Many companies are riding on the coattails of digitalisation to grow their business.
iFAST Corporation Limited (SGX: AIY) is no exception.
The fintech firm recently reported its fiscal full-year 2021 (FY2021) earnings and presented a sparkling set of numbers.
The group saw net inflows of S$3.74 billion, up from the previous year’s S$3.16 billion, as more people opened accounts and parked money with them for investments.
As a result, iFAST saw its assets under administration (AUA) climb by 31.5% year on year to a record high of S$19 billion.
Here are five other highlights from the group’s earnings that investors can take note of.
1. Good financial numbers all around
For FY2021, the group reported a 31.9% year on year increase in net revenue to S$113.2 million.
iFAST’s operating profit increased by close to 40% year on year to S$36 million.
Net profit jumped by 44.8% year on year to S$30.6 million.
The group’s profit before tax (PBT) margin has steadily risen over the years, helped by operating leverage within the business.
In FY2017, the PBT margin was just 17.7% but has since increased to 31.6% for FY2021.
Operating cash flow was also healthy at S$46.5 million, up from S$41.6 million a year ago. Free cash flow for FY2021 stood at S$27 million.
2. Hong Kong contribution to kick in
iFAST’s Hong Kong division saw its net revenue increase by 27% year on year to S$24.4 million for FY2021.
However, the division’s bond AUA fell in the fourth quarter of 2021 (4Q2021) on investor concerns over defaults in Chinese property bonds. The group also saw a 38% year on year decline in bond turnover.
Despite this, the AUA of the Hong Kong division saw a 7.7% year on year increase to S$2.86 billion.
iFAST expects that its ePension division, as part of its Hong Kong division, will see profits grow substantially in the next four years, particularly from 2023 onwards.
This ePension division will not add to its AUA numbers but will, instead, contribute a stream of recurring service fees for the group.
The group’s guidance of net revenue of more than HK$800 million in 2024, along with a 15% PBT margin, provides for a conservative estimate of a six-month delay in the implementation of the project.
This guidance will be revisited later in the year.
3. An upcoming boost from India
iFAST’s India division is accounted for as an associate as the group holds an effective 39.35% in it.
The AUA of the division has seen healthy growth too, increasing by 19.5% year on year to around S$594 million.
Mutual fund distributors are searching for a full-service platform to grow their business and iFAST is eager to onboard them as B2B (business to business) clients.
The division is also enjoying new revenue streams in FY2021 including equities admin fees and service fees for its IG markets (wealth advisory) sub-division.
With fees expected to be charged on direct portfolio management services, iFAST should see such fees contributing to its India operation’s revenue by the second quarter of this year.
4. Digital bank ambitions
Last month, iFAST splashed out S$73 million to purchase an 85% stake in a UK digital bank, BFC Bank.
It plans to develop services adjacent to wealth management, and acquiring a digital bank with a valid licence will allow consumers and investors to manage payment flows across borders while enjoying attractive deposit rates in different currencies.
iFAST believes that banks act as the “foundation” layer within the financial industry and that having access to this layer will allow the group to innovate and grow at a faster clip.
The acquisition will, however, incur start-up losses to the tune of S$4 million for this year, and that iFAST targets for BFC Bank to be profitable by 2024.
5. Higher dividends
In line with the jump in net profit, the group has also declared a final dividend of S$0.014, up 40% year on year from the prior year’s S$0.01.
With this declaration, iFAST’s FY2021 dividend per share stands at S$0.048, 45.5% higher than the S$0.033 paid out in FY2020.
Get Smart: Advancing on its five-year plan
iFAST intends to continue to advance on its five-year plan that it announced during its last quarter’s earnings.
Investors should be patient, though, as such initiatives will take time to come to fruition.
Meanwhile, iFAST will focus on growing its AUA and net revenue slowly and steadily.
Investors should also look forward to possibly higher dividends for FY2022 as the business improves over time.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.
