iFast Corporation Ltd (SGX: AIY) is a wealth management platform provider with assets under administration (AUA) of S$8.75 billion, as of 31 March 2019. The group is present in Singapore, Malaysia, Hong Kong, India and China and its business is divided into three main divisions – business-to-business (B2B), business-to-business-to-consumer (B2B2C) and business-to-consumer (B2C).
The group was incorporated in 2000 and was one of the first financial technology (fintech) companies in Singapore. Its Fundsupermart platform is now one of the major platforms that retail investors use to select unit trusts as it offers a wide selection. The growth of iFAST’s AUA has also been very impressive over the years, even though there were significant dips in 2009 and 2015.
In assessing iFast’s potential to raise its dividends, I will look at a few aspects of its current business and also review its future prospects and outlook.
Free cash flow generation
iFast has a consistent track record of free cash flow generation, as can be seen in the table below.
Aside from 2016, when operating cash flow dipped below S$10 million, every other year has seen operating cash flow in excess of capital expenditure. With such a consistent record of free cash flow generation, investors should gain assurance that the group is at least able to maintain the current level of dividends.
History of dividend increases
iFast was only listed in late-2014, so the dividend history for the group is rather short. From what the group has disclosed so far, though, dividends have been on a rising trend since FY 2016. In both 2015 and 2016, the total dividend per share was 2.79 Singapore cents; in 2017 this was raised to 3.01 Singapore cents, and for 2018, the total annual dividend was 3.15 Singapore cents.
This steady increase in dividends demonstrates the group’s commitment to raising dividends as the business continues to improve. This is important for investors to note as there are some companies which do not have the practice of raising dividends even though profits and cash flows are increasing.
Net profit tagged to AUA growth
iFast’s net profit is tied very closely to the growth of its AUA, as fees are charged based on a percentage of the AUA. iFast has so far managed to grow its AUA consistently over time, as the group expands its presence in existing markets and offers new types of securities (e.g. bonds and equities), in addition to unit trusts.
AUA growth, however, may be choppy as stock markets are naturally volatile. However, I believe the underlying trend would be up as iFast still has a lot of untapped potential in Asia due to the growth in middle-class consumers, and also the shift towards more wealth management services being offered by private bankers.
iFast’s 10-year AUA target
It’s encouraging to note that iFast has set a 10-year growth target for its AUA, to reach S$100 billion by the year 2028. This illustrates the group’s long-term vision and also implies that the runway for AUA growth is still long. Therefore, I believe the group definitely has good potential for raising its dividend above the current 3.15 Singapore cents per share if the business continues to report increased profits and cash flows. iFast offers a historical dividend yield of around 2.8% currently.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in iFast Corporation Limited. The Motley Fool Singapore has recommended shares of iFast Corporation Limited.