Profits Slump At iFast Corporation Ltd

iFast Corporation Ltd  (SGX: AIY) released its first-quarter earnings report on Friday. The reporting period was for 1 January 2016 to 31 March 2016.

iFast listed on the Singapore Exchange in late 2014. It is an internet based investment products distributor with two business divisions: the B2C (business-to-consumer) division and the B2B (business-to-business) division.

Individual investors in Singapore might be familiar with the company’s consumer-facing platform:

Financial highlights

  1. iFast’s revenue fell by 10.6% year-on-year, coming in at S$18.6 million.
  2. Revenue net of commissions and fees, for the quarter clocked in at S$9.3 million. This was a 5.1% drop from the S$9.8 million reported during the same period last year. Recurring net revenue stood at S$8.1 million up 0.4% year on year.
  3. For the first quarter 2016, profit plunged 58.4% to S$1.25 million from S$3.0 million the year on year. Not included were China operation profits, which were negative S$0.83 million for the quarter.
  4. Earnings per share (eps) followed suit, dropping from 1.16 Singapore cents to 0.48 Singapore cents, which was a 58.6% decrease year on year.
  5. iFast recorded cash flow from operations of negative S$0.23 million for the reporting quarter. Capital expenditure was S$0.38 million for the same period. This meant iFast was in a negative cash flow position for the quarter, a huge drop from the positive cash flow of S$2.9 million recorded in Q1 2015.
  6. As of 31 March 2016, average assets under administration (AUA) stood at S$5.47 billion, down 1.8% from a year ago.
  7. The company also reported S$27 million in cash and equivalents and no debt for the quarter. This is a slight decline from the end of 2015, when there was S$29.5 million in cash and equivalents and no debt.
  8. The company has proposed an interim dividend of 0.68 cents per share, similar to the dividend announced in the previous year.

Operational highlights

Profit after tax in Singapore decreased by 28.4% from $2.77 million in 1Q15 to $1.98 million in 1Q16. This was due the negative global financial markets sentiment during the quarter and increases in operating expenses. The increase in expensed was due to increased efforts in enhancing platform capabilities and improving the range of investment products and services being provided to customers in the period.

The profit generated from Hong Kong operation decreased by 89.3% from $0.40 million in 1Q15 to $0.04 million in 1Q16. The significant decline was due to negative equity markets sentiment particularly in China/Hong Kong and a slowdown of investment subscription volume as a result of the suspension of CIES announced in 2015.

Operating losses were also incurred to build an online stockbroking platform, post the acquisition of the stockbroking firm in Hong Kong (iFAST Securities (HK) Limited).

China Operations was a negative contributor to the tune of S$0.84 million due to the initial start-up expenses.

Lastly, Malaysia operation profit generated of $0.07 million in the first quarter, while the loss incurred by the Malaysia operation was $0.02 million in 1Q15.

During the quarter iFast has struck two deals. On 20 April it completed the acquisition of a 21.5% stake in the holding company of iFast India business. Also on 28 April it signed a memorandum of understanding to sell a 5% stake in its iFast China business for USD$1.75 million (S$2.36 million). Completion is expected in June 2016.

Future Outlook

iFast’s management mentioned in its earnings release the following:

Overall, the Group aims to continue to grow the overall sales and profitability of the Group excluding China, and with that, to be able to deliver healthy dividend payments to shareholders.  

In 2016 and 2017, the China business is expected to have a negative impact on the overall operating profit of the Group on a consolidated basis. The actual impact on the NAV and cash flows of the Group may however be better than the headline operating numbers.

The Directors are of the view that it is important for the Group to maintain a healthy balance between ensuring the short-term profitability and doing enough to ensure the long-term growth of the Group, especially in tackling big markets with good growth potential such as China and India

Foolish summary

iFast last traded at a price of S$1.22 on Friday.

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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 Esjay does not own shares in iFast Corporation Ltd.