Mon, Aug 31, 2020 – 1:00 PM
CGS-CIMB has downgraded Singapore-based wealth administration and brokerage platform iFast Corp to “maintain” from “add”, though it elevated the goal price to S$2.44, from S$1.85 beforehand.
The mainboard-listed firm was buying and selling at S$2.34 as on the noon break on Monday, down S$0.03 or 1.Three per cent.
Market exuberance appeared to have “considerably” priced in iFast’s prospects of successful the bid for Hong Kong’s digital pension system in addition to for a digital banking licence in Singapore, CGS-CIMB stated, whereas describing the counter as “too quick, too livid”.
It was buying and selling at 35 instances its FY21 forecast price-to-earnings ratio, analyst Andrea Choong wrote in a analysis be aware dated Friday.
Primarily based on Friday’s closing price of S$2.37, the stock has surged greater than 23 per cent since early August, when Bloomberg reported that iFast was a part of one of many shortlisted consortium finalists to digitise and centralise Hong Kong’s pension system named e-MPF.
The consortium that features iFast is led by telecommunications supplier PCCW, and is vying with Ping An Insurance coverage’s OneConnect for the undertaking.
The appointed e-MPF operator will obtain charges primarily based on the Obligatory Provident Fund’s asset pool. Bids are at about 20-35 foundation factors (bps) in charges, or about HK$2 billion to S$3.Four billion (S$353 million to S$600 million) in income per yr for the winner, in response to Bloomberg’s report.
CGS-CIMB believes iFast may maintain a 10-30 per cent stake within the consortium, though shareholding particulars haven’t been disclosed. Subsequently, utilizing a mid-range level of about 28 bps in charges, a profitable bid might add some S$4-11 million in yearly web revenue to iFast and improve its earnings per share by one to 4 Singapore cents, Ms Choong wrote.
She stated that the fintech participant’s position in PCCW’s e-MPF consortium will probably be akin to iFast’s operations as an funding administrator with the Central Provident Fund in Singapore.
In the meantime, iFast can also be main a consortium comprising China’s Yillion Group and Hande Group for a wholesale digital bank licence in Singapore. If awarded the licence, iFast will personal a 65 per cent stake within the entity.
The outcomes of each its bids in Hong Kong and Singapore are anticipated to be introduced by the tip of this yr.
“iFast’s collaborations with top-tier digital gamers in bidding for high-profile authorities contracts and licences entrench its franchise value within the area,” the analyst wrote.
Regardless of the ranking downgrade, CGS-CIMB upped its goal price, primarily based on sum of the elements, to think about incrementally larger stockbroking income from sustained buying and selling volumes, the scaling up of iFast’s Malaysia operations, and diminished working bills over FY20-21 due to the Singapore authorities’s prolonged Jobs Help Scheme.
CGS-CIMB elevated its estimates for iFast’s earnings per share by 27 per cent for FY20, by 29 per cent for FY21, and by 35 per cent for FY22.
Earlier this month, iFast acquired approval-in-principle from the Securities Fee Malaysia to begin stockbroking operations in early 2021 within the nation, which is able to add to its current stockbroking companies in Singapore and Hong Kong.
CGS-CIMB famous that stockbroking has not historically been a key development driver for iFast, given the decrease margins of about eight bps per commerce in addition to the stiff competitors with ultra-low or zero charges within the area.
The Malaysia stockbroking operations will probably require an operational ramp-up interval of about six to 9 months earlier than there shall be significant earnings contribution, Ms Choong stated.
Nevertheless, elevated buying and selling volumes throughout the area, because of prolonged work-from-home initiatives, ought to offset this, she added.