S i n g a p o r e Tuesday, 13 October 2020

Research Talent Development Grant Scheme

INITIATE COVERAGE BUY

iFAST Corporation (IFAST SP)
Share Price S$2.88
Riding On The Wave Of Digitalisation And Fintech
Target Price S$3.34
Against the backdrop of a rapidly growing wealth management fintech industry in Asia,
Upside +16.0%
iFAST has carved out a niche to expand its assets under administration and revenue
streams. Initiate coverage at BUY with a target price of S$3.34.
COMPANY DESCRIPTION
• Rapid growth of asset and wealth management in Asia. iFAST Corporation (iFAST) iFAST is a wealth management fintech
platform headquartered in Singapore. It
rides on the strong growth of the industry’s assets under management (AUM), seeking to
provides a comprehensive range of
disrupt and digitalise Asia’s wealth management industry. The high proportion (>80%) of investment products and services to financial
unmanaged assets in Asia continues to fuel industry AUM growth well into 2030, with advisory firms, financial institutions, banks,
CAGR estimated at high single digits over the next decade. This supports our thesis that Internet companies, multinational companies,
iFAST’s assets under administration (AUA) is undergoing a structural growth trend. as well as retail and high net worth investors
in Asia.
• Captive customer base in B2B segment. iFAST’s business-to-business (B2B) segment
caters to businesses such as financial advisory firms, other financial institutions and STOCK DATA
banks. Making up >70% of AUA for iFAST, the suite of services provided by the group GICS sector Financials
ensures stickiness among the B2B customer base. This supported the high percentage Bloomberg ticker: IFAST SP
(>80%) of annual recurring net revenue prior to FY20. Shares issued (m): 271.9
Market cap (S$m): 810.9
• Strong dividend growth may present upside surprise. We believe iFAST’s earnings
growth is beginning to accelerate, supporting a sustainable rise in dividends. Historically, Market cap (US$m): 597.6
iFAST has kept dividend growth steady, pegged to 76-88% of 2017-19 net profit. Based 3-mth avg daily t'over (US$m): 2.7
on our estimates, we expect DPS of S$0.059 and S$0.064 for 2020-21, representing
76% and 75% of earnings, respectively. This is 26% and 21% higher than Bloomberg Price Performance (%)
52-week high/low S$3.00 /S$0.72
consensus estimates of S$0.047 and S$0.053 for 2020-21 respectively.
1mth 3mth 6mth 1yr YTD
• Multiple possible catalysts ahead. iFAST is currently engaged in bids for initiatives that 27.6 97.2 239.8 182.0 171.2
would expand its revenue stream. In Hong Kong, iFAST and PCCW are finalists against
Major Shareholders %
a consortium led by Ping An Insurance’s OneConnect Financial Technology to digitalise
Lim Chung Chun (CEO) 20.2
the country’s retirement fund system. In Singapore, iFAST is among nine applicants
Singapore Press Holdings 14.9
shortlisted for the three digital banking licences that the Monetary Authority of
Singapore (MAS) seeks to issue. We expect operating expenses to grow in the near term Lim Wee Kian 7.3
should iFAST secure these bids, with earnings accretion within three years of
commencement.
FY20 NAV/Share (S$) 0.35
• Initiate coverage with BUY and a target price of S$3.34, pegged to 40.3x 2021F PE, FY20 Net Cash/Share (S$) 0.04
or 2 SD above its 5-year mean. We believe the elevated valuation is justified, given that:
a) Asia’s wealth management industry is undergoing a sustainable record growth phase; PRICE CHART
and b) earnings for iFAST are beginning to scale up from operating leverage on higher (lcy) IFAST CORP LTD IFAST C ORP LTD/FSSTI IND EX (%)
revenues and a slower growth in expenses. iFAST currently trades at 33.9x forward PE. 4.00 400

3.50 350

3.00 300
KEY FINANCIALS 2.50 250
Year to 31 Dec (S$m) 2018 2019 2020F 2021F 2022F
2.00 200
Net turnover 121 125 175 196 213
EBITDA 15 22 32 37 40 1.50 150

Operating profit 10 9 19 22 24 1.00 100

Net profit (rep./act.) 11 10 21 23 25 0.50 50
Net profit (adj.) 11 10 21 23 25 8
Volume (m)
EPS (S$ cents) 4.0 3.5 7.6 8.3 9.0 6
4
PE (x) 59.6 69.0 31.6 28.8 26.6 2
P/B (x) 7.4 7.1 6.7 6.4 6.0 0
Oct 19 Dec 19 Feb 20 Apr 20 Jun 20 Aug 20
EV/EBITDA (x) 41.4 28.6 19.7 17.4 16.0
Dividend yield (%) 1.3 1.3 2.5 2.7 2.8
Net margin (%) 9.0 7.6 11.9 11.6 11.6 Source: Bloomberg
Net debt/(cash) to equity (%) (28.0) (23.3) (11.9) (9.4) (10.5)
Interest cover (x) n.a. 349.1 422.7 n.a. n.a. ANALYST(S)
ROE (%) 13.1 10.8 22.5 23.3 23.7 Clement Ho
Consensus net profit - - 17 20 20 +65 6590 6630
UOBKH/Consensus (x) - - 1.20 1.13 1.26 [email protected]
Source: iFAST, Bloomberg, UOB Kay Hian

