iFAST Corporation Limited is living up to its name with big, rapid moves, say CGS-CIMB analysts. The Singapore-listed financial services company has been making headlines for its collaborations with top-tier digital players in bidding for high-profile government contracts and licenses, entrenching its franchise value in the region, say CGS-CIMB analysts Andrea Choong and Caleb Pang in an August 28 note.
“iFAST’s share price has risen approximately 24% since the announcement of being shortlisted as 1 of 2 reported consortium finalists to digitise and centralise Hong Kong’s (HK) pension system (e-MPF) in Aug 20,” note Choong and Pang. The PCCW-led consortium (includes iFAST and possibly several other parties) is vying with Ping An Insurance’s OneConnect for the project.
See: iFAST triggers SGX query on share prices surge over 11%
The HK government is committing HK$3.4 billion (S$0.60 billion) in public funding for e-MPF development, and its operator will receive fees based on the system’s total MPF assets (approximately S$177 billion).
Bloomberg reports that the current bids are approximately 20-35 basis points (bp) in fees, or approximately $353 million to $600 million in revenue per year.
“Shareholding details have not been disclosed, but we think it is reasonable to consider iFAST would hold a 10-30% stake in the consortium in our scenario analysis. Using the mid-range point of approximately 28bp in fees, a successful bid could add approximately $4 million to $11 million in yearly net profit to iFAST, increasing EPS [earnings per share] by 1-4 Singapore cents,” note Choong and Pang.
Also on August 20, iFAST obtained approval-in-principle from Malaysia’s Securities Commission to commence stockbroking operations in early-2021. The company already has stockbroking businesses in Singapore and Hong Kong.
Although stockbroking has not traditionally been a key growth driver for iFAST, given lower margins and stiff competition in this space, Choong and Pang think a six- to nine-month period should be expected prior to meaningful earnings contribution, but elevated trading volumes across the region (due to extended work-from-home initiatives) should offset this.
Citing incremental stockbroking revenue growth from sustained trading volumes and the scaling up of Malaysia operations, as well as the extension of government jobs support aid in FY2020-2021F, Choong and Pang have downgraded iFAST to “hold” from “add” with a raised target price of $2.44.
“Market exuberance has substantially priced in the potential win of the e-MPF bid in Hong Kong and the digital wholesale banking (DWB) licence in Singapore; the projected announcement timeline for both prospects are by end-2020,” note the analysts.
iFAST Corp reported record quarterly earnings for 2Q2020, as it collected higher recurring fees from a bigger pool of assets under administration. For the three months to June 30, 2020, iFAST reported net earnings of $4.53 million, up 84.7% y-o-y. Revenue in the same period was $38.6 million, up 25.8% y-o-y.
Last month, iFAST Corporation prompted a query from the Singapore Exchange Regulation (SGX RegCo) following an 11.28% surge in its share price to $2.17 as at 10.35am, from its opening price of $1.95 on Aug 7.
As at 11.42am, shares in iFAST are trading at 1 cent lower, or 0.44% down, at $2.29.