iFAST Corporation is on track to report record 4QFY2020 earnings with net profit rising 140% y-o-y, says CGS-CIMB Research. This is despite missing out on a digital wholesale banking licence in Singapore last month.

CGS-CIMB analyst Andrea Choong is reiterating “hold” on the wealth management company with a raised target price of $4.15 from $3.41. 

“We believe that growth prospects for FinTech and wealth management platform operators such as iFAST Corporation will remain firm going into FY2021F,” says Choong in a Jan 13 note. 

The company announced on Jan 6 that its assets under administration (AUA) reached another record high level of $14.45 billion as at Dec 31, 2020.

The figure represents a 44.5% growth from $10 billion as at Dec 31, 2019, and a 14.8% increase q-o-q from $12.59 billion as at Sept 30, 2020.

Get the latest Singapore corporate news stories for FREE

“We understand that the strong momentum came largely from market sentiments turning more bullish in the quarter, spurring investing trading volumes. By product, unit trusts made up the bulk of the absolute increase, while stocks and ETFs maintained their [more than] 30% q-o-q growth rate (since 2QFY2020),” adds Choong.

Most of the AUA growth in 4QFY2020 stemmed from Singapore, as the pace in Hong Kong and Malaysia slowed. The group’s Singapore operations grew 52.8% y-o-y for its AUA.

See: iFAST Corp's AUA grows 44.5% y-o-y to record $14.45 bil

Entering 1HFY2021F, Choong expects iFAST Corp’s AUA growth to be sustained by hybrid work-from-home/office arrangements, as Singapore enters Phase 3 of its economic reopening, cases in Hong Kong ease, while Malaysia implemented a second movement control order.

In addition, sustained market momentum and iFAST’s edge of an end-to-end digital platform from onboarding of clients to executing trades will contribute to AUA growth, though these growth trends are expected to normalise from 2HFY2021F as investors and markets adjust to a new normal.

Licenced operator

iFAST Corp was not awarded a digital wholesale banking licence in Singapore, but it does not rule out the possibility of putting in its bid once again when the MAS re-evaluates candidates for the final wholesale banking licence, says Choong. 

Last month, MAS awarded two out of three available wholesale banking licences. The two awardees are a consortium comprising Greenland Financial Holdings Group, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management and an entity wholly-owned by Ant Group.

See also: MAS awards digital bank licences to two consortiums, two entities

Outside of Singapore, iFAST Corp is also looking to submit its bid as a digital bank in regional markets, with more updates expected in the coming earnings briefing.

"The downside risk of not being awarded a digital wholesale banking licence by the Monetary Authority of Singapore has played out," says Choong, but share price has recovered on the back of market optimism that its PCCW-led consortium could be successful in its bid as an eMPF operator in Hong Kong.

See also: iFAST Corp bags best returns, gears up for long-term growth

That said, iFAST Corp brings with it expertise and experience in administrating the investments of members of Singapore’s Central Provident Fund. The timeline of the award by Hong Kong’s MPF Authority has not been announced.

“Consequently, we expect iFAST to post PATMI of approximately $7.1m in 4QFY2020F,” says Choong, an increase of 16% q-o-q and 140% y-o-y for the company. 

As at 10.37am, shares in iFAST Corp are trading at 24 cents higher, or 6.08% up, at $4.19.