6 Highlights from iFAST Corporation’s Latest Earnings

iFAST Corporation Limited (SGX: AIY) started the year 2021 on a strong note. 

The financial technology (fintech) company saw its revenue, net profit and assets under administration (AUA) surge as the pandemic pushed more people to open brokerage accounts and transact digitally.

Here are five highlights from its latest set of earnings.

1. Strong growth and positive operating leverage  

For the quarter, iFAST reported a 51.4% year on year increase in net revenue and a 43.8% year on year (YoY) increase in gross revenue. The increase was driven by positive market sentiment and higher net inflows of client assets as the group expanded the range and depth of products and services being offered.

By comparison, operating profit more than doubled from S$4.3 million in 1Q2020 to S$10.3 million in 1Q2021. Net profit in 1Q2021 also soared to a record S$8.8 million, an increase of 142.5% compared to 1Q2020. 

The significant jump in operating profit and net profit shows positive operating leverage in iFast’s business model, where expenses rose at a slower pace as compared to revenue.

2. Record AUA of S$16.1 billion 

iFast saw a record AUA inflow of S$1.3 billion for 1Q2021, pushing the group’s AUA to $16.1 billion at the end of the quarter. For context, for the whole of 2020, net inflows amounted to S$3.2 billion, implying that net inflows for 1Q2021 have already achieved 40.5% of what the entire 2020 had chalked up.

Meanwhile, gross unit trust subscriptions grew 66.8% year on year to a record S$2.2 billion in 1Q2021. Again, for context, for the whole of 2020, gross unit trust subscriptions amounted to S$5.6 billion, implying gross unit trust subscriptions for 1Q2021 has already achieved 39.2% of what was recorded for the entire 2020.

(Source:1Q2021 earnings presentation)

3. Non-recurring net revenue surged by 114.8% 

IFast’s non-recurring net revenue surged by 114.8% YoY from S$4.8 million in Q12020 to S$10.4 million in 1Q2021. The increase was due mainly to an increase in financial institution clients’ investment subscription in unit trusts including portfolio services, the significant growth of business in exchange-traded funds (ETFs) and stocks and the resulted increase in service fees arising from the currency conversion administration services provided to customers, and an increase in information technology (IT) solution fee from the provision of IT Fintech solutions to business partners in the period.  

By comparison, iFast’s recurring net revenue only increased by 29.5% YoY from S$14.0 million in Q12020 to S$18.1 million in Q12021, driven mainly by an increase in fees resulting from higher net inflows and AUA as mentioned in point 2 above. 

Interestingly, the group has successfully grown its recurring net revenue every year since its initial public offering (IPO) in 2014. Average contribution from recurring net revenue as opposed to non-recurring net revenue in the period from 2020 to 1Q2021 was 67.0%. 

(Source:1Q2021 earnings presentation)

4. Singapore operation remains largest revenue contributor

iFast’s Singapore operation continued its strong momentum from 2020, given the group’s continuous investments in building a strong integrated digital wealth management platform in recent years. 

Net revenue for the Singapore operation increased by 57.3% YoY to S$19.2 million in 1Q2021, representing 67.3% of the group’s total net revenue for the period. The growth in net revenue was due to robust growth rates in AUA, sales and net inflows for FSMOne.com, its business-to-consumer (B2C) division, as well as for its business-to-business (B2B) division. 

Of particular note, sales from the B2B division grew 127% YoY and its iFast Global Markets segment (iGM) saw sales surged by 158% YoY in 1Q2021. iGM provides clients with an advisor-assisted financial plan to help them take charge of their finances while recommending suitable products. With more wealth advisors choosing to tap on iGM, iFast’s in-house advisory team grew 20% quarter-on-quarter (QoQ). 

(Source:1Q2021 earnings presentation)

5. Positive operating and free cash flow

IFast asset-light business model is highly cash generative. The group recorded an operating cash flow of S$12.6 million and free cash flow of S$10.4 million in Q12021. 

In fact, its cash position has surged to S$58.4 million with zero borrowings. This provides the group plenty of flexibility to grow and expand its business as well as reward dividends to shareholders. 

6. Interim dividend raised

In line with the strong results, iFAST has upped its interim dividend to S$0.01. This is 33.3% higher than the S$0.0075 the group declared in the same period last year. 

Since the group expects its business performance for the full year 2021 to show healthy growth compared to 2020, it is not surprising that it also expects to increase its dividend per share in 2021 compared to 2020. 

More good news to come?

Investors could look forward to more business developments in the months to come.

IFast is still awaiting the finalisation of the details for the design, build and operation of Hong Kong’s eMPF platform as part of the country’s revamp of its Mandatory Provision Fund Scheme. The group had announced back in January 2021 it will work alongside PCCW Solutions Limited as a prime subcontractor.

IFast had also in March 2021 announced the launch of its stocks and ETFs brokerage services on FSMOne.com in Malaysia, its B2C division. In addition to the launch of stocks and ETFs in Malaysia, its Malaysia operation is looking to broaden its markets to provide stocks and ETFs listed in the United States and Hong Kong markets in the near future so that investors can create a globally diversified portfolio. 

iFast also plans to apply for a digital banking license in Malaysia, despite losing out on a similar framework in Singapore. Malaysia’s central bank, Bank Negara Malaysia, had announced in December 2020 that up to five licenses will be issued to successful applications in 1Q2022. 

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