iFast Corporation Ltd’s Latest Earnings Report: What Investors Should Know

iFast Corporation Ltd  (SGX: AIY) reported its 2016 full year and fourth quarter earnings this morning.

As a quick background, iFast is an internet-based investment products distribution platform. Some investors in Singapore would be familiar with its consumer facing product, The business of iFast can be divided into two buckets: the B2C (business-to-consumer) division and the B2B (business-to-business) division.

You can catch up with the results from the company’s previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures for iFast:

  1. For the fourth quarter of 2016, iFast’s revenue rose 3.9% year-on-year, coming in at $21.6 million. In 2016, iFast recorded $80.6 million in revenue, down 5.6% from a year ago.
  2. On a net revenue view (net of commissions and fees), iFast reported $11 million for the fourth quarter of 2016, an 8.1% increase from the same quarter in 2015. For the full year, net revenue was $40.7 million, a 2% decline from the year before. Of the $40.7 million in net revenue, $34.7 million was deemed to be recurring in nature by iFast.
  3. For the fourth quarter of 2016, profit attributable to shareholders fell 60% to $1.15 million. For 2016, profit attributable to shareholders decreased by 55% to end at $5.45 million.
  4. Earnings per share (EPS) for the fourth quarter declined 52%, falling from 1.10 cents in the fourth quarter of 2015 to 0.44 cents in the reporting quarter. For the full year, EPS declined 55% year-on-year to end at 2.08 cents.
  5. iFast ecorded cash flow from operations of $1.21 million for the reporting quarter. Capital expenditure was $278,000 for the same period. The lower capital expenditure gave iFast positive free cash flow of $0.9 million for the fourth quarter of 2016, down from the free cash flow of $3.3 million seen a year ago. For the full year, iFast Corporation generated $4.3 million in free cash flow, down from 2015’s free cash flow of $12.5 million.
  6. As of 31 December 2016, iFast’s assets under administration (AUA) was S$6.1 billion.
  7. As of 31 December 2016, iFast Corporation had $22.5 million in cash and equivalents and just $23,000 in debt. This is a slight decline from the $29.5 million in cash and equivalents and no debt recorded at the end of 2015.

iFast closed 2016 a decline in revenue and a big drop in profit. In 2016, the investment products distributor absorbed $3.6 million in start-up losses for its China operations. The firm maintains a strong balance sheet and recorded positive free cash flow in 2016.

The board of directors proposed a final dividend of 0.75 cents per share. This puts 2016’s total dividend at 2.79 cents per share, which is unchanged from the previous year. For 2017, iFast gave the following guidance regarding its dividend:

“For FY2017, our Directors intend to recommend and distribute dividends of 60% or more of our Group’s net profit (excluding our China operation, and exceptional items)”

Operational Highlights

Market conditions were tough in 2016, leading to lower profit for the company.

At the end of the fourth quarter of 2016, the B2C business segment recorded an AUA of S$1.55 billion. Meanwhile, the B2B side clocked in with an AUA of S$4.55 billion.

At the country level, Singapore’s net revenue fell slightly to $29.5 million in 2016. Elsewhere, Hong Kong and Malaysia recorded net revenue of $8.66 million (down 9.3%) and $2.26 million (up 16.4%), respectively.

iFast provided an outlook in its earnings release:

“Going forward, the Group expects the growth of AUA and revenue will benefit from the stockbroking services starting 2017, in addition to the additional services such as discretionary portfolio management services and bonds.

The Group expects China to remain loss-making in 2017, as the Group continues to invest in growing the China business. However, the Group does not expect the losses to increase significantly.

Barring a significant deterioration of the current stock market conditions, the Group expects to see improvements in its business over the next two years.”

At its opening share price of $0.87 on Friday, iFast trades at around 42 times trailing earnings and has a dividend yield of 3.2%.

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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.