iFAST

iFAST: Released its maiden results following its IPO in Dec '14, as 4Q14 headline net profit dived 67% y/y to $0.9m, dragged mainly by one-time IPO expenses ($1.9m), as well as higher IT maintenance and services, insurance costs and business development costs in China.

Revenue for the internet-based investment products distributor gained 17.7% to $19.8m, boosted by a significant growth of business and asset under administration (AUA) in Hong Kong and Malaysia, as well as an increase in processing fee due to higher subscriptions of unit trusts and bonds.

This brought FY14 earnings to $8.6m (+1.1%) and revenue to $78.4m (+12.8%). Excluding one-offs, earnings would have grown a staggering 33.7% to $10.5m.

Notably, AUA- the key recurring revenue driver for iFast, grew at a stellar pace (+16%) in FY14 to a record $5.36b. This supports a larger net revenue base going forward, currently comprising recurring (80%) and non-recurring (20%) revenue.

AUA is the total assets distributed on the group's online platforms. This comprises over 1,800 investment products (including 1,600 funds) provided by fund houses, banks (bond dealers) and insurance companies, for customers ranging from individual investors to adviser-assisted investors.

Subsequently, iFast receives trailer, platform and wrap fees on a recurring basis from both the product suppliers and customers.

Balance sheet is lean, with no borrowings and a cash pile of $33.7m, earmarked for M&As, JVs and business expansion into the Chinese market, as well as to enhance its product, IT and service capabilities.

The group intends to grow its business in China, where the group has been developing its core IT system in its small office in Shenzhen. Management disclosed that they have been in discussions with possible business partners and targets for a launch in 2H15.

Final DPS of 0.68¢ declared. In 2015, iFast intends to distribute 60% of earnings (excluding exceptional items) on a quarterly basis.

Coverage on iFast is thin and peer comparison is limited given its niche business model.

We do not rule out that the stock may see an upward re-rating supported by price discovery, when visibility and awareness picks up for its highly scalable business.

At $1.315, iFAST is trading at 26x P/E and 5x P/B. Its closest peer, ARA Asset Management, which provides a range of property management and investment services, trades at 16.3x P/E.