IFast Corp 1QFY2015 earnings: Broad-based growth drives earnings up 49.1%

iFast Corporation Ltd (SGX: AIY) released its fiscal first quarter earnings (for the three months ended 31 March 2015) yesterday morning.

Recently listed in December 2014, iFast is an internet based investment product distribution platform which can be classified under two groups: the B2C (business-to-consumer) division and the B2B (business-to-business) division. Common folks would be more familiar with the B2C website known as while the B2B platform is utilized by mainly the financial institutions, banks and financial advisory companies (also known as insurance companies).

Financial highlights

For the quarter, overall revenue for iFast came in at S$20.89 million, 19.3% higher on a year-on-year comparison. Net revenue (revenue nett of commisions and fees) also increased 18.2% to S$9.86 million as compared to last year.

Net profits attributable to shareholders surged 49.1% to S$3.01 million for the corresponding period, in line with the improvement in total revenue. By and large, the positive results are propelled by the growth of business and AUA (Assets under administration) across the 3 countries where the operations are – namely Singapore, Hong Kong and Malaysia.

On the balance sheet front, the company has a rock-solid financial position with no debt and a total of S$63.34 cash and other investments. Out of the latter, $23.75 million is embodied by Cash and cash equivalents with the remaining S$39.59 million held in other investments (representing investments in available-for-sale financial assets).

Business Highlights and Outlook

As previously mentioned, the company is mainly split into 2 segments: B2C and B2B. On a whole, AUA grew 21.8% to S$5.75 billion as of 31st March 2015, where B2C division commands 25.3% of the AUA and the remaining 74.7% belongs to the B2B division.

The change in AUA is a good gauge of how well the company is doing. As the company stated in its IPO prospectus, “the size of our AUA is a good indicator of our Group’s net revenue, which represents revenue earned by our Group after deducting commission and fee paid or payable to third party financial advisers.”

1Q14 ($’000) 1Q15 ($’000) Change (%)
Recurring Net Revenue 6,547 8,092 23.6
Non-Recurring Net Revenue 1,795 1,765 (1.7)
Total Net Revenue 8,342 9,857 18.2

Let’s move on to net revenue – which means “revenue earned by the Group after commission and fee paid or payable to third party financial advisers”. Based on the chart above, 81.2% is derived from recurring net revenue and 17.9% is from non-recurring net revenue.

Recurring net revenue, comprising of different type of fees based on % of average AUA, registered a hike of 23.6% to S$8.09 million. In contrast, non-recurring net revenue dipped 1.7% for the same period to S$1.77 million. Non-recurring net revenue is derived from several sources; including commission and processing fees from first-time subscriptions, service and admin fees as well as advertising fees earned. Overall, the company clocked in a remarkable 18.2% growth from S$8.34 million to $9.86 million on a year-to-year comparison.

The management team has also given a few updates in the earnings release (summarized in our own words) for iFast Corp’s future outlook,:

  • The company is working at expanding the range of asset classes under distribution for 2 main reasons: 1) to innovate and ensure they stay as a leader in the industry 2) Provide suitable products for a broader group of investors and continue drive the AUA (Assets under Administration) growth
  • Expansion in China is currently in the works as operations have commenced in July 2014, notwithstanding the pre-requisite licenses required for operating an investment platform

Foolish Summary

Barring unforeseen circumstances, given the quarter’s solid results, pristine balance sheet and a potential expansion into China’s huge market, it seems like iFast Corp will continue to scale greater heights in FY2015. Nevertheless, investors should still perform their due diligence and understand the business risks before investing.

The company has declared an interim dividend of 0.68 cents. At its closing price yesterday of $1.36, iFast traded at around 34.3 times its latest trailing earnings and sports a dividend yield of 3.94%.

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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.