For the first time since its listing, iFAST provided guidance for operating expenses during the third quarter of 2019.
3Q19 net revenue grew 9% but net profit fell 5% because of increased spending on the company’s IT capabilities. More importantly, iFAST is guiding for slower expense growth in 2020. Overall operating expenses are expected to grow 5-9% year on year to SGD60-62 million in 2020 which is lower than the double digit percentage growth during the last few years.
iFAST PBT margins
If all goes well and iFAST grows revenue faster than 9% per year in 2020, profit margins should start growing again.
Assets under administration (AUA) and valuation
Despite volatile markets, AUA grew 4% sequentially and 17% year on year to a record SGD9.4 billion. Growing AUA is crucial because the iFAST platform will become more attractive for clients and distributors.
iFAST is slowly reducing its reliance on unit trusts with clients also buying other assets such as stocks and bonds. Unit trusts made up 83% of AUA as of end-September 2019 compared to 87% one year ago.All in all, iFAST did well to grow AUA in a quarter when markets were volatile. If iFAST is successful in getting a Singapore digital license, the move away from unit trusts should accelerate even further. But I’m not hopeful about the company’s prospects of getting a Singapore digital license. Competition will be intense with established fintech players like Grab involved.
iFAST is trading at 30.3x trailing earnings and 20x trailing earnings excluding China losses. I’m not buying more yet because I already have a decent sized position but I’ll be happy to add more if the trailing P/E drops below 25x.