SINGAPORE (Nov 1): Maybank Kim Eng says investment products distribution platform iFast Corporation is likely to drive revenue growth through increased volume instead of improved margins.
This comes amid increased competition for iFast’s business-to-consumer (B2C) product offerings such as its online robo-advisory services and FSMOne platform.
“iFAST is positive that expansion of its B2C product offerings can drive growth,” says Maybank analyst Ng Li Hiang in a non-rated report on Wednesday.
However, Ng notes that iFast has acknowledged that competitors have responded by trying to match its fee charges for pre-funded accounts in Singapore.
“Its recent promotions, such as $10 flat rate for SGX stocks/ETFs trades have also attracted clients with large ticket sizes,” Ng says.
iFast last week reported a 21.5% increase in earnings to $2.3 million for 3Q17 ended September, on the back of a 24.9% rise in revenue to $26.2 million.
As at end September, the group’s assets under administration (AUA) grew 19.3% y-o-y to reach a new record of $7.16 billion.
See: iFAST reports 21.5% rise in 3Q earnings to $2.3 mil on higher revenue
“iFAST remains optimistic revenues will improve due to favourable market conditions and growth in AUA,” Ng says.
But the analyst cautions that iFast’s net revenue could be significantly affected if trailer fees, which makes up more than 60% of recurring net revenue, becomes regulated in the countries it has a presence in.
Meanwhile, Ng notes that iFast’s losses from China operations have widened to $3 million in the first nine months of FY17.
“Given the potential growth in both onshore and offshore markets, iFAST believes that further ramp-up and investments into China is necessary to scale up its operations,” Ng says.
To this end, Ng says the group's acquisition of a minority stake in Beijing Financial Alliance Technology (BFAT) in 3Q17 could help to bring in potential business-to-business (B2B) partners and improve sales.
As at 12.20pm, shares of iFast are trading flat at 97 cents.