Analysts are charmed by iFast Corporation’s results for FY2023 ended Dec 31, 2023, raising their target prices by as much as 54% on long-term growth assumptions.
UBS Global Research analysts Aakash Rawat and Benjamin Tan, for one, further increased their target price to $10.50 in a Feb 22 note while maintaining “buy” on iFast, up from $10 in November 2023 and $6.50 prior.
Analysts from other broking houses are more measured in staying “hold” on the Mainboard-listed company, but CGS International Research analyst Andrea Choong is perhaps the next-most bullish.
In a Feb 23 note, Choong raised her target price to $9.10 from $5.90 previously, citing “possible project delays” and “‘q-o-q earnings volatility”.
On Feb 22, iFast reported 917% y-o-y higher net profit for the 4QFY2023 and a 340% y-o-y increase in its full-year net profit at $28.27 million. This is a reversal from the same period a year ago, when iFast reported an 82% y-o-y drop in net profit to $1.3 million for the 4QFY2022.
A key update from its 4QFY2023 earnings was that iFast cut its FY2024-FY2025 revenue and net revenue guidance for its Hong Kong business, but maintained its corresponding pretax profit estimates.
See also: UBS raises iFast target price even further to $10.50 after 'strong' FY2023 results
In addition to its wealth management platform business there, iFast is one of the builders of the Hong Kong mandatory ePension platform project.
According to management, the revision was due to a delay in the onboarding process for ePension trustees, resulting in delayed recognition of both revenue and opex. Management also cited softer Hong Kong platform business earnings due to persistently challenging market conditions.
This delay would likely result in a further step-up of ePension revenues in FY2026 before it reaches a steady state, says Choong.
iFast’s FY2023 earnings per share (EPS) grew 335.9% y-o-y to 9.59 cents, from 3.97 cents previously.
Choong sees core EPS at 19 cents for FY2024, 33 cents for FY2025 and 35 cents for FY2026.
‘Above expectations’
Meanwhile, iFast’s “hypergrowth” in earnings beat UOB Kay Hian Research analysts Heidi Mo and John Cheong’s full-year forecasts by 18%.
In a Feb 23 note, the UOBKH analysts are keeping “hold” on iFast with a higher target price of $8.56, up from $6.56 previously.
That said, Mo and Cheong are lowering their FY2024-2025 revenue forecasts by 19%, after factoring in management’s lowered revenue guidance for the Hong Kong market and the “strong growth” in iFast’s core wealth management platform.
The analysts also trim their FY2024-FY2025 earnings estimates by 2% and 1% to $49 million and $82 million respectively, after factoring in higher-than-expected profit before tax margins from the Hong Kong market.
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iFast’s UK bank, which it acquired in 2QFY2022, is expected to incur a smaller loss in 2024.
iFast Global Bank (iGB) incurred a $2.6 million loss in 4QFY2023, widening 23.8% q-o-q and 34.1% y-o-y. Management attributes this to higher operating expenses from new Digital Personal Banking (DPB) services and the development of Digital Transaction Banking (DTB) services.
“Management continues to effectively market its DPB services to retail customers, evidenced by its customer deposit amounts growing 53.4% q-o-q and 257.9% y-o-y to $358.6 million as at Dec 31, 2023,” write Mo and Cheong. “This has contributed to higher net interest income, and management expects this to lead to profitability by 4QFY2024.”
‘Margins trending higher’
Finally, DBS Group Research analyst Ling Lee Keng is maintaining “hold” with a higher target price of $8.33, up from $6.95 previously.
In a Feb 22 note, Ling raises her earnings forecast by 15% and 2% for FY2024 and FY2025, mainly on higher margin assumptions. This is despite the 5%-6% cut in overall total revenue on the back of the lower guidance for the Hong Kong business.
Ling’s net margin assumption rises 16.1% and 19.5% for FY2024 and FY2025 respectively, from 13.3% and 18.0% previously.
For context, 4QFY2023 net margin improved to 17.0% from 13.7%, with increasing contributions from the Hong Kong ePension project.
However, operating expenses could remain high as the group continues to build its ePension projects (eMPF and ORSO) in Hong Kong, says Ling, while the UK bank is only expected to breakeven in 4QFY2024.
