5 Things You Should Know About iFast Corporation’s Upcoming IPO

Credit: Simon Cunningham

There’s been a flurry of recent initial public offerings (IPOs) in Singapore and one of the companies poised to join that list would be iFast Corporation Limited. If you haven’t heard of iFast, you may have heard of its main consumer-facing product,, first launched in 2000, is an online platform in Singapore which distributes investment products (think funds, unit trusts, and corporate bonds) and it is targeted at do-it-yourself investors

The company has come a long way since then. Today, it also has a thriving business-to-business (B2B) arm, serving investors who are taking investment advice from banks, financial institutions, and financial advisory firms. iFast distributes over 1,800 investment products (including more than 1,600 funds) across Singapore, Hong Kong, and Malaysia, works with over 150 financial advisory companies, and has “over 190,000 B2B adviser-assisted and B2C accounts” in its platforms.

The nifty chart below (click for a larger image) from iFast’s prospectus gives a clear overview of the company’s business.

iFast business model

Source: iFast’s listing prospectus.

Besides being a distribution platform for investment products, iFast also provides a wide range of services including the execution of investment transactions, IT services and software tools, research and investment trainings, and backroom functions.

With all these as a backdrop, let’s dive into the five things you should know about iFast’s IPO.

1. The nitty-gritty

The company would be issuing 32.8 million new shares priced at S$0.95 each. This would give iFast a market capitalization of S$243.4 million based on its enlarged share count of 256.2 million shares post-IPO.

Of the 32.8 million shares to be issued, 2.8 million would be made available to the general public while the rest of the remaining 30 million shares would be placed to select investors with the help of the underwriters of iFast’s IPO.

In a separate deal which would happen simultaneously with the listing, iFast would be issuing a total of 19 million shares to two cornerstone investors, namely, FIL Investment Management (Hong Kong) Limited and OWW Capital Partners. The former’s part of Fidelity, a giant asset management group, while the latter is a Singapore-based private equity firm which has invested in a number of B2B and B2C (business-to-consumer) IT companies in Southeast Asia and China.

One other substantial shareholder worth mentioning is SPH AsiaOne, a wholly-owned subsidiary of local newspaper publisher and property developer Singapore Press Holdings Limited (SGX: T39). SPH Asiaone, which owns close to a fifth of iFast’s shares, has been “a long-term passive investor” in the company since 2000.

iFast’s public offer opened last Thursday at 7pm and will close at 12 noon on 9 December.

2. Key highlights

iFast has built its own proprietary IT systems and that allows the firm to scale up its business model without substantial increase in operating costs unlike traditional brick-and-mortar businesses. Furthermore, the company has significant recurring revenue (accounting for an average of 81.6% of its total net revenue for the period between  2011 and the first nine months of 2014) which is driven by its assets under administration (AUA); iFast’s AUA has grown at an impressive compounded annual rate of 26.8% to S$5.13 billion in the decade ended 30 September 2014.

Investors should note the importance of iFast’s AUA; the company has even gone as far as to state that “the size of our AUA is a good indicator of [iFast]’s net revenue, which represents revenue earned by [iFast] after deducting commission and fee paid or payable to third party financial advisors.”

Although iFast has a well-known B2C business through its platform, the bulk of its revenue actually comes from its B2B operations (the B2B segment of iFast’s business made up 85.7% of the company’s total revenue in the first nine months of 2014).

The outlook for iFast also looks promising with the growing levels of affluence in the Asia region potentially leading to higher demand for wealth management services. As a service provider to the wealth management industry, that’s a tailwind iFast can enjoy.

3. iFast’s financials

From the financial year ended 31 December 2011 (FY2011) to FY2013, iFast had delivered phenomenal growth in profits as seen in the chart below.

iFast revenue and profit

Source: iFast’s listing prospectus

Another key highlight worth mentioning is iFast’s robust balance sheet: the firm has a cash hoard of S$15.1 million as of 30 September 2014 with no bank borrowings.

4. Use of proceeds

iFast would raise around S$44.6 million from its IPO (including the Cornerstone tranche of shares) after deduction of the estimated listing expenses. Of that sum, S$27.2 million (55.3%) would go towards funding iFast’s “mergers and acquisitions strategy”. iFast believes that it can boost its AUA growth through acquisitions in its existing markets and new markets.

The remaining proceeds (44.7%) would be used for expansion of iFast’s business in China (14.2%), enhancement of product capabilities, IT, and servies (16.3%), and working capital (4.9%).

5. Valuation & dividend policy

Assuming an annualized earnings per share of 3.96 cents (derived from iFast’s EPS of 2.97 cents for the first nine months of 2014), iFast’s shares would be valued at an estimated price to earnings (P/E) ratio of 24 times based on a listing price of S$0.95.

As iFast is pretty unique in what it does, there are no real comparable listed companies in Singapore’s market for another viewpoint. The SPDR STI ETF (SGX: ES3), an exchange –traded fund which tracks Singapore’s market barometer the Straits Times Index (SGX: ^STI), is valued at 13.5 times its trailing earnings.

iFast currently does not have a fixed dividend policy, though the company has intentions to distribute 60% of its net profits for the fourth quarter of 2014 and for the whole of 2015.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.