Last Friday, iFAST Corporation Limited (SGX: AIY) released its third-quarter 2020 earnings report.
There is good reason to pop the champagne as the financial technology (fintech) company reported a stellar set of numbers.
To recap, iFAST is a wealth management fintech platform that allows its clients to buy and sell a variety of financial securities such as unit trusts, bonds and equities.
The group was incorporated in 2000 and as at end-September 2020, offers access to 11,000 investment products. It operates in five countries: Singapore, Malaysia, Hong Kong, China and India.
Here are five things you should know about iFAST’s latest record quarter.
Operating leverage
For the third quarter, iFAST reported a 35.7% year on year jump in net revenue.
Meanwhile, operating profit soared 164% year on year from S$2.8 million a year ago to S$7.4 million in the reporting quarter.
Net profit attributable to shareholders more than doubled from S$2.5 million to S$6.2 million.
The sharp rise in net profit compared to net revenue shows a strong operating leverage within iFAST’s business.
As revenue increases, expenses have risen at a slower pace, thus allowing more profit to flow down to the bottom line.
Net profit margin rose from 14.6% in the third quarter of 2019 to 27% in the current quarter.
Record AUA, again
The group reported yet another new record high for its assets under administration (AUA) of S$12.59 billion as of 30 September 2020.
A record-high net inflow of client assets of S$1.07 billion during the quarter contributed to this strong showing.
Recall that it was just two quarters ago when iFAST reported that its AUA had declined to S$9.54 billion due to the volatility in global financial markets.
In this context, it has been a sharp turnaround for the business as the pandemic had accelerated digitalisation trends and led to higher inflows in the last six months.
A higher proportion of stocks
Unit trusts have traditionally been iFAST’s strong suit.
After all, the group started out offering unit trusts on its FundSuperMart platform long before it began offering equities as an additional option for investors.
If we look at the AUA breakdown by products a year ago, unit trusts took up 83% of the group’s total AUA, with stocks and exchange-traded funds (ETFs) occupying just 5.5% of the total.
For the latest quarter, though, the unit trust proportion has fallen to 76.6%, while the stocks and ETFs portion has doubled to 11.1%.
This rise in the proportion of stocks underscores the influx of investors opening new accounts with iFAST’s FSMOne, as many are taking advantage of attractive valuations to invest their money.
An increase in the interim dividend
iFAST has been keeping its annual dividends constant over the last two years.
The group has been paying out a quarterly dividend of S$0.0075 for each of the first three quarters, and a S$0.009 dividend for the final quarter.
For the full year, these dividends add up to S$0.0315.
For the current quarter, iFAST has raised its interim dividend from S$0.0075 to S$0.008, up 6.7%.
With the sharp rise in net profit, the group could have declared a higher dividend.
However, management stressed the need to retain sufficient capital for expansion in case it snagged the digital wholesale bank licence in Singapore.
Hong Kong eMPF platform project
Back in August, several media outlets had reported that iFAST is working with Hong Kong’s PCCW Ltd (SEHK: 0008) to modernise and digitise Hong Kong’s Mandatory Provident Fund (MPF) platform.
This eMPF project is expected to be very lucrative for the winning bidder as it comprises a two-year implementation period and seven-year operation cum maintenance period.
Assuming iFAST wins the contract, it will receive a cut of the revenues generated for the eMPF system, though this amount has not been formally quantified.
However, the group itself has not officially confirmed whether it has submitted a bid, or not.
Get Smart: Expansion in Malaysia and China
On an earnings call for analysts, CEO Lim Chung Chun said that iFAST plans to launch new products and services in Malaysia and China by early 2021.
These initiatives should build on the AUA growth momentum that the group is enjoying, enabling it to further grow its client base and recurring revenue.
iFAST plans to launch stock dealing services for Bursa Malaysia securities by early 2021 after receiving in-principle approval from the Securities Commission Malaysia in August.
For China, the group’s Chinese arm has been approved as a private fund manager in September and is looking to launch in early 2021 too.
This approval will expand its range of services on its platform and hopefully garner it more AUA and revenue.
These are exciting times for the group.
Even as its AUA and net profit hit new record-highs, with its plans for further growth, perhaps the best is yet to come.
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Disclaimer: Royston Yang owns shares in iFAST Corporation Limited.
