CGS International analyst (CGSI) Andrea Choong is keeping her “add” call and target price of $9.50 unchanged on iFast Corporation, following its 3QFY2024 ended Sept results.
The analyst notes that the group’s profit after tax and minority interests (patmi) of $16.8 million was in-line with her forecast but 7% above Bloomberg consensus’ estimates, while the 9MFY2024 net profit formed 73% and 76% of her’s and Bloomberg’s FY2024 estimates respectively.
Similarly, 3QFY2024 net revenue rose 4% q-o-q, thanks to a 24% y-o-y assets under administration (AUA) growth and continued HK ePension contributions, which remained stable q-o-q.
“Losses from iFAST Global Bank in the UK halved to $0.8 million in 3QFY2024, on track to meet iFAST’s breakeven target in 4QFY2024. Losses in China narrowed slightly to $1.4 million in 3QFY2024,” writes Choong.
For the period, the group declared an interim dividend per share (DPS) of 1.55 cents, to which the analyst writes: “We expect around 6.2 cents DPS in FY2024F, an around 28% dividend payout ratio, which implies about 1.9 cents in 4QFY2024.”
Meanwhile, iFAST announced the launch of its occupational retirement schemes (ORSO) platform project.
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The group has guided for ORSO to contribute AUAs comparable to its current AUA in Hong Kong come 1QFY2025. Despite the expected positive profit contributions from ORSO however, iFAST has reiterated its FY2025 targets for its Hong Kong business, implying that its profit before tax (PBT) target of over HK$500 million ($85.3 million) in FY2025 will include ORSO contributions.
“Given limited disclosure on potential fees per AUA for this project, we make no changes to FY2025 to FY2026 net profit estimates at this juncture,” notes Choong.
The analyst adds that although ORSO AUA in Hong Kong came up to an estimated HK$294 billion in Sept, the ramp-up of new business could take time given the scheme is not a government-driven project.
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The onboarding phase of iFast’s ePension project is also progressing as planned, with quarterly contributions guided to stay stable until a more substantial pick-up in 2HFY2025.
Meanwhile, the group’s Global Bank’s (iGB) deposits rose 25% q-o-q to $806 million in 3QFY2024. On this, Choong writes: “Management expects a positive profit trend going forward in FY2025, but we are less sanguine given its conservative balance sheet strategy of largely deploying deposits with the Bank of England and investment-grade bonds.”
Overall, the CGSI analyst is awaiting more significant ePension earnings to come through.
She adds: “iFAST guides for an around 25% to 30% dividend payout ratio in the medium-term to balance capital needs for iGB and shareholder returns.”
Re-rating catalysts noted by her include swifter onboarding of the ePension project and stronger-than-expected securities trading volumes on the back of heightened market volatility, while downside risks include delayed implementation of the project and difficulties due to labour shortage.
As at 12.25 pm, shares in iFast are trading 6 cents higher or 0.80% up at $7.53.
