iFAST: A blue sky scenario

The share price of iFAST has exploded upwards this week after the company was included in the MSCI Singapore small cap index. Fund managers are buying. Retail shareholders are selling. One of the iFAST directors even sold some shares last Friday.

Is iFAST still a buy now?

Here’s a scenario where iFAST can still be a multi-bagger even at current levels.

iFAST has a vision of achieving SGD100 billion assets under administration by 2028. In 2028, iFAST hits this SGD100 billion AUA target and achieves SGD595 million net revenue based on its existing 0.6% take rate.

Earnings per share reaches SGD1.1 based on the pretax margins of mature peers such as Hargreaves Lansdown. Investment platforms such as iFAST tend to grow earnings exponentially once they reach scale because of their fixed costs and limited variable costs. I’ve assumed a 55x trailing PE which leads to a SGD63 share price because of its growth profile and presence in growing Asian wealth management hubs such as Singapore, Hong Kong and China. Even at SGD100 billion AUA, the company will still be smaller than its peers such as Charles Schwab and Hargreaves Lansdown.

 iFAST 2020 (SGDm)iFAST 2028 (SGDm)Hargreaves Lansdown 2020 (GBPm)Charles Schwab 2020 (USDm)
AUA14,450100,000104,0006,690,000
Net revenue/AUA0.6%0.6%0.5%0.2%
Net revenue8659555111,691
Pretax profit254113784,300
Pretax margin29%69%69%37%
Net profit213293133,299
Earnings per share0.081.160.662.12
PE (TTM)90552432
Share price8.563.7  

Although the share price will be highly volatile at current levels, there’s a chance that iFAST could be a $60 or even a $100 stock by 2028 if the company executes well. Share price catalysts in 2021 include details on the Hong Kong MPF contract, improved Malaysia earnings after introducing stockbroking services and accelerating AUA growth in China.  I haven’t sold any shares this month and I even bought more shares at the $6.30 level. Looking forward to 2Q results!

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