As expected, iFAST has another tough quarter. I won’t rehash the results as you can read that from the group’s presentation slides. I will just share my views on what caught my attention and my intention going forward.
The impairment due to India business has caused the group to report a loss for the quarter. While it is never nice to make a loss, cutting away this segment for the moment might not be such a bad idea. Among the markets iFAST is in, both China and India have been a drag. Both have potential due to their huge market but both are notoriously tough markets for different reasons. Given that iFAST has made inroad with Hong Kong ePension project, continue to work on China’s market seems to make sense. Hence I am fine with this one-off impairment charge.
“2022 will be a year where the Group will see overall revenue continue to grow, but net profit will see a substantial decline. This happens as the Group incurs an impairment charge for the India business, initial operating losses for iFAST Global Bank and an increase in its overall operating expenses“
As highlighted by the company, the top line is still growing but bottom line will be hit due to impairment and its expansion. However, with the fund raised earlier this year, the group a good buffer of cash to fund their expansion. Also operating cash flows stays strong and while lower than past 2 years, it is likely to be higher than any previous year.
In an earlier estimate during the 1Q2022 presentation, ePension project is expected to start contributing from 4Q2023 but it looks like they are able to get it up faster. A quarter really doesn’t matter much but it shows that they are putting in substantial effort on the project and that gives me confidence of the accuracy of their projections.
After the Q1 results, I made a projection of how their earning might turn out from now till 2025. You can read the post here. With the latest information, I updated the projection with some changes in the assumptions
Assumption
- Annualised 2022 earning from 1H2022
- Zero growth for Singapore and Malaysia segments
- Continued loss from both China and UK segments
- Group guidance for HK segment is close to actual figure.
- No other unforeseen circumstance
| Year | EPS (cents) | YOY Growth |
| 2021 | 11.1 | – |
| 2022 | 4.7 | – 54% |
| 2023 | 7.6 | + 63% |
| 2024 | 14.2 | + 87% |
| 2025 | 24.9 | + 75% |
Even after reducing my projection significantly, as long as the ePension Project’s data is accurate, then the earning in 2024 and 2025 is significant. Depending on the PE the market wants to give the company, there’s potential upside for this investment. Also, there are possibly other upsides such as they can turn digital bank profitable in 2024. They continue to grow both Singapore and Malaysia markets when the current bear market is over.
Of course, things could turn sour too. Market sentiment can stay down for longer than expected. The digital bank turn out to be a dud. Even for the ePension project, they could screw up the project and instead of record earning, they might need to pay for delay etc.
As mentioned in my previous post, at the end of the day it is how confident you are of the group to deliver what they have said. For me, being vested for 5 years and a customer of FSMOne, I do have sufficient confident in them.
In a nutshell, the group is going to face near term pressure but mid to long term prospect continues to look good. I have indicated in my earlier post that it would be hard for me to resist the temptation if price slides near to $3 and I still feel the same. If it really come to that price, I am likely to add a bit more.
Towards Financial Independence 