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4 Things To Know About Recent Announcements By iFAST (SGX: AIY)

Acquiring a digital bank will complement iFAST existing wealth management platform such as FSMOne.

It’s been a good and busy past couple of weeks for iFAST Corporation (SGX: AIY), an established regional FinTech player founded in Singapore in 2000.

iFAST, which has been listed on the SGX since 2014, has seen its share price perform tremendously well since 2020, increasing from $1.06 on 3 January 2020 to $7.68 as of 14 January 2022, or a rise of more than 7 times over the past two years.

The increase in share price is well warranted. For FY2020, the company saw its revenue increase by about 35% to $169 million, while net profit for the year more than doubled to $20.9 million, compared to $9.3 million the year before. This growth has continued onto 2021, where iFAST has currently recorded revenue of $161 million and net profit of $23 million as of 3Q2021, indicating that the company will likely exceed its already-impressive performance in 2020.

In many ways, iFAST has benefitted from being an established FinTech player in a Singapore market that is furiously adopting FinTech in all ways of life. As shared in their 2020 annual report, “while ‘FinTech’ only became a buzzword less than a decade ago, iFAST Corp has started developing its own IT solution in-house back in 2000 when the company was first founded.”

And while most retail investors would be familiar with FSMOne, iFAST also works with different partners, from global asset management firms, to banks for bond offerings, to bring on-board a wide range of options to investors and wealth advisers. The company has more than 280 distribution agreements with different product providers to offer over 14,000 investment products, including over 9,400 funds, over 1,500 bonds, stocks and ETFs (Singapore, Hong Kong and US stockbroking capabilities) as well as discretionary portfolio management services and insurance products on the platform.

Since the start of 2022, iFAST has requested two trading halts leading to two announcements. In this week’s edition of 4 Stocks This Week, we look at 4 things that you may want to know about the recent announcements made by iFAST.

#1 iFAST Is Acquiring A Digital Bank In The UK

Last week, iFAST announced that the company intended to acquire a BFC Bank Limited – a full licensed UK bank – for approximately $45.9million. This represents about 2% of the company’s current market capitalisation. In addition, iFAST will also inject approximately $27.5 million into BFC Bank.

Some key financial numbers of the BFC bank can be found below.

Source: iFAST

#2 The iFAST’s Five-Year Plan

As we wrote previously, iFAST was one of the companies applying for a digital bank license to operate in Singapore in 2020 – which they were not successful in. They are also currently leading a consortium to apply for a digital bank license in Malaysia.

Hence, the proposed deal to acquire a digital bank should come as no surprise to anyone. iFAST believes that at a price-to-book multiple of about 1.62X, this is an attractive level. What could perhaps be a surprise to some investors is that the company acquired a digital bank from the UK, where it currently has no presence. But this could also be seen as a way for it to expand its market beyond Asia through this acquisition.

From a strategic point, iFAST believes that wealth management platforms with seamless links to good digital banking services that allow consumers and investors to manage payment flows seamlessly across borders while getting attractive deposit rates in various currencies, will have strong advantages. As such, the company believes that having a digital bank in a trusted jurisdiction would be a central component of its ecosystem.

Source: iFAST

The acquisition of the BFC Bank will enable iFAST to add a digital bank to its Fintech Ecosystem. In an increasingly digitally-connected world, this will help accelerate the growth of the Group’s overall wealth management business, and support its iFAST’s Five-Year Plan.

iFAST’s Five-Year Plan

  1. Get Bigger and Better: Continue to work on increasing the scale and quality of its Fintech wealth management platform in various markets, in line with the Group’s target AUA of S$100 billion by 2028.
  2. Accelerate Hong Kong Growth: Substantially accelerate the growth of the Group’s overall Hong Kong business as it effectively executes its ePension business in Hong Kong, and continues to improve on its existing platform capabilities.
  3. More Licences: Pursue more financial licences in different jurisdictions and make strategic investments in adjacent Fintech capabilities, while ensuring that wealth management will remain as its core service as a progressive Fintech player.
  4. Truly Global Business Model: Make tangible progress towards the Group’s vision of being a top Fintech wealth management player with a truly global business model, which will be even more scalable.

#3 Successful Placement Of 14,000,000 Shares Raising $105 Million

To fund the acquisition of BFC Bank, iFAST announced on 11 January 2022 that it has successfully raised $105 million via placement of 14,000,000 shares priced at $7.50 per share. iFAST also shared that the placement was well oversubscribed, with over S$150 million in total subscription, more than double the initial base deal size of S$75 million.

According to the company, about $73.4 million will be used to fund the acquisition of BFC Bank while $2.4 million is used to pay the estimated fees and expenses in connection with the placement. The remaining amount of about $29.2 million will be used for general corporate and working capital purposes.

#4 Placement Price Of $7.50 represents a discount of 4.5% to iFAST-Then Price Of $7.85

Issuing more shares is typically seen as non-ideal for existing shareholders. This is because an increase in total share capital has a dilutive effect on existing shareholders. Moreover, to attract investors, new shares are usually be priced at a discount to the existing trading price of the shares – otherwise, these investors could just buy it from the secondary market.

For iFAST case, the new shares were priced at $7.50, representing a discount of 4.5% to the last trading price of iFAST shares on 7 January, just before the placement on 10 January.  iFAST share price took a tumble on 11 January ending at $7.57 and is currently trading at $7.68 as of 14 January.

This puts iFAST current market capitalisation at about $2.12 billion.

Read Also: 4 Singapore Billionaire Stocks Performing Well In 2021: iFAST; Hour Glass; Thomson Medical; Straits Trading

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