iFAST Corporation Limited (SGX: AIY), a financial technology company, reported a sterling set of results for the fiscal year 2020 last Friday.
The local fintech company operates a platform for the buying and selling of unit trusts, equities and bonds..
Amid a pandemic that has ravaged the world, the group rose to the occasion and posted an impressive set of numbers.
iFAST experienced an acceleration in the adoption of online trading platforms led to a surge in revenue and profits.
In response, iFAST’s share price has been on a tear.
After nearly tripling from a share price of S$1.03 to S$3.00 in 2019, the fintech firm’s share price has gone on to double again to around S$6.21 year to date.
The Smart Investor was invited to participate in the earnings briefing.
Here are five highlights from the group’s earnings briefing that investors should know.
Soaring net profit
For 2020, net revenue rose 31.7% year on year to S$85.9 million, driven by higher recurring and non-recurring revenue.
A combination of operating leverage and assistance from the government’s Jobs Support Scheme pushed operating profit up 130.6% year on year to S$25.8 million.
The strong performance extended to its net profit, which more than doubled from S$9.5 million in 2019 to S$21.2 million in 2020.
Meanwhile, the group’s balance sheet remains rock-solid with S$53.3 million in cash and investments and no debt.
Operating cash flow more than doubled from S$19.4 million in 2019 to S$41.6 million last year, while capital expenditure inched up slightly to S$12.2 million.
iFAST, therefore, generated free cash flow of S$29.4 million for 2020, a sharp improvement from the S$7.3 million in 2019.
Record-high inflows and AUA
The group recorded a record net inflow of client assets of S$3.2 billion last year.
This strong inflow pushed iFAST’s assets under administration (AUA) to a record high of S$14.45 billion as of 31 December 2020, up 44.5% year on year.
In the fourth quarter alone, net inflows more than tripled from S$268 million to S$847 million.
The level of subscription into funds, equities and ETFs also ballooned to S$11.1 billion in 2020, a steep jump from the S$4.3 billion in 2019.
Snagging the eMPF project
The group failed to clinch a Singapore wholesale digital bank licence in December last year but it made up for it by announcing a successful tender in Hong Kong.
The contract is for the design, build and operation of an electronic platform for the Mandatory Provident Fund run by the Hong Kong government.
iFAST had participated in the tender for this project as the main subcontractor alongside PCCW Solutions Limited, a unit of PCCW Limited (SEHK: 0008).
On the earnings call, CEO Lim Chung Chun could not share further details of this contract as it was still being finalised.
What he did disclose was that the contract will run for seven years starting from 2023 and will have a “material impact” for the group.
He added that iFAST will share more details with investors when information becomes available.
Clear catalysts
Two other catalysts were mentioned on the earnings call.
One is the impending launch of Malaysian stock trading in the next few months.
Currently, customers on iFAST’s FSMOne platform can only trade in Singapore, Hong Kong and US stocks.
By adding Malaysian stocks to the mix, iFAST should see further improvements to its AUA.
For China, the group had just obtained its private fund management licence back in September last year.
AUA traction has been healthy there and the group plans to double down on business development efforts.
Lim anticipates that AUA should see healthy growth in China this year, though profitability will remain elusive.
There may be better numbers in 2022 onwards as the flowthrough effect from higher AUA kicks in.
Higher dividends
Because of the strong financial performance, iFAST has upped its final dividend by 11.1% year on year from S$0.009 last year to S$0.01 this year.
For the full year, dividends stood at S$0.033, 4.,8% higher than the S$0.0315 declared in 2019.
Dividends have seen a steady rise from S$0.0279 in the fiscal year 2016 to the current S$0.033, demonstrating that the group is willing to reward investors with higher payouts as the business grows.
Moving forward, Lim remarked that dividends may be increased gradually for the rest of 2021 in line with the anticipated stronger performance.
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Disclaimer: Royston Yang owns shares in iFAST Corporation Limited.
