iFAST Corporation Ltd (SGX:AIY) and UOB-Kay Hian Holdings Limited (SGX:U10) operate in a similar industry. In this article, let’s make some quick-and-dirty comparisons between the two companies to determine which might be of better value.
Introducing the Companies
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. Currently, it has a presence in Singapore, Hong Kong, Malaysia, China and India.
The company has two main business divisions – Business-to-Consumer (B2C) and Business-to-Business (B2B). Together, they offer more than 7,700 investment products (including unit trusts, bonds, stocks and exchange-traded funds), and services such as online robo-advisory portfolios and financial technology (fintech) solutions to their customers.
On the other hand, UOB-Kay Hian is Singapore’s largest domestic stock broker based on the number of registered trading representatives employed. The company also provides wealth management services in Singapore and Hong Kong. Worldwide, it has around 2,960 professional and support staff.
The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing prices on 9 July 2018. Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2017 (FY2017) for both companies, unless otherwise stated.Source: SGX StockFacts
Round 1: Profitability
In the first round, we will analyse the profitability of the companies in terms of profit margins and return on equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.Source: SGX StockFacts
UOB-Kay Hian has superior gross and net margins than its peer. However, it losses to iFAST when it comes to ROE.
Winner: UOB-Kay Hian, with its higher gross and net margins.
Round 2: Growth
In the next round, we will compare the revenue, gross and net profit compounded annual growth rate (CAGR) of the two firms for the past four financial years. Firms that can grow both their top- and bottom-line consistently over time should also see their share price rise.Source: SGX StockFacts; author’s calculations
iFAST has higher revenue, gross profit and net profit growth rates as compared to UOB-Kay Hian.
Winner: iFAST, with its better growth rates.
Round 3: Valuation
As Foolish investors, we have to focus on the value of the business and not on the daily fluctuations in the share price.
We will now compare the price-to-earnings (PE) ratio, price-to-book (PB) ratio and dividend yield of the two companies. The values below are as of the closing prices on 9 July 2018.Source: SGX StockFacts; author’s calculations
UOB-Kay Hian has lower PE and PB ratios, and higher dividend yield as compared to iFAST.
Winner: UOB-Kay Hian, as it provides better value than iFAST, despite its higher share price.
The Foolish Bottom Line
Final Score: 2-1 to UOB-Kay Hian, after emerging victorious in two out of the three rounds.
Even though UOB-Kay Hian has triumphed over iFAST overall, we have not compared other important aspects of UOB-Kay Hian such as its balance sheet strength, free cash flow situation and growth prospects. Potential investors interested in the firm should research more on it before investing their money. This simple exercise would help to take some heavy-lifting off their back though.
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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 contributor Sudhan P owns shares in iFAST Corporation Ltd.