iFast Corporation’s earnings for 2QFY2024 ended June 30 beat CGS International’s expectations with stronger Singapore inflows and trading volumes, coupled with a narrower loss from its UK digital banking operations.
The wealth management platform operator posted 2QFY2024 patmi of $16 million, up 11% q-o-q and a staggering 346% y-o-y from just $3.6 million in 2QFY2023. This is 15% above CGS International (CGSI) analyst Andrea Choong’s forecast and 11% above Bloomberg consensus.
iFast’s 2QFY2024 net profit formed 54% of Choong’s FY2024 estimates.
The group declared an interim 1.5 cent dividend per share (DPS) for the quarter, up from 1.1 cents this time last year. Last quarter, iFast declared a first interim dividend of 1.3 cents per share, up from 1 cent in 1QFY2023.
In light of rising DPS, Choong has raised her DPS forecast to 6.2 cents in FY2024, up from 5.4 cents previously, “on the back of its stronger and more consistent earnings profile”.
In a July 26 note, Choong keeps her “add” call on iFast with a higher target price of $9.50 from $9.10 previously. The target price represents an upside of 26.7% as at Choong’s report and an upside of 28.0% as at iFast’s last close price of $7.43 on July 29.
See also: iFast's net profit in 2QFY2024 surges 346.1%
Hong Kong ‘stable’
Contributions from iFast’s Hong Kong business, touted as a major driver, was stable q-o-q, notes Choong. There, iFast is one of the builders of the mandatory ePension platform project.
The Mandatory Provident Fund Authority (MPFA) announced on June 26 that the onboarding of trustees is on track and has commenced with two trustees: YF Life and China Life.
See also: Three catalysts spur higher target prices for iFast after FY2023 results
According to iFast’s management, the ramp-up in revenue recognition from the ePension project may pick up only towards 4QFY2024, and then even more significantly only in FY2025, which could also include contributions from the commencement of its occupational retirement schemes (ORSO) platform project.
With ePension contributions trickling in steadily, Choong has raised her assumptions on contributions from Hong Kong until FY2026 “to account for management’s conservatism on this segment”. “Notably, the two trustees onboarded accounted for only 1% of total MPF NAV as at end-June. There are another 10 trustees to be onboarded over 4QFY2024 to 4QFY2025.”
Swifter onboarding is a re-rating catalyst, writes Choong, while implementation delays of the project are a downside risk.
Losses narrow in UK
Over in the UK, iFast Global Bank’s customer deposits rose to $646 million in 2QFY2024, up 25% q-o-q. Choong notes that the digital bank had ended 2023 with just $359 million in customer deposits.
In 2QFY2024, the bank’s losses narrowed to $1.6 million, improving from a $2.3 million loss logged in the first quarter, on the back of stronger pickup in its EzRemit business.
“iFast reiterates its target of breaking even in 4QFY2024. In June, iFast increased its stake in iFast Global Bank from 91.3% to 93.1%. The total consideration for this 1.8% stake was GBP15 million ($25.91 million). While iFast aims to eventually offer lending products, management said balance sheet strength remains a key priority,” says Choong.
As at 10.41am, shares in iFast are trading 2 cents higher, or 0.27% up, at $7.45.
