iFast Corporation Ltd’s Latest Earnings Report: Headwinds In Near Future Seen

iFast Corporation Ltd  (SGX: AIY) released its fiscal fourth-quarter earnings report this morning. The reporting period was for 1 October 2015 to 31 December 2015.

iFast is an internet based investment products distributor which got listed only in late 2014. The business of iFast can be divided into two divisions: the B2C (business-to-consumer) division and the B2B (business-to-business) division. Individual investors in Singapore may be familiar with the company’s consumer-facing platform:

You can learn more about the company’s IPO (initial public offering) in here or catch up with the previous earnings report here.

Financial highlights

The following’s a quick take on the latest financial figures from iFast:

  1. For the fourth-quarter of 2015, iFast’s revenue rose by 4.9% year-on-year, coming in at $20.7 million. For 2015, revenue grew by 8.9% to $85.3 million.
  2. On a net revenue basis (net of commissions and fees), iFast reported $10.16 million for the fourth-quarter of 2015, an 8.5% increase from the same quarter in 2014. For the full year, net revenue was $41.5 million, a 13.2% increase from the year before. From this amount, $34.7 million was recurring in nature.
  3. For the fourth-quarter, profit for the period tripled to $2.9 million. For 2015, profit rose 41.9% to end with $12.1 million. Investors should note that there were $1.95 million in IPO expenses included in 2014, thus making it a favorable comparable for 2015. Excluding the IPO expenses, iFast’s profit still rose by 15% in 2015.
  4. Despite the higher profit, earnings per share (EPS) for the fourth-quarter declined 16%, falling from 1.31 cents a year ago to 1.10 cents in the reporting quarter. For the full year, EPS declined by 8.1% to end at 4.65 cents.  A larger share count as a result of the IPO had led to the per-share drop in earnings.
  5. iFast recorded cash flow from operations of $4.2 million for the reporting quarter. Capital expenditure was $895,000 for the same period. The lower capex gave iFast positive free cash flow of $3.3 million for the fourth-quarter of 2015, up from $2.7 million a year ago ($3.0 million in cash flow from operations and $0.35 million in capex). For the whole of 2015, iFast had $12.5 million in free cash flow, 36% higher than the $9.2 million seen in 2014.
  6. As of 31 December 2015, assets under administration (AUA) was S$5.64 billion, up 5.2% from a year ago. The company has said that this is a “key indicator” of its business performance.
  7. The company also reported $29.5 million in cash and equivalents and no debt, as of 31 December 2015. This is a slight decline from the end of 2014, when there was $35.4 million in cash and equivalents and no debt.

iFast wrapped up 2015 with positive top-line and bottom-line growth. The company also maintained a strong balance sheet and had recorded growth in free cash flow for 2015; iFast’s financial strength provides it with options for its future.

The company’s board of directors had proposed a final dividend of 0.75 cents per share. This puts 2015’s total dividend at 2.79 cents per share. For 2016, the group gave the following guidance on dividends:

“For FY2016, our Directors intend to recommend and distribute dividends of 60% of our Group’s net profit (excluding our China operation, and exceptional items)”

Operational highlights and a future outlook

At the end of the fourth-quarter of 2015, the B2C business segment recorded an AUA of S$1.42 billion. Meanwhile, the B2B side clocked in AUA of S$4.22 billion. AUA from the B2C and B2B segments had grown by 5.3% and 5.2%, respectively.

At the country level, Singapore’s net revenue grew by 16.8% year-on-year to $30 million for 2015. Elsewhere, Hong Kong and Malaysia (the company’s other two geographical markets outside of Singapore) had recorded net revenue of $9.6 million and $1.9 million respectively, up 0.7% and 31.1% from 2014.

As mentioned in the prior quarter, iFast’s wholly owned China subsidiary, iFast Platform Services (ShenZhen) Qianhai Limited has received a Funds Distributor Qualification in October 2015. The company plans to have a soft launch of its China business in March 2016 and pointed out in the earnings release that the launch is expected to result in start-up losses from China in the current fiscal year.

The company had been busy with adding new products and services in 2015: These include the distribution of bonds and the launch of an online Discretionary Portfolio Management Service in Hong Kong. Earlier this year in January, iFast had also completed the acquisition of Winfield Securities in Hong Kong, giving it stockbroking capabilities.

The company believes that the new services will help it to further expand its AUA – and thus revenue – over time.

In the earnings release, iFAST stated it is confident that it has the vision and strategy to enable “robust growth rates” in its AUA, revenue, and profit in the “medium to long-term.” But, it warned that short-term volatility in the financial markets can have significant negative impacts to its business. The company added that “2016 has started with sharp downturns in global equity markets. This is expected to have some negative impacts on [iFast’s] revenues and profitability in [the first-quarter of 2016].”

Foolish summary

At its opening price $1.25 today, iFast traded at 27 times trailing earnings and had a dividend yield of 2.2%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.