Refer to last page for important disclosures. 1

UOB Kay Hian is supported by the Research Talent Development Grant Scheme. See the last page for more information.
S i n g a p o r e Tuesday, 13 October 2020

Contents
Investment Highlights .................................................................................................................. 3

Earnings Outlook .......................................................................................................................... 4

Valuation ...................................................................................................................................... 6

Financial Statements ................................................................................................................... 7

Appendix I: Company Background .............................................................................................. 9

Appendix II: Industry Outlook ..................................................................................................... 10

Appendix III: Risk Factors .......................................................................................................... 13

Appendix IV: Key Management ................................................................................................. 14

Appendix V: Corporate Milestones ............................................................................................ 15

Appendix VI: Indicative Timetable of Key Events ...................................................................... 16

This report uses the closing prices of 13 Oct 2020

Refer to last page for important disclosures. 2

S i n g a p o r e Tuesday, 13 October 2020

Investment Highlights
Beneficiary of broader market trends. A collaborative report by Morgan Stanley and High growth in total AUM to be captured.
Oliver Wyman dated Jun 20 shows that high net worth (HNW) AUM as a proportion of total Underlying trend of greater financial literacy
for the next generation.
assets in the Asia-Pacific (APAC) region continues to remain lowest globally at 1-5%1. Total
AUM (including retail and institutional) in Asia’s wealth management industry remain below
20%. Separately, PwC projects a 10% CAGR for AUM through to 20252. This growth will
likely continue into 2030 and beyond as more investors seek professional wealth
management advisory and wealth management tools. More specifically, there are vast
amounts of unmanaged wealth in the Chinese markets due to the stellar economic growth
in the past decade which is likely to continue. Although iFAST’s losses in China since its
entry in 2014 have been widening, we believe this is a product of the company’s focus on
capturing a larger customer base and will eventually result in scalability in the future.
Additionally, financial literacy is a growing trend among young adults and teenagers. With
the advent of easy online brokerages, iFAST is likely to capture a lion’s share of this
demand. This is due to the wide array of investment products and tools available for retail
investors, sustaining growth in the medium-to-long term.
Captive customer base provides support for recurrent sales. iFAST’s B2B clientele Stable recurring revenue from long-standing
comprises large financial institutions such as Financial Alliance, Great Eastern, Manulife, relationships with blue-chip clients.
Bank of China and CIMB, among others. It provides a full suite of services such as back-
end processes for financial institutions and tax-effective employee solutions to multinational
corporations. iFAST also maintains a captive customer base that relies on its services.
Additionally, these large clients are more resilient to market downturns and ensure that
>80% of revenue for iFAST is considerably recurring. The company has gone through the
bear markets and SARS in 2001-03, as well as the global financial crisis in 2008. We
believe that these experiences also stand testament to management’s ability to navigate
tough conditions and emerge stronger.
Strong corporate governance and management quality. iFAST is among the 95 SGX- Recent entry into SGX Fast Track list is a
listed companies recently included in the 2019 SGX Fast Track list, which will be given testament to high corporate governance
standards.
prioritised response on selected corporate action submissions. While the benefits are not
entirely tangible, the stringent admission criteria to the list are a strong testament to the
high corporate governance standards and good compliance track record of the company.
Strong dividend growth may present upside surprise. We believe iFAST’s earnings The 3-year DPS CAGR stands at 28%,
growth is beginning to accelerate, supporting a sustainable rise in dividends. Historically, reflecting the broader industry trends and
iFAST’s acceleration in growth.
iFAST has kept dividend growth steady, pegged to 76-88% of 2017-19 net profit. Based on
our estimates, we expect DPS of S$0.059 and S$0.064 for 2020-21, representing 76% and
75% of earnings, respectively. This is 26% and 21% higher than Bloomberg consensus
estimates of S$0.047 and S$0.053 for 2020-21 respectively.
Multiple possible catalysts ahead. iFAST is currently engaged in bids for initiatives that Current estimates exclude these bids.
would expand its revenue stream. In Hong Kong, iFAST is among minorities in a
consortium led by PCCW, which is up against another group led by Ping An Insurance’s
OneConnect Financial Technology, in a bid to digitalise the country’s retirement fund
system. The deal is expected to generate S$6.54b in revenue for the winning consortium, of
which the net profit is estimated to be in the range of 2-2.5% (S$130.8m-S$163.5m).
In Singapore, iFAST is among nine applicants short-listed for the three digital banking
licences that MAS seeks to issue. We expect operating expenses to grow by 9-11% if
iFAST secures the licence. But we believe operations will be accretive to shareholders
within three years of commencement.

