For many investors, the main reason for investing is to grow their wealth so that they can enjoy a comfortable retirement.
In line with this goal, growth investors allocate their money to companies that show good promise of increasing their top and bottom lines.
Generally, fast-growing companies tend to plough back all or most of their earnings back into the business as they need large amounts of working capital for expansion.
However, some stocks pay out a dividend and post healthy growth.
iFAST Corporation Limited (SGX: AIY) is one such business.
The fintech company not only promises future growth but also doles out a quarterly dividend that will bring a smile to income-seeking investors.
Let us dig deeper into what iFAST can deliver to investors in the years to come.
An ambitious three-year plan
The group experienced impressive growth in revenue from 2018 to 2021, with total revenue rising from S$122.3 million to S$216.9 million.
Net profit over this period nearly tripled from S$10.9 million to S$30.6 million.
2022 saw iFAST stumble as the fintech encountered volatile market conditions, recognised an impairment loss on its Indian associate, and carried on spending to strengthen its platform and service offerings.
As a result, net profit that year tumbled to S$6.4 million.
Despite this setback, iFAST expects the group to enter a period of high growth in both revenue and profitability from 2023 to 2025 as it executes its ambitious three-year plan.
The plan involves strengthening its core platform to make it better and more profitable, thus ensuring customers become stickier.
Another aspect is to accelerate the growth of its Hong Kong division (more on this later) and to advance its goal to have a truly global business model.
Contributions from the Hong Kong eMPF contract
Back in January 2021, iFAST announced that it had successfully secured a contract for the design, build and operation of the Hong Kong eMPF (Mandatory Provident Fund) platform.
Although this project was reportedly behind schedule as announced by iFAST in January this year, the group still expects to recognise contributions from this ePension contract in the fourth quarter of 2023 (4Q 2023).
iFAST had released a set of financial projections for the eMPF project back in October 2021 which could potentially see the profit for its Hong Kong division multiply by seven-fold by 2025.
Back then, the target net revenue for 2024 and 2025 was estimated to be HK$800 million and HK$1.2 billion, respectively.
For the first quarter of 2023, iFAST has updated its Hong Kong targets and raised the net revenue amount for 2024 and 2025 to HK$900 million and HK$1.3 billion, respectively.
The profit before tax is projected to be HK$250 million for 2024 and HK$500 million for 2025.
Applying the exchange and tax rates for Hong Kong, we get a projected net profit for the division of S$36.1 million for 2024 and S$72.1 million for 2025.
In contrast, iFAST’s Hong Kong division reported a net profit of just S$8.1 million for 2022.
Launching new digital bank services
In January 2022, iFAST splashed out S$73 million to purchase a UK digital bank which it has renamed “iFAST Global Bank”.
After integrating the bank into the group, iFAST launched the Digital Personal Banking (DPB) platform in April this year.
Its purpose is to integrate its digital bank capabilities into its fintech ecosystem to deliver long-term growth.
Customers can then access different investments and financial services, opening the group to a new revenue stream – net interest income.
However, with iFAST Digital Bank incurring start-up losses for both 2022 and 2023, management envisions that this UK division will only achieve profitability starting in 2024.
Launch of ORSO ePension services
In another piece of good news, iFAST announced just last week that it has launched ORSO ePension services for the Hong Kong Occupational Retirement Scheme Ordnance (ORSO) pension scheme.
The group has digitalised the system to enable users to perform a range of essential tasks such as enrolment, termination, contribution, and withdrawal via an online platform.
iFAST expects the ORSO pension system to make a material contribution to revenue and net profits from 1Q 2025 onwards.
Get Smart: Patience and cautious optimism
It seems iFAST is poised to deliver a sharp jump in revenue and profitability if all these initiatives go well.
Investors, however, need to be patient and optimistic about the progress of these business developments.
The good news is that the annual dividend for the fintech has increased from S$0.0315 in 2018 to S$0.048 in 2022.
This translates to a dividend yield of 1% but this yield could rise in due course should iFAST pay out higher dividends in time to come.
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Disclosure: Royston Yang owns shares of iFAST Corporation Limited.