We believe iFAST offers investors a
unique investment proposition as a direct proxy to the wealth
management industry as well as an angle into digital finance.
iFAST’s key performance driver lies in the growth of Assets
Under Administration (AUA), which generates recurring
revenues. We expect iFAST to grow at a faster rate than the
wealth management industry which is expected to accelerate,
given the growing demand for overall wealth management
products in the region. We have imputed 20% growth in AUA
for FY15-17F to result in 3-year earnings CAGR of 31%. Our
AUA assumptions exclude M&As and its recent Bondsupermart
New business initiatives to drive growth
approval on 30 Apr 2015 from MAS to distribute bonds and
ETFs in Singapore, which will allow iFAST to broaden the range
of investment products that it can distribute. We believe this
initiative would gradually improve iFAST’s AUA over time.
Subject to regulatory approvals, iFAST is planning to launch an
Online Discretionary Portfolio Management (Online DPMS)
service, starting with Hong Kong, which would cater to DIY (doit-
yourselves) investors who want additional help with asset
allocation and automated rebalancing.
M&A is a wildcard
A wildcard to iFAST’s growth would be
M&As. In addition, the successful execution of its operations in
China would also support growth. Note that iFAST has
earmarked about 70% of its IPO proceeds for M&A and
expansion into the Chinese market.
We use the Dividend Discount Model (DDM) as the valuation
methodology for iFAST, given that it is a cash-led business,
supplemented by a relatively high dividend payout. We arrive at
our TP of S$1.73 (Prev S$1.60), after imputing a higher terminal
growth rate of 4%, up from 2%, given its superior growth vs
peers. iFAST currently trades at a cheaper 0.8x FY16F PE to
growth ratio, compared to 3.6x for its overseas peers. New
initiatives like the distribute of bonds and ETFs in Singapore
should also boost growth in the longer term.
Key Risks to Our View:
Highly regulated industry.
The securities and financial services
industry is highly regulated and iFAST is subject to a variety of
laws and regulations across the regions it operates in. Security
breaches is also a risk that could result in adverse publicity and
damage to reputation. (Read Report)
Source : DBS Group Research
Labels: Finance Sector, iFast Corporation Ltd