1 https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2020/jun/Global-Wealth-Management-Report-2020.pdf
2 https://www.pwc.com/sg/en/asset-management/assets/asset-management-2025-asia-pacific.pdf

Refer to last page for important disclosures. 3

S i n g a p o r e Tuesday, 13 October 2020

Earnings Outlook
Top-line expansion expected due to growing value of AUA. iFAST has consistently FIGURE 1: AUA BREAKDOWN BY MARKETS
captured the demand for wealth management as the percentage of managed wealth in Asia (S$'000)

grows. AUA grew 11.5% in 1H20 alone, as digitalisation was hastened by the lockdown 20,000
18,000
measures in the region. This trend is set in motion and we believe it will continue as Asian 16,000
economies recover from pandemic-related measures. Top-line growth has been adjusted 14,000
downwards marginally to account for fee compression. Overall, our 5-year AUA and total 12,000

revenue CAGR estimates are at 13% and 16% respectively (revenue CAGR is higher due 10,000
8,000
to 1H19’s poor performance as financial market sold off in 4Q18).
6,000

Gross and operating margins to improve. The cost of sales that iFAST incurs are the 4,000
2,000
commissions and fees paid to third-party financial advisers. The same fee compression that 0
is occurring to iFAST’s commission and fee income will similarly affect the fees paid to 2016A 2017A 2018A 2019A 2020F 2021F 2022F 2023F 2024F
Singapore Malaysia Hong Kong China India (implied)
third-party financial advisers, resulting in lower cost of sales. Additionally, as iFAST
continues to scale and achieve higher AUAs, we believe they will be able to gain scalability, Source: iFAST, UOB Kay Hian

inching gross margin upwards.

iFAST’s operating margins benefit from strong operating leverage. Operating margins have
been steadily growing from 6.7% in FY16 to 8.9% in 2019, despite increasing costs related
to business expansion (in all regions, particularly in China). We see this as a key positive
that iFAST benefits greatly from scale and is only beginning to reap the economies of scale.
1H20 achieved an operating margin of 13%. We believe iFAST is able to maintain an
operating margin of 12-14% between 2020 and 2024, particularly as management has
guided that growth in expenses would be lowered to high single digits from the double digit
range in the last few years, as initial ramp-up and development costs have been incurred.
Net profit CAGR of 37% over next 3 years. This is partly due to 2019’s earnings being
weighed down by 1H19’s performance. Earnings are expected to gain on strong top-line
growth and in 2020, support from Singapore’s Job Support Scheme by 118%/9.68%/8.16%
for 2020F/2021/2022 respectively. The 1H20’s net profit accounts for 40% of our full year
estimates.
Strong operating cash flow supporting stable and consistent dividend payout.
iFAST’s history of strong cash flow generation capabilities have been matched with a
consistent dividend payout that is growing over the years. This is set to accelerate due to
the aforementioned industry trends, achieving an operating cash flow of S$39m in 2022
(2019: S$19.4m). In fact, iFAST reported a 115% yoy increase in operating cash flow of
S$19.7m in 1H20 that already exceeded the full year operating cash flow in 2019.
This will support the expected increases in dividend payouts over the coming years. Full
year DPS is expected to come in at S$0.059 for 2020, representing an 87% yoy increase.
Going forward, we expect a CAGR of above 20% for DPS in the coming 5 years, barring
any disruption in operations or the wider market.
FIGURE 2: REVENUE BREAKDOWN FIGURE 3: OPERATING EXPENSES BREAKDOWN
(S$'000) (S$'000)
450,000 51.5% 160,000 16.0%

400,000 51.0%
140,000 14.0%
50.5%
350,000
50.0% 120,000 12.0%
300,000
49.5% 100,000 10.0%
250,000 49.0%
80,000 8.0%
200,000 48.5%
48.0% 60,000 6.0%
150,000
47.5%
100,000 40,000 4.0%
47.0%
50,000 20,000 2.0%
46.5%
0 46.0% 0 0.0%
2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
Total Revenue Net Revenue Cost of sales (%) RHS Total OpEx Operating Profit (EBIT) Operating Margin (RHS)

Source: iFAST, UOB Kay Hian Source: iFAST, UOB Kay Hian

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S i n g a p o r e Tuesday, 13 October 2020

FIGURE 4: NET INCOME AND MARGIN FIGURE 5: DPS AND PAYOUT RATIO
(S$'000) (S$ cents)

