Ai?

Not Artificial Intelligence but two of my top 10 counters: Arista Networks and iFAST. Both announced their Q4 and FY2022 results yesterday. One is blazing the track while the other is still nursing her injury.

Arista’s revenue and EPS are up by 48% and EPS up by 58% respectively for the year!

Strong contribution by both Meta and Microsoft has accelerated the growth. Beyond the cloud titans, the group is also growing in its enterprise, campus, and network software and services segments. It is clear that the group is continuing to gain market share with a huge potential addressable market.

One of the tough thing about investing in Arista is understanding what they are doing. Unless you are in the network sector, it is hard to grasp the edge that they have over their competitors. The judgement is often based on their reported performance.

The other aspect is that do not expect linear growth from them. If you look at the revenue growth over the past 5 years, there will be flat and down years. It is hard to predict spending by Meta and Microsoft going forward. Looking at their intention to go into metaverse and AI in the next few years, the demand should still be strong but given this year’s jump, the growth would probably be more muted nex year.

I will be holding on to my current stake.

iFAST’s AUA down by 8.3% and EPS down by 80%!

The decrease in profitability can be attributed to a tough market sentiment for the year, impairment for India business and start up loss for acquisition of UK Bank. I wasn’t expecting much from this set of results but am still slightly disappointed with its Q4 results. While total net revenue has increased, its operation expenses ballooned by 42%, causing a huge drop in net profit for the quarter. A 30%-40% drop is probably more palatable.

Taking a step back and looking at the data over the past 5 years, pandemic has caused a surge in its business from 2020 to 2021. If we exclude those two years, then in terms of revenue, earning (excluding impairment) and operating cashflows, 2022 is a better year than 2019.

Going forward, will it go back to its last year’s high and beyond? A lot depends on the group’s execution of HK ePension division and UK bank. Assuming the group’s projection of its HK profit after tax is about there, the table shows my projection* of group’s EPS for the next few years.

Year	0% growth in SG/MY from 2022 PBT HKD100 mil Break even in UK 2024 Same loss in CHN	10% growth in SG/MY from 2022 PBT HKD 250 mil Break even in UK 2024 Same loss in CHN	20% growth in SG/MY from 2022 PBT HKD 500 mil Break even in UK 2024 Same loss in CHN
2022	2.1 cents	2.1 cents	2.1 cents
2023	7.8 cents	8.5 cents	9.2 cents
2024	18 cents	19 cents	20 cents
2025	29 cents	32 cents	35 cents

So can invest in iFAST? It really depends if you believe the management can deliver what they promise.

For me, I will continue to hold on to my current stake.