It hasn’t been an easy year for investors of iFAST Corporation Limited (SGX: AIY).
The fintech group was soaring high last year as digitalisation brought in fund inflows of well over S$3.7 billion that boosted its assets under administration (AUA).
Its AUA hit a record high of S$19 billion as of 31 December 2021.
However, stock market volatility and the purchase of a UK digital bank resulted in the group reporting a net loss for its fiscal 2022’s second quarter (2Q2022).
For 3Q2022, net profit plunged by 72% year on year as expenses shot up in tandem with high inflation.
iFAST’s share price was riding high at S$10 late last year but has fallen by 65% to a 52-week low of S$3.54 recently.
The stock has seen a breath of fresh air in the past month as it jumped 25% to close at S$5.92.
Can the group’s share price revisit the all-time highs that it touched a year ago?
A perfect storm of negatives
First, let’s size up the current situation for the fintech group.
It is facing a perfect storm of negative news and events in 2022 that led to a sharp decline in its net profit and a dip in its AUA.
iFAST had communicated previously that tough market conditions will negatively impact its business as inflows will taper off.
For the first nine months of 2022 (9M2022), net inflows came up to S$1.86 billion, significantly below the S$3 billion registered in 9M2021.
Consequently, AUA had declined to S$16.98 billion as of 30 September 2022, down 7.6% year on year.
A reduction in transactional activities also hit the group’s non-recurring revenue for its core non-banking operations, which tumbled by 25% year on year from S$27.2 million to S$20.4 million in 9M2022.
iFAST also saw expenses jump by 31% year on year even as net revenue inched up just 3.5% year on year.
Coupled with the impairment loss on its India business and start-up losses for its iFAST Global Bank division, it’s no wonder that the group’s net profit took a significant hit.
Market volatility is expected to persist
It’s important to realise that the negative events mentioned above may not be confined to just 2022.
In particular, market volatility is expected to persist as the US Federal Reserve is committed to hiking interest rates further to bring inflation down to its targeted level of 2%.
There is also the prospect of a recession hitting Singapore’s shores either next year or in 2024 as warned by Prime Minister Lee Hsien Loong.
And iFAST’s digital bank is projected to continue making losses, with the group targeting to achieve breakeven by 2024 at the earliest.
Lingering uncertainties and a decline in consumer spending power will continue to act as headwinds for iFAST as it moves into 2023.
The promise of a new day
There’s a glimmer of hope for the business, though.
iFAST unveiled details of the size of its Hong Kong e-pension contract late last year.
Based on its projections, the net profit for this division alone could hit S$17.4 million in 2024 and S$57.3 million in 2025.
For context on how important this initiative is, iFAST reported a net profit for the group of S$30.6 million in FY2021.
The group has also reiterated in its latest 3Q2022 commentary that it expects “revenue and profitability to grow to new highs in 2023” as the e-pension division contributes substantially from 3Q2023 onwards.
Growing and building its platform
Meanwhile, iFAST has been busy building its platform capabilities.
Its Singapore iGM division developed a new bond trading interface for its clients, and a debit card was also launched in 3Q2022 to enable clients to spend money in their cash accounts.
Physical events also resumed in Hong Kong, where the business-to-business (B2B) division held a “What and Where to Invest in 2H2022” information session to attract financial advisors.
iFAST helped to provide investment insights to assist these advisors to manage their clients’ portfolios better.
Get Smart: Patience wins the day
In the short term, there will be further volatility that will dent investor sentiment, keeping them away from the markets and lowering fund inflows.
However, investors can look forward to contributions from iFAST’s e-pension division by the second half of next year.
This division is unaffected by market volatility and promises to take the group’s net profit to a new high if executed and managed properly.
All investors need is patience and to have faith that management can deliver as promised.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.
