iFAST just released their latest quarter results this morning. It’s a detail report and I won’t rehash it here. While Q3 earning’s seem underwhelming as compared to recent quarters in the past 2 years, the most anticipated information was how much would the eMPF project add to iFAST earning in 2024 and 2025.
The above is what is shared by the management. Basically they are projecting net revenue from HK to increase by about 8x and 12x in 2024 and 2025 respectively from FY2020.
The increase looks huge but is this huge enough to justify its current price of $9.60 and PE of 88? I decided to crunch some numbers and made an estimation of the group’s net profit in 2024 and 2025. As with any prediction, the outcome is highly uncertain as it contains numerous assumptions.
So take the numbers in this post with many pinches of salt and this is definitely not a recommendation to buy or sell.
Besides using the numbers provided on Hong Kong target, I assume the growth rate of Singapore’s and Malaysia’s market to be the same over the last 4 years. For 2021 figure, I am just going to use 9M2021’s number which itself is definitely lower than the actual full year’s result. Base on the above, Singapore market has been compounding at about 20%, while Malaysia market compounded at 40%. The other assumption I am making is by that in China and Other markets will break even by 2024/2025. Finally, I take PAT to be about 85% of PBT.
|2025||$0.43||$123 mil||$144 mil||$54 mil||$69 mil||$21 mil|
|2024||$0.25||$71 mil||$83 mil||$45 mil||$23 mil||$15 mil|
If the management is right with their projection, Hong Kong will take over Singapore as the leading contributor in 2025. Based on EPS of $0.11 for this financial year, its EPS will compound at a rate of 32% to hit $0.25 in 2024 and 41% to hit $0.43 in 2025. Depending on the premium that the market is going to give to the company, the table below summarises the possible price of the company if ALL the assumptions are correct.
The jump from 2024 to 2025 is big due to the increase in net revenue, margin based on net revenue due to the HK market and valuation. Considering that market will not wait until 2025 to make the jump and I am using 9M2021 as the starting point in my computation, I think $20 in 2024 is a possibility.
Double the Money in 3 years time?
IF I am correct, then doubling the money in 3 years time sounds a pretty good idea. Of course, there is no guarantee and if the execution in any part did not go well, price might plummet by more than 50%! Similarly, if there are other catalysts along the way, such as being awarded digital bank license, China break even earlier, then return might be 3-5x! Either way, expect the journey to be volatile.
For me, I am satisfied with the latest report and after making the estimation (no matter how inaccurate it might turn out to be), I am likely to hold on to my current stake. Given that iFAST is already my top position and I have sold some in July at $8.96 and $8.83, I am unlikely to buy more at the current price. However, if the price retracts to about $7, I might consider to add some back.