The new digital platform of ORSO ePension Services, a Hong Kong pension scheme, has been launched. CGS-CIMB's Andrea Choong, for now, has kept her "reduce" call on iFast Corp, a key vendor of the platform.
Via this platform, previous manual and paper-based workflow and transactions are now digitalised.
iFast had previously guided that this ORSO ePension Services will make "material" positive contributions to both its revenue and earnings starting from 1QFY2025.
However, the company has yet to share more concrete details on the costs and fee structure.
According to Choong, the fees to be earned by iFast is based on the asset size of the ORSO schemes, which was around HK$344 billion ($59 billion) as at end of March.
"We understand that iFast will now be approaching ORSO scheme partners and trustees to sign them up for this digital solution.
"In our view, its value proposition will be to reduce the overall costs of operating ORSO, and offer seamless backend operation services to its business partners," she adds.
Choong warns that the extent of what iFast can make will "greatly depend" on who can be attracted to use the platform, as this scheme is not government mandated and therefore may take some time to ramp up.
"Details on expressions of interest from these participants are not disclosed at this stage," she adds.
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For now, with an estimate of 1 basis point that can be earned from the AUM of HK$344 billion, that translates into a revenue of $5.8 million that iFast can generate.
Assuming 10 basis points per AUM, Choon estimates an additional net profit of $7.6 million for the company's FY2025 earnings.
For now, pending further clarity, Choong expects neutral to positive share price movement on the back of this news as management has previously communicated its plans to initiate this project.
iFast is slated to report its first-half FY2023 results by end of July.
Choong's target price of $3.50, which has been maintained, is based on her discounted cash flow projections.
"Stronger-than-expected securities trading volumes on the back of heightened market volatility is a key potential re-rating catalyst," says Choong.
"Integration challenges delaying the commencement of both its eMPF and ORSO ePension Services projects are downside risks," she adds.
