iFAST sets SGD100 billion AUA target

iFAST announced a great set of Q2 2018 results with double digit growth in revenue, earnings and AUA (Assets under Administration) along with its ambitious 10 year vision.

Net revenue grew 25% year on year to SGD30.9 million which led to net profit growing 40% to SGD2.9 million in the second quarter of 2018. AUA grew 22% year on year and 3% sequentially to a record SGD8.3 billion as of end June 2018.

iFAST has applied for a virtual banking license in Hong Kong which will allow the company to provide more efficient cash management facilities for its clients (eg. deposits, securities finance). Competition will be fierce with 50 companies reportedly been keen to apply for the license. Media reports have also suggested that the first virtual banking licenses could be issued in end-2018.

The company’s Vision 2028 was the key highlight. iFAST has set a target to achieve SGD100 billion in AUA by 2028 which implies a 28% annual growth rate. For Singapore, its largest market, the company’s 10 year target is SGD35 billion which works out to a 20% growth target.

I think the company’s large addressable market and strong moat should help iFAST to achieve its ambitious growth targets. In Singapore, the size of the unit trust market in 2016 was SGD82 billion. Meanwhile PWC estimates that the AUM for Hong Kong private banking market is over USD800 billion.

iFAST’s regulatory licenses and its distribution relationships with funds, insurance providers, stock exchanges and bond dealers are powerful competitive advantages. On the client side, they have spent more than 10 years establishing B2B relationships with thousands of financial advisors and 320 financial institutions in 5 countries which includes Singapore, Hong Kong, Malaysia, China and India.  According to management, setting up a B2B business is a lot more difficult than a B2C business because establishing institutional relationships requires more time while catering to the needs of many organizations is a complex affair.

iFAST’s growth targets suggests that my previous forecast for 10-20% annual revenue and earnings growth is achievable. If iFAST achieves its 2028 vision, an investment in iFAST is set to be a multi-bagger over the next five years.

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