■ Launching an investment funds platform in China by end-1Q16
■ 80% of net revenue from recurring sources
■ Innovating through new products and services
On 19 October 2015, iFAST, an internet-based investment products distribution platform, obtained regulatory approval to launch an investment funds platform in China, targeted to roll out by end-1Q16. We met management to understand its expansion plans following its IPO in December 2014.
It intends to work with different industry players to construct a platform to meet the wealth management needs of Chinese investors, in both onshore and offshore investment products. As of 30 September 2015, iFAST had assets under administration of SGD5.4b in Singapore (72.8%), Hong Kong (23%) and Malaysia (4.2%).
In June 2015, iFAST proposed an acquisition of Winfield Securities for HKD14.7m. This would enable iFAST to conduct securities brokerage services in Hong Kong and expand the range of investment products available on its platform. If the proposed purchase goes through, iFAST would have about SGD24m remaining from its IPO proceeds earmarked for M&A purposes. Management did not divulge any potential candidates within its existing markets or surrounding countries in the region.
iFAST caters to the needs of >150 financial advisory companies, financial institutions and banks. Its value proposition is simple: cheaper, faster and predictable. New clients are able to tap onto iFAST’s existing IT infrastructure and range of products available quickly when entering into one of the company’s markets. Management estimates that it has about 55% of the market share in mutual funds distribution in Singapore.
iFAST lists out its fees in a transparent manner, allowing clients to operate with a certain degree of certainty on future expenses.
These recurring fees (80.4% of 2014 net revenue) comprise:
1) trailer fees,
2) wrap fees and
3) platform fees, typically ranging from 0.1-0.9% of average assets under administration.
Non-recurring revenue (19.6% of 2014 net revenue) includes upfront commission or processing fees and advertising fees.
Apart from geographical expansion, iFAST is looking to roll out new products as well. In 2015, iFAST launched its online bonds and ETFs business in Singapore as well as online Discretionary Portfolio Management Services in Hong Kong.
One of the key risks facing iFAST is regulations. In January 2015, the Hong Kong government suspended the Capital Entrant Investment Scheme, leading to a reduction in subscription volume. As a result, 3Q15 net revenue and PATMI from Hong Kong fell by 16.1% and 58.8% YoY to SGD2.3m and SGD0.3m.
iFAST is trading at a 2016E PER of 24.6x and dividend yield of 2.6% based on the Bloomberg consensus. (Read Report)
Source : Daiwa Capital Markets