What a difference a year makes.
For the first quarter of 2021 (1Q2021), stock markets were ebullient.
Back then, financial technology (fintech) company iFAST Corporation Limited (SGX: AIY) saw its net profit surge 142.5% year on year to S$8.8 million.
The firm’s assets under administration (AUA) also hit a record high of S$16.11 billion, up nearly 69% year on year.
Fast forward to today, and iFAST has reported that global stock market conditions have turned “very poor” for 1Q2022.
The effects have been stark.
The group announced a 35% year on year fall in net profit to S$5.7 million while AUA saw a 2% decline to S$18.63 billion, dipping from last quarter’s record-high of S$19 million.
Here are five other highlights from the fintech company’s latest earnings.
A weaker set of financials
iFAST’s revenue for 1Q2022 fell 5.1% year on year to S$52.5 million, while net revenue after fees and commissions to financial advisers dipped by 1.2% year on year to S$28.2 million.
Though this decline was gentle, staff costs and other operating expenses saw a 6.5% and 18.9% year on year increase, respectively.
Operating profit thus came in 29% lower year on year at S$7.3 million while net profit fell by 34.9% year on year to S$5.7 million.
It’s noteworthy that iFAST’s net profit is still higher than 1Q2020’s level of S$3.6 million, demonstrating the resilience of its business model as it scales up its platform capabilities and enjoys healthy fund inflows.
Higher clarity on for Hong Kong eMPF
The group has also provided more clarity on the expected contributions from its Hong Kong division.
Recall that this division had snagged the electronic Mandatory Provident Fund (eMPF) contract and will work alongside PCCW Limited (HKSE: 0008) as its main contractor.
In October last year, iFAST provided early projections for the net revenue and profit before tax (PBT) margins for both 2024 and 2025.
These numbers have been updated to include 2023’s contributions as well.
The new targets for net revenue are — more than HKD 280 million in 2023, HKD 900 million in 2024 and 1.3 billion in 2025.
Along with the new forecast, its PBT targets for these three years have been updated to over HKD 100 million, 250 million, and 500 million, respectively.
Using an SGD:HKD exchange rate of 5.72 and a corporate tax rate of 16.5%, this means the Hong Kong division’s net profit contribution will be around S$14.6 million, S$36.5 million, and S$73 million for the years 2023, 2024, and 2025.
As a comparison, Hong Kong contributed S$8.4 million in net profit for FY2021 and S$2.2 million for 1Q2022.
Global bank ambitions
iFAST has added its recently-acquired UK-based BFC Bank to its fintech ecosystem.
The group intends to tap into this digital bank to allow consumers and investors to manage payment flows seamlessly while enjoying attractive deposit rates.
Management believes that this is the future of wealth management and a fully-licensed digital bank domiciled in the UK can help the group achieve its global banking ambition.
BFC Bank has been renamed iFAST Global Bank and will contribute start-up losses of around S$4 million for 2022.
iFAST hopes to achieve profitability for the bank by 2024.
Progress in Singapore and Malaysia
Despite the tough conditions, the group reported continued business progress in its key markets of Singapore and Malaysia.
In Singapore, the number of business-to-business (B2B) partners increased 13% year on year due to continued platform enhancements and product and services upgrades.
With these collaborations, the division is well-poised to deliver stronger results when market sentiment strengthens again.
The AUA for Malaysia surged 31.4% year on year to hit a record high of S$1.97 billion as of 31 March 2022.
With the launch of stockbroking services on its FSMOne.com platform last year, the division saw more clients placing money in their cash accounts for stock trading.
Looking ahead, iFAST Malaysia will offer investors access to more stock exchanges and roll out more initiatives for ETF investments.
The division also plans to launch an Islamic cash account for investors to park their funds.
An unchanged interim dividend
iFAST has declared an interim dividend of S$0.01 per share, unchanged from a year ago.
The trailing 12-month dividend stands at S$0.048, giving the group’s shares a trailing dividend yield of 0.8%.
Get Smart: Fortune is tied to the stock markets
Investors need to realise that iFAST’s fortunes are tied closely to the performance of stock markets.
The group has reiterated that financial market volatility may cause short-term interruptions to its growth path.
The remainder of 2022 may see further declines in profitability as expenses ramp up and losses from iFAST Global Bank kick in.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.