA) to $100 billion by 2028 to 2030, Ling believes growth should come from inorganic activities including mergers and acquisitions (M&As). As at March 31, iFast’s AUA stood at $21.05 billion.

In addition to her upgrade, Ling has increased her discounted cash flow (DCF)-based target price estimate to $9.57 from $8.33 previously. This is from a lower weighted average cost of capital (WACC) of 8.8% from 9.3% as the analyst adjusts her capital structure with higher level of debt, which is lower than the cost of equity.

“The group’s return on equity ratio (ROE) has also improved to 21.9% in 1QFY2024, versus 12.2% in FY2023, and is closer to its peak of 25.8% in FY2021,” she writes.

See also: UOBKH lowers MINT’s TP to $2.93 after its data centre JV’s all-in cost of debt to increase after January expiry

“There is no change in our earnings forecasts and projection of 15% y-o-y growth in AUA for FY2024 and FY2025,” she adds.

In an April 26 technical update, UOB Kay Hian has recommended investors "sell" iFast at around $7.04 - $7.05.

The team has also recommended investors "stop" at $7.33 and "profit target" at $6.28.

"[The] price is trading below the cloud, keeping the downtrend intact. A bearish conversion and base lines crossover is likely," writes the team.

It adds that the moving average convergence/divergence (MACD) remains "bearish" and could be turning down.

As at 2.41pm, shares in iFast are trading 21 cents higher or 3.03% up at $7.15.

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