iFAST reported its 2022Q1 results on last Saturday. With its net revenue and net profit decreased by 1.2% and 35% respectively, its share price continue its slide since the beginning of the year. Its share price has dropped by a whooping 45% from $8.40 at the end of last year to the current price of $4.71.
Despite the above, I am still going to hold on to my current stake. I will share briefly why I am doing that.
Business Perspective
Recurring revenue is still increasing
One of my initial reasons that led to my investment in iFAST is its recurring revenue. Personally, I feel that this provides the stability to the group’s business. So it’s good that this is still growing at 8.8% despite the weak market condition. Hopefully, this growth can be sustained going forward in the coming quarters.
Visibility of strong HK net revenue/profit from 2023 to 2025
With more visibility from the HK ePension system project, the group has updated their guidance on HK net revenue and net profit from 2023 to 2025. I did a rough projection based on the given guidance with the following assumptions:
- Annualising FY2022 Q1 results
- Group’s guidance for HK is close to actual figure
- Singapore and Malaysia markets grow on average at 10% annually
- China and India markets continue to make increasing losses
- No other unforeseen circumstances
The table below shows my projection of their EPS for 2023 to 2025.
| Year | EPS (cents) | YOY Growth |
| 2021 | 11.1 | – |
| 2022 | 6.1 | – 45% |
| 2023 | 11.1 | + 82% |
| 2024 | 18.6 | + 68% |
| 2025 | 30.2 | + 63% |
As seen from the above table, the impact from the Hong Kong growth is huge. The annualised growth from 2021 to 2025 will be around 30%. Given that market is short sighted and often look at annual growth number only, I won’t be surprise that it will value iFAST at a PE of 50 to 60 during 2023 to 2025. So price could hit $15 to $18 in 2025.
Potential growth driver from iFAST Global Bank
The new segment for group is iFAST Global Bank. If they can fulfil the aim of getting it profitable by 2024, then this will provide a new growth driver for the group.
Strong leadership
During the AGM, there were some questions on the increase of their guidance for HK which differ from the analysts. Also why the group is confident of getting the bank business going even though SE and Grab has not even started a bank after receiving the license for one year.
I think the answers from the CEO and management were quite logical. They replied that they can’t speak for the other parties but given that the group is the one handling the project, they would know the details better. As for the bank, two reasons were given. Firstly, it is a bank that they have acquired, so they are not starting from scratch and what they need to do is to put in some structures to get it going. Secondly, they said they are known to do things fast!
My point is to invest in iFAST, you got to have some trust that they can execute the plan that they set up. And given that my initial investment with them was in 2017, I have built up sufficient confidence in them over the past 5 years. Their track record do show that they meant what they say.
Portfolio Perspective
No matter how confident I am with the group, there are always execution and unforeseen risks. Hence, I also need to protect the downside risk if things did not turn out as expected.
Sold a portion of my shares last year
I sold a portion of my shares last July at around $8.86 as I was wary of the tougher comparable numbers for second half of 2021. On hindsight, it turned out to be the correct decision to lock in some profit then. So emotionally, I am not affected by the recent price movement.
Occupies just 6% of Portfolio
iFAST has never occupied more than 10% of my portfolio. Before I sold part of my holding last July, its position size was around 9%. Based on the current price, it occupies about 6% of portfolio. So even if all things go wrong which I do not think it will happen, the loss while painful will not be devastating.
Why not buy more?
The opportunity to triple the money in 3 years time is indeed attractive. However, given that I have made my plan to hold a certain amount of cash in the coming one to two years and there are also other opportunities in the US market, I will give it a miss for the moment. But if the price continues to slide to around $3, I might find it hard to resist the temptation.
Towards Financial Independence 