SINGAPORE (April 28): RHB is upgrading iFAST to “buy” after starting 1Q17 with a blast as assets under administration (AUA) reached a record high. And although the share price has declined rapidly, RHB expects the stock to bottom out as 1Q results point to a better FY17F.
iFAST this morning reported NPAT for 1Q17 rose 61% although this would have more than doubled to $2.95 million, if not for its China operations, which are in their startup phase.
(See also: iFAST says 1Q earnings nearly double to $2 mil on record assets under administration)
AUA also reached a record high of a total of $6.46 billion, with all three core markets of the group hitting record-high AUA, following the bullish market sentiment.
In a Friday report, analyst Jarick Seet believes the worst may be over for iFAST if such market conditions can continue.
Over the last two years, iFAST has been busy broadening the range of products and services as an investment platform but the full benefits from these efforts would likely be realised in the coming years.
China operations would likely continue to incur more expenses, after widening its losses to $0.94 million in 1Q17, as it remains in the early stages of building the iFAST brand among potential clients and investment practitioners in the country’s wealth management industry.
As at March 31, the China business has signed up over 55 fund houses, with over 2,100 funds on its platform.
However, Seet does not expect its China operations to be profitable in 2017 and would likely continue to incur more expenses as they ramp up.
The China business is likely to continue to tie up with more funds, as well as have more in-house advisory training. Due to smaller margins, the management estimates that AUA need to be more than $1 billion in order to break even.
Looking ahead, Seet expects losses in its China operations to continue to drag down profitability despite new investment product categories faring relatively well.
“We think iFAST’s share price decline of over 60% from its peak may have bottomed, with a more positive outlook ahead,” says Seet, “As such, we lift our call to ‘buy’ and upgrade FY17F earnings by 14%, which increases our DCF-backed target price to 88 cents.”
Shares of iFAST are up 12 cents at 72 cents.
