iFAST Corporation Ltd’s Latest Earnings: 14 Key Points Investors Should Know

iFAST Corporation (SGX: AIY) released its 2018 first-quarter earnings last Saturday.

Headquartered in Singapore, iFAST is an Internet-based investment products distribution platform that provides a comprehensive range of investment products and services to both corporate clients and retail investors. I had the opportunity to attend iFAST’s earnings briefing on Monday to hear directly from CEO Lim Chung Chun.

Here are 14 key things that I learnt about 2018’s first quarter:

1. Revenue grew 40.1% year-on-year to S$31 million. After deducting commissions and fees, net revenue was up 28.7% year-on-year to S$14.4 million. Recurring net revenue was at S$11.5 million, up 22.3% from a year ago.

2. Profit attributable to shareholders surged 52.6% to S$2.75 million. Diluted earnings per share (EPS) jumped 50% to 0.93 cents (note: the previous year’s diluted EPS was restated to include the adoption of new accounting rules).

3. Operating cash flow fell from S$2.8 million a year ago to S$1.0 million in the latest quarter. With capital expenditure (purchase of plant, equipment, and intangible assets) increasing from S$891,000 to S$4.1 million, iFAST’s free cash flow fell from S$1.9 million a year ago to a negative S$3.1 million in the reporting quarter.

4. As of 31 March 2018, the company had S$20.6 million in cash (includes investments in money market funds) and just S$17,000 in finance leases. A year ago, the company had S$26.5 million in cash and S$23,000 in finance leases.

5. Assets under administration (AUA) grew 24.8% year-on-year to hit a record high of S$8.07 billion, marking the seventh straight quarter of record AUA levels for the company. The contribution from the bonds/ exchange-traded funds (ETFs)/stocks business was a combined 8.1% of iFAST’s total AUA.

6. A interim dividend of 0.75 cents per share was proposed, up 10.3% from the interim dividend of 0.68 cents seen in the first-quarter of 2017.

7. In his opening remarks, Lim said the positive results from the latest quarter were from the company’s efforts to expand its product range over the past few years, and a better stock market environment overall.

8. PBT margin was 29.5% for the first-quarter of 2018 (excluding China operations). Including the China losses, iFAST’s PBT margin was 20.8%. Lim commented that the margins are not “conducive” yet but could expand in the future. A large part of investments in existing markets (think Singapore) has already taken place, he said, so as the company scales up, there is room for margin expansion in the years ahead.

9. As mentioned earlier, iFAST’s ended the reporting quarter with S$20.6 million in cash. On top of that, the company has another S$24.7 million in other investments which consist of fixed income funds, corporate bonds, and to a lesser extent, equity holdings. More importantly, Lim commented that the current cash position is at a surplus relative to the company’s needs.

10. Over in Singapore, one of the biggest developments over the last 12 months was the launch of its stockbroking service in June 2017. Lim said that the service is starting to show “decent growth,” and is still in the early stages of growth.

11. Lim believes that iFAST’s stockbroking services are competitive as it is able to offer one of the lowest prices in the industry, but yet remain profitable. He believes that few players, save for Phillip Capital, are able to achieve that. He also said that iFAST only needs “a couple of percentage points of market share” to be comfortably profitable. In the future, iFAST is likely to offer margin financing as well.

12. Meanwhile, iFAST also launched a Fintech Solutions division in Malaysia. Lim said that the B2B business has been traditionally based offline, and there was a need to provide solutions to help bring offline processes online. iFAST earns a service fee but more importantly, the customer’s operations are linked up with iFAST’s platforms, which makes the company’s services stickier to its B2B customers.

13. iFAST has guided towards similar losses in 2018 for the China business as compared to 2017. For Lim, it’s important to take a long term view for results in China to turn up. iFAST typically takes between five to six years to be profitable in a country.

14. Lim also touched on the company’s activities in India, where iFAST owns an effective stake of 19.2% in iFAST Financial India. The associate is not profitable yet, but has made significant progress. The regulatory environment is also improving, which should help adoption of the associate’s services. He added that the entity is expected to remain as an associate at the moment, though the company has hopes that it can be a stand alone listed-entity in the future.

Attending the earnings briefing allowed us to better understand the thoughts company’s performances, and to put the company’s actions into perspective. Shares of iFAST closed Monday at S$0.915 each. At that price, the company has a trailing price-to-earnings (PE) ratio of 26.2 with a dividend yield of 3.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of iFAST Corporation Ltd. Motley Fool Singapore writer Chin Hui Leong doesn’t own shares in any companies mentioned.