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iFAST benefiting from Asia’s rapid digital adoption: DBS

Jovi Ho
Jovi Ho • 4 min read
iFAST benefiting from Asia’s rapid digital adoption: DBS
Going forward, the group plans to expand to China via Shanghai/Shenzhen/Hong Kong Stock Connect.
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Covid-19 has accelerated digital adoption across Asia, and financial services company iFAST, like its name, is expected to grow faster than the industry, writes DBS Group Research analyst Ling Lee Keng in a September 8 note.

Ling is maintaining “buy” on the company with a raised target price of $2.60 from $2.35. DBS Group Research is raising iFAST’s assets under administration (AUA) growth assumption to 15% each in FY2020F and FY2021F, from 12% previously.

“Covid-19 has accelerated the pace of digitalisation. The recent 2Q2020 results, which saw asset under administration (AUA) grew 11.5% year-to-date, is a testament of the growing adoption of Fintech services,” says Ling.

iFAST is an internet-based investment product distribution platform. iFAST has more than 450 financial institutions and other corporations, and over 9,300 wealth advisers are using its B2B platforms.

In Hong Kong, iFAST is part of one of the two consortiums in the race to operate Hong Kong’s digital retirement funds system. The Mandatory Provident Fund Schemes Authority (MPFA) is seeking to update its systems by creating an electronic platform that will centralise the data of its 4.3 million members by 2022.

See: iFAST moving fast and furious in Hong Kong, Malaysia: CGS-CIMB

One of the finalists is a consortium led by Oneconnect Financial Technology – backed by Ping An Insurance Group, and working with a French technology partner, Atos. The other player is a group led by PCCW, and iFAST is their technology partner.

This is similar to the FSMOne platform that iFAST has in Singapore, notes Ling, where users just need to have one account to trade multiple products. iFAST was also involved in a similar platform for The Employees Provident Fund (EPF) in Malaysia and is also the investment administrator for The Central Provident Fund Board in Singapore.

Ling points out that the contribution to iFAST could be significant if it wins the contract. “We assume iFAST could get a cut of the fee income. As at June 2020, MPFA had net assets worth HK$967.8 billion (S$171.17 billion). Based on a 20-basis point calculation, this works out to approximately HK$2 billion (S$357 million) per year. Assuming if iFAST gets a 3% to 5% cut of the fee income, contribution to bottom line could be in excess of $10 milllion.”

In Malaysia, iFAST Capital Sdn Bhd has obtained approval-in-principle to carry out the regulated activity of dealing in securities from the Securities Commission Malaysia. This service is expected to be launched by early 2021.

In Singapore, iFAST is currently pursuing a digital banking licence in Singapore. iFAST Corp is among the nine digital wholesale bank (DWB) applicants shortlisted to progress to the next stage of assessment. The timeline for the award of the digital bank licences would be by the end of this year, and the Monetary Authority of Singapore (MAS) will issue up to three DWB licences.

See also: Digital bank hopeful iFast posts record 2Q2020 on trading fees jump

Securing this licence would allow the group to further broaden its services to include the ability to provide cash management and related wealth management services to various companies in the digital economy, including payment players and e-commerce players, notes Ling. The lending capabilities would be another additional revenue stream for the group.

About $80-100 million capital is needed if it wins, to be funded via a combination of cash, equity and debt financing, says Ling. As at end-June 2020, iFAST had net cash of $21.6 million. Based on estimates, the digital bank launch is expected to add between 9% to 11% to the Group’s operating expenses in 2022.

Currently, iFAST offers trading of Stocks and ETFs in Singapore, Hong Kong and Malaysia by early 2021. Going forward, the group plans to expand to China via Shanghai/Shenzhen/Hong Kong Stock Connect. Stock Connect allows international and Mainland Chinese investors to trade securities in each other's markets through the trading and clearing facilities of their home exchange.

As at 12.52pm, shares in iFAST are trading flat at $2.25.

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