Shares of iFAST Corporation Limited (SGX: AIY) are up over 166% year to date.
The financial technology (fintech) company has witnessed a surge in account openings and fund inflows in the last 18 months as more people head online due to the pandemic.
In the process, the group’s assets under administration (AUA) also scaled record highs, ending the third quarter of the fiscal year 2021 (3Q2021) at S$18.38 billion.
In line with higher inflows and increased AUA, iFAST also reported a strong set of financial numbers, with net profit for the first nine months of 2021 (9M2021) surging by 63.6% year on year to S$23.4 million.
There is much to look forward to for the fintech company.
The company’s Hong Kong division is also set to receive a massive boost in profits from winning the Hong Kong electronic Mandatory Provident Fund (eMPF) contract.
Not content to rest on its laurels, iFAST has also announced a five-year plan with four strategic initiatives to take its business to the next level.
Here are five aspects you should know about the plan and its implications.
1. Bigger and better
iFAST is continually upgrading its platform to serve its clients better.
By having “bigger and better” as one of its objectives, the group hopes to continue to scale up its offerings and increase the quality of its services.
Back in 2018, the group had set its sights on a 10-year group AUA target of S$100 billion.
Based on the current AUA, the target implies a compound annual growth rate (CAGR) of around 27%.
As a comparison, iFAST’s AUA grew at a three-year CAGR of 24% from S$7.58 billion at the end of 2017 to S$14.45 billion at the end of last year.
With accelerated digital adoption due to the pandemic, there’s a fair chance the group can attain its AUA growth target if it continues to invest in strengthening both its platform and ecosystem.
2. Fast-track growth at its Hong Kong division
iFAST pulled off an unexpected coup by clinching the eMPF contract in Hong Kong along with PCCW Ltd (SEHK: 0008).
The local fintech recently set up a new ePension division that will involve the operation and administration services for the MPF scheme and the Occupation Retirement Scheme Ordinance (ORSO) scheme.
Because of this contract, iFAST’s Hong Kong division is set to see substantial growth.
For 9M2021, Hong Kong contributed a little over one-fifth of profit before tax.
The group has provided estimates for the contributions from the division that may potentially increase net profit by seven-fold by 2025.
This news implies that Hong Kong may become the key contributor to group profit in the years to come.
It has emphasized, however, that the ePension division will not add to the group’s AUA (because the funds are parked under the Hong Kong government rather than with iFAST).
Instead, the group will be providing a service to the government and earning a recurring fee.
3. Pursuing more licences
Being a fintech company means that iFAST needs to be nimble and innovate to gain a technological edge.
Apart from relying on its platform to do so, the group believes that it has to snag the right suite of licences to enable it to have a foot in the door when it comes to running a successful and efficient operation.
Armed with a track record of running a profitable business model, these licences can help it to achieve more user stickiness and credibility.
The aim is for iFAST to pursue financial licences in different countries while also making strategic investments to bolster its fintech capabilities.
Two examples were provided to illustrate how iFAST intends to achieve this goal.
The first is the pursuit of digital banking licences as banks are usually the biggest distributors of wealth management products.
Getting a banking licence will open doors for the group to offer wealth management products, thereby increasing its value proposition to clients.
Another is the development of a marketplace for bond trading.
Currently, there is no organised exchange for the trading of bonds, while companies such as MarketAxess (NASDAQ: MKTX) do offer bonds trading but only for institutional clients.
iFAST aims to eventually set up a bonds marketplace for individual investors and to do so, it would have to get a “recognised market operator” licence that it is currently applying for.
4. A global business model
Finally, iFAST aims to harness the power of the internet to develop a global business model that can not just scale easily, but also be competitive globally.
The Singaporean-born fintech sees opportunities in emerging markets where individuals may not have access to wealth management products yet.
By targeting to achieve global scale, iFAST can then provide seamless access to a wide variety of investment options for such individuals.
An example provided by CEO Lim Chun Chung is Netflix (NASDAQ: NFLX). Although the streaming TV company is headquartered in the US, its content is available worldwide and its customers are also global.
Broadening its product portfolio and targeting the world as its potential client base means that the group will have the potential to bring in significant amounts of AUA from different sources.
5. An ambitious plan
You can’t fault iFAST for dreaming big.
With the positive developments that have occurred in the past two to three years, management is now more aware than ever of how it should go about achieving higher levels of success.
Lim sees massive potential in the fintech space for iFAST to continue its breakneck growth.
Formalising its five-year plan will help the group to stay focused and take it one step closer to achieving its ambition of being a global company with a scalable business model.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.