40,000 14.0% 14.0 160.0%

35,000 12.0% 12.0 140.0%

30,000 120.0%
10.0% 10.0
25,000 100.0%
8.0% 8.0
20,000 80.0%
6.0% 6.0
15,000 60.0%
4.0% 4.0
10,000 40.0%

5,000 2.0% 2.0 20.0%

0 0.0% 0.0 0.0%

2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
PATMI Net Income Margin EPS (LHS) DPS (LHS) Payout Ratio (RHS)

Source: iFAST, UOB Kay Hian Source: iFAST, UOB Kay Hian

FIGURE 6: CASH AND DEBT FIGURE 7: DPS AND PAYOUT RATIO

(S$ '000)
(S$' cents)
70000.0
One-time loan taken in
3.0 100%
60000.0 2018 to finance initial
capital for HK virtual 2.5 80%
50000.0 banking business.
2.0
40000.0
60%
1.5
30000.0 40%
1.0
20000.0
0.5 20%
10000.0
0.0 0%
0.0 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F
2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
DPS (LHS) Payout ratio (RHS)
Net cash Total debt Cash at hand

Source: iFAST, UOB Kay Hian Source: iFAST, UOB Kay Hian

FIGURE 8: OPERATING CASHFLOW, FREE CASH FLOW TO FIRM

(S$'000)

60,000

50,000

40,000

30,000

20,000

10,000

-10,000
2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
Net cash from operating activities Free Cash Flow To Firm

Source: iFAST, UOB Kay Hian

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S i n g a p o r e Tuesday, 13 October 2020

Valuation
BUY with target price of S$3.34/share. The valuation is pegged to 40.3x 2021F PE, or 2
SD above its 5-year mean. We believe the elevated valuation is justified, given that: a)
Asia’s wealth management industry is undergoing a sustainable record growth phase; and
b) earnings for iFAST are beginning to scale up from operating leverage on higher
revenues and a slower growth in expenses.
iFAST has been able to deliver consistent top- and bottom-line growth, and is set to expand
current operations in Singapore, Hong Kong and Malaysia. China remains a strong
potential upside for iFAST to continue double-digit growth in AUA in the future. The
management’s ability to source for deals and potential revenue streams boosts our
confidence in iFAST’s ability to grow exponentially.
On the back of higher operating cash flow, an estimated DPS of S$0.059/S$0.064 is
expected for 2020/21F respectively. It is also expected to grow through to 2024. At the
current price, this translates to an indicative yield of 2.0/2.2%.
iFAST currently trades at 33.9x 2021F PE.

FIGURE 9: HISTORICAL PE BAND FIGURE 10: HISTORICAL P/B BAND

(x) (x)
50 8

45 +2SD:. 40.3x 7
40 +1SD:. 34.9x 6
35 +1SD:. 4.6x
Average 29.6x
5
30
Average 3.7x
25 4
-1SD:. 24.2x
20 3
-2SD:. 18.9x -1SD:. 2.7x
15
2
10
1
5
0 0
2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2020

Source: Bloomberg, UOB Kay Hian Source: Bloomberg, UOB Kay Hian

FIGURE 11: PEER COMPARISON

Company Bloomberg Trading Price @ Market -------------- PE -------------- ------------- PB ------------- ------- EV/EBITDA -------- Net ROE
Ticker Curr 13 Oct 20 Cap 2019 2020F 2021F Curr 2020F 2021F 2019 2020F 2021F Gearing 2020F
(TC) (TC) (US$m) (x) (x) (x) (x) (x) (x) (x) (x) (x) (%) (%)
iFAST IFAST SP S$ 2.88 570 81.2 37.1 33.9 8.8 8.4 7.9 34.5 24.1 21.3 (11.9) 22.5
Singapore Exchange SGX SP S$ 9.19 7,261 20.9 22.5 22.3 7.9 7.4 6.9 15.4 14.9 14.3 (41.2) 33.7
Hong Kong Exchanges & Clearing 388 HK HK$ 376.80 352,380 50.3 43.4 37.5 10.1 10.1 9.5 24.1 24.6 21.0 (246.6) 23.9
Bursa Malaysia BURSA MK RM 8.37 4,995 27.8 22.4 26.7 8.4 8.4 8.3 11.0 15.3 18.1 (233.8) 39.8
Global average 33.0 29.4 28.8 8.8 8.6 8.3 16.8 18.2 17.8 (173.9) 32.5
Source: Bloomberg, UOB Kay Hian

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S i n g a p o r e Tuesday, 13 October 2020

FIGURE 12: PROFIT & LOSS

Year to 31 Dec (S$m) 2018 2019 2020F 2021F 2022F
Revenue, net 121 125 175 196 213
Operating expenses (111) (116) (156) (173) (189)
EBIT 10 9 19 22 24
Other non-operating income 1 2 3 3 3
Associate contributions 1 (0) (0) (0) (0)
Net interest income/(expense) 1 (0) (0) 1 1
Exceptional items 0 0 2 0 0
Pre-tax profit 12 11 24 26 28
Tax (2) (2) (4) (4) (4)
Minorities 0 0 0 1 1
Net profit(rep./act.) 11 10 21 23 25
Net profit(adj.) 11 10 21 23 25

Deprec. & amort. 6 13 13 14 16

EBITDA 15 22 32 37 40

Per share data (S$ cents)

EPS - diluted 4.0 3.5 7.6 8.3 9.0
Reported EPS - diluted 4.0 3.5 7.6 8.3 9.0
Book value per shares (BVPS) 32.2 33.6 35.4 37.5 40.0
Dividend per share (DPS) 3.2 3.2 5.9 6.4 6.7
Source: UOB Kay Hian

FIGURE 13: BALANCE SHEET

Year to 31 Dec (S$m) 2018 2019 2020F 2021F 2022F
Cash/Near cash equiv. 61 25 11 10 12
Accounts receivable/debtors 42 61 86 96 103
Stocks 24 19 20 20 21
Other current assets 128 105 117 125 135
Current assets 3 18 15 13 11
Fixed assets 8 11 11 11 11
Investments 1 1 1 2 2
Other financial assets 18 22 26 29 32
Total non-current assets 30 52 53 54 55
Total assets 158 157 170 180 190
Accounts payable/creditors 34 47 62 70 76
Short-term debt/borrowings 37 4 0 0 0
Other current liabilities 0 4 3 2 2
Current liabilities 71 55 66 72 78
Long-term debt 0 0 0 0 0
Deferred tax liability 2 2 2 2 2
Other non-current liabilities 0 11 8 5 4
Total non-current liabilities 2 13 9 7 6
Total liabilities 73 68 75 79 83
Minority interest - accumulated (0) (0) (0) (0) (0)
Shareholders' equity 86 90 95 101 107
Liabilities and shareholders' funds 158 157 170 180 190
Source: UOB Kay Hian

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S i n g a p o r e Tuesday, 13 October 2020

FIGURE 14: CASH FLOW

Year to 31 Dec (S$m) 2018 2019 2020F 2021F 2022F
Operating cashflows 18 19 24 34 39
Pre-tax profit 12 11 24 26 28
Tax (1) (2) (4) (4) (4)
Deprec. & amort. 6 13 13 14 16
Associates (1) 0 0 0 0
Working capital changes (0) (5) (8) (3) (1)
Non-cash items 3 3 3 3 3
Others (1) (1) (5) (3) (3)
Cash from investing activities (19) (8) (14) (15) (17)
Capex (growth) (9) (12) (14) (15) (17)
Investments (10) 4 0 0 0
Proceeds from sale of assets 0 0 0 0 0
Others 0 0 0 0 0
Cash from financing activities 29 (47) (24) (20) (20)
Dividend payments (8) (8) (16) (17) (18)
Issue of shares 0 0 0 0 0
Proceeds from borrowings 37 4 0 0 0
Loan repayment 0 (37) (4) 0 0
Others/interest paid (0) (6) (4) (3) (2)
Net increase/(decrease) in cash 28 (36) (13) (2) 2
Beginning cash 33 61 25 11 10
Changes due to forex impact (0) (0) 0 0 0
End cash 61 25 12 10 12
Source: UOB Kay Hian

FIGURE 15: KEY METRICS

Year to 31 Dec (%) 2018 2019 2020F 2021F 2022F
Growth
Turnover 19.8 3.4 39.7 11.8 8.6
EBITDA 35.2 44.8 45.1 13.2 8.6
Pre-tax profit 22.5 (10.4) 116.2 9.7 8.2
Net profit 20.8 (12.8) 118.5 9.7 8.2
Net profit (adj.) n.a. (12.8) 118.5 9.7 8.2
EPS 19.1 (13.7) 118.5 9.7 8.2

Profitability
EBITDA margin 12.7 17.8 18.5 18.7 18.7
EBIT margin 8.1 7.3 10.9 11.4 11.3
Gross margin 49.2 52.0 52.0 52.0 52.0
Pre-tax margin 10.2 8.8 13.7 13.4 13.3
Net margin 9.0 7.6 11.9 11.6 11.6
ROE 13.1 10.8 22.5 23.3 23.7
ROA 7.9 6.0 12.7 13.0 13.3
ROIC 8.4 7.1 19.3 19.5 19.6
RONTA 12.6 19.0 27.6 28.4 29.8

Leverage
Interest cover (x) n.a. 349.1 422.7 n.a. n.a.
Debt to total capital 30.4 4.1 0.2 0.2 0.2
Debt to equity 43.7 4.2 0.2 0.2 0.2
Net debt/(cash) to equity (28.0) (23.3) (11.9) (9.4) (10.5)
Current ratio (x) 1.8 1.9 1.8 1.7 1.7
Source: UOB Kay Hian

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S i n g a p o r e Tuesday, 13 October 2020

Appendix I: Company Background

iFAST is a leading wealth management fintech platform, with AUA of approximately
S$11.15b as at 30 Jun 20.
Incorporated in the year 2000 in Singapore, iFAST provides a comprehensive range of
investment products and services to financial advisory firms, financial institutions, banks,
multinational companies, as well as retail and high net worth investors in Asia. The Group A shift of assets in Asia to wealth managers in
offers access to more than 11,000 investment products including unit trusts, bonds and recent years has benefitted iFAST’s B2B
Singapore Government Securities, stocks and exchange traded funds, and insurance business.
products. It also offers services including online discretionary portfolio management
services, research and investment seminars, IT solutions, and investment administration
Improved population financial literacy and
and transaction services. The company is present in Singapore, Hong Kong, Malaysia, growth of retail investing has benefitted
China and India. The company has more than 420,000 B2B adviser-assisted and business- iFAST’s B2C arm in recent years.
to-consumer (B2C) customer accounts as of 2019, as well as over 400 clients (financial
advisory firms, institutions, banks and Internet companies) under its B2B services arm.
B2C BUSINESS
B2C caters to investors who prefer to do their own investments online (DIY investors). B2C represents 27.8% of iFAST’s total AUA in
iFAST offers the FSMOne.com multi-products transactional platform in Singapore, Hong 2019.
Kong and Malaysia. It encompasses a wide range of investment products, supported by a
user-friendly website and mobile application, research content and customer service
support. Fundsupermart (FSM) offers a range of investment and insurance products to
retail investors.
B2B BUSINESS
B2B caters to the requirements and business needs of financial advisory firms, financial B2B represents 72.2% of iFAST’s total AUA in
institutions and banks advising retail and HNW clients. iFAST provides a suite of services to 2019.
B2B partners, including a wide range of investment products, fee collection, operational
support, IT solutions, and wrap account services. It provides tax-effective employee benefit
solutions to companies that want to administer pension schemes for their employees via an
Internet platform. It also provides investors with transparent adviser-assisted wealth
management plans.
FY19 SALES BY GEOGRAPHY (%)
B2B2C BUSINESS
Business-to-business-to-consumer (B2B2C) - Launched in recent years, iFAST Fintech
Solutions provides innovative and customisable fintech solutions to institutional clients and
business partners to develop and improve their B2C fintech capabilities.
SHIFT TOWARDS HIGHER B2C SALES MIX
The shift in sales mix towards higher B2C non-recurring sales is set to accelerate on the
back of the increased retail investing activity as a result of the COVID-19 pandemic.

Source: iFAST

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S i n g a p o r e Tuesday, 13 October 2020

Appendix II: Industry Outlook

WEALTH UNDER MANAGEMENT IN ASIA CONTINUES TO GROW
Amid a global economic slowdown due to the COVID-19 pandemic, it is likely that the pace Short-term slowdown in the growth of the
of growth for the wealth management industry is set to slow down in the near term. wealth management industry globally due to
However, across the globe, Asia remains a bright spot for wealth management. According near-term market uncertainties.
to KPMG (APAC)’s head of asset management Bonn Liu in a report dated Jul 20, APAC
AUM growth is expected to outpace American and European counterparts. It is driven by
fundamental factors that will sustain long-term growth of the wealth management industry in Asian wealth management to continue to
Asia, despite impacts of the pandemic3. Overall, PwC has laid out growth expectations for outperform globally from ageing population
and maturing financial markets.
AUM in Asia to reach US$29.6t in 2025 from US$15.1t in 2017.
According to a report by McKinsey, the consulting firm estimates that as the “great wall of
4
Chinese capital” opens up, over $6t of assets for management will be available . We have
seen such regulatory relaxation recently; most notably in Apr 20 where the Chinese
government opened up the asset management sector to foreign firms and allowed for
Financial markets in China continue to open
foreign funds to obtain fund management licences. This boosts optimism that financial
and help spur growth in Asia’s wealth
markets in China will continue to open and help spur growth in the Asian wealth management industry.
management industry. Additionally, it is estimated that an ageing population in Asia will lead
to double digit growth in pension and insurance assets that will further propel Asia’s wealth
management industry. As iFAST covers a wide array of wealth management services,
including pensions and retirement schemes, we see tailwinds for the B2B segment of the
business.
Among the top disruptive trends in wealth management according to Deloitte, retail
investors are now demanding access to the same asset classes and investment strategies
5 Digitalisation is the only way to bring a wider
as HNW and institutional investors . This necessitates the digitalisation of these services to
range of asset classes and products to retail
provide the same access at lower costs (cutting the need for personal and exclusive investors.
financial advisers). Digital brokerages such as iFAST are optimally positioned to capture
this trend; offering a wide variety of products and services including global equities, bonds,
exchange traded funds (ETF), government securities and insurance products.
Accelerated by the COVID-19 pandemic, the reliance of digital wealth management The pandemic has increased reliance on
platforms has increased. Additionally, as economies begin to pick up in the coming years digital wealth management platforms.
and more liquidity flows towards financial assets, digital wealth managers such as iFAST
will be the main beneficiaries. This comes as institutional and retail investors seek to
capitalise on the start of a bull market. To meet this growing demand, financial institutions
will also seek back-end and secondary services from which iFAST’s B2B segment stands to
gain.
Asset growth in Asia’s wealth management industry fell from an average of 15% from 2012-
6
17 to a mere 5% for the first time in 2018 , mainly due to weaker Asian markets and
geopolitical uncertainties.

3 https://home.kpmg/xx/en/blogs/home/posts/2020/07/asset-management-in-asia-pacific.html
4 https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Will%20the%20good%20times%20keep%20rolling%20for%20Asias%20asset%20managers/Will-the-good-
times-keep-rolling-for-Asia-asset-managers-web-final.pdf
5 https://www2.deloitte.com/us/en/pages/consulting/articles/ten-disruptive-trends-in-wealth-management.html#
6 https://www.mckinsey.com/industries/financial-services/our-insights/asian-asset-management-protecting-and-creating-value-in-disruptive-times

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S i n g a p o r e Tuesday, 13 October 2020

BREAKDOWN OF ASSETS ACROSS APAC (US$’T)

Clients 2014A 2015A 2016A 2017A 2020F 2025F APAC BREAKDOWN OF ASSETS
(US$'t)
Pension Funds 3.8 3.9 4.0 4.6 5.8 6.8 250
Insurance Companies 7.5 7.7 9.1 10.5 11.7 13.7
200
Sovereign Wealth Funds 2.6 2.7 2.8 3.1 4.0 5.7
HNWI 15.1 15.5 16.7 17.0 19.7 28.9 150

Mass Affluent 19.8 20.4 22.1 22.3 25.9 36.6

100
Institutional (Unmanaged) 60.8 62.6 67.6 68.5 79.5 114.2
50
Total Assets (A) 109.6 112.8 122.3 126.0 146.6 205.9
APAC AUM (B) 8.8 11.0 12.1 15.1 16.9 29.6 0
2014A 2015A 2016A 2017A 2020F 2025F
% Penetration Rate (B / A) 8.0 9.8 9.9 12.0 11.5 14.4 Pension Funds Insurance Companies Sovereign Wealth Funds
HNWI Mass Affluent Institutional (Unmanaged)
Source: PwC, UOB Kay Hian
Source: PwC, UOB Kay Hian

LOWER FEES, HIGHER VOLUME

Fee compression has been a decades-long trend since Charles Schwab, a brokerage, Fee compression trend in Southeast Asia set
banking, wealth management and financial advisory firm, offered discounted stock trades in to accelerate on deeper penetration.
the US in 1975. In recent years, the rapid adoption of online brokerages as the main form of
trading for retail and institutional traders has quickly pushed fees down further. This comes
in tandem with the rise of passively managed funds that command much lower fees from its
actively managed counterparts. This sector-wide fee compression culminated in the
eventual zero-fee trades adopted in the US by most online brokerages, including Charles
Schwab, Interactive Brokers, as well as TD Ameritrade and E*TRADE (both are digital
brokerages offering a wide range of products for retail and institutional investors), in Oct 19.
In Southeast Asia, the fee compression trend has largely been slower, partly due to the iFAST’s wide range of products and services
presence of less mature financial markets in the region. However, the fee compression captures the gap between hands-off
brokerage and higher-cost active asset
trend is set to accelerate as more online brokerages, such as TD Ameritrade, penetrate the
management.
regional market offering lower or no fees for trading. However, brokerages such as iFAST
continue to differentiate themselves by offering a wider variety of products, including unit
trusts and insurance products. Additionally, iFAST’s ability to provide a vast range of
services on advisory and portfolio management allows the wealth management platform to
effectively capture the gap between hands-off zero-fee brokerage and higher-cost active
asset management.
A silver lining to the fee compression is the higher volume due to lower entry barriers and
costs to trading and investing. This is complemented by a new generation of young adults
who are becoming increasingly financially literate, bringing the management of their
personal portfolios into their own hands. With greater transparency of information, the
average retail investor seeks the same access to products and services as HNW individuals
and institutional investors - benefitting platforms such as iFAST.
BANKING AND WEALTH MANAGEMENT CONSOLIDATION
The value in digital brokerage and wealth management is not lost, despite the fee
compression which is faced globally. In Nov 19, Charles Schwab announced its US$26b
acquisition of TD Ameritrade (17% premium at the time of announcement). Then in Feb 20,
Morgan Stanley, most well known globally as a leader in investment banking, announced a
US$13b acquisition of E*TRADE (30% premium at the time of announcement).
Charles Schwab and Morgan Stanley have cited the importance of digital wealth
management in their overall strategy in capturing the growing asset management trend
globally. This is due to their ability to capture a wide customer base and the synergies in
banking and wealth management. As such, we believe that iFAST remains an attractive
M&A target for larger financial institutions in Asia. This is despite the recent rally in share
prices, supported by its proven track record and potential for sustained growth. Additionally,
the aforementioned mergers support iFAST’s bid for a digital wholesale banking licence.
The premium paid in the acquisitions of E*TRADE and TD Ameritrade stand testament to
the synergies between banking and wealth management that iFAST is trying to pursue.

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S i n g a p o r e Tuesday, 13 October 2020

TD Ameritrade and E*TRADE are relatively low commission brokerages that have led the
fee compression trend in the industry for the past decade. However, both firms have
continued to grow rapidly in recent years despite the bulk of their operations being
conducted within the mature US financial market. This shows the growth potential of the
online brokerage business despite the fee compression. TD Ameritrade has been able to
outpace E*TRADE in growth due to its larger international presence. We see this as an
encouraging sign for iFAST, given the growth outlook in the Asia-Pacific region. As a
homegrown brand, iFAST claims a home ground advantage in Southeast Asia, and the new
offices in China will allow for greater penetration and growth in the future.

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S i n g a p o r e Tuesday, 13 October 2020

Appendix III: Risk Factors

Fee compression. With more online brokerages offering commission-free trading services,
iFAST needs to continue to differentiate itself through its unique range of products and
services, or competitive fee compression would weigh on the fee and commission revenue.
Increasing competition. Naturally, as the wealth management industry in Asia gains
traction, there have been more players entering the field. Especially in China, subsidiaries
of Chinese mega-banks such as the Bank of China, China Merchants Bank and China
Construction Bank have launched wealth management services to capture this demand.
Some of these banks have initiated a joint venture in active wealth management with global
leaders such as JPMorgan Asset Management, French manager Amundi, BlackRock, and
Temasek, among others. Additionally, international brokerages such as Interactive Brokers
and TD Ameritrade have been increasing their footprint in the region, offering lower fees
and lower commissions.
Inability to reduce cost of sales. As fee compression affects the fee and commission
income for iFAST, we expect a similar effect to occur for the fees paid to third-party
financial advisers, which are included in the cost of sales. Additionally, as iFAST continues
to scale and achieve higher AUAs, we believe they will be able to command lower
commissions and fees as a percentage of the higher AUA. However, if iFAST is unable to
do so, gross margins will be adversely affected, and consequently affect iFAST’s bottom-
line and dividend payout.
Share price is upbeat due to positive sentiment. Alongside a demand for growth equity,
iFAST’s bids to digitalise Hong Kong’s pension system and for a banking licence in
Singapore seems to be partially priced in. If iFAST fails to secure both bids, there will likely
be a downward correction in the share price for the near term.

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Appendix IV: Key Management

SELECTED DIRECTORS/ MANAGEMENT
Name Position Experience

Mr Lim is the Chairman and CEO. He co-founded the company with the launch of its B2C division Fundsupermart.com in
Singapore in 2000. The B2B division, iFAST Financial, was launched in 2001. Mr Lim subsequently led the company’s
regional expansion efforts, extending iFAST’s presence to Hong Kong, Malaysia, China and India, building a well-established
fintech ecosystem across the five markets. Mr Lim also led the company to its successful listing on the SGX-ST Mainboard in
Mr Lim Chung Chun CEO and Chairman Dec 14.
Before setting up the company, Mr Lim was the Head of Research at ING Barings Securities. He graduated with a Bachelor
of Engineering (Electrical) from the National University of Singapore in 1991, and obtained a Diploma in Investment from The
Institute of Banking and Finance in 1993.

Mr Yao was previously the Minister of State at the Ministry of Defence, the Minister of State and the Senior Minister of State
at the Prime Minister’s Office. He was the Mayor of South East District from 2004-11, Deputy Speaker of Parliament from
2006-11, and Member of Parliament for the MacPherson Single Member Constituency from 1991 to 2011. From 2009-18, Mr
Mr Yao Chih Matthias Lead Independent Director
Yao was a member of the Housing & Development Board. He is also currently the Managing Director of Agmonton. He was
awarded the Overseas Merit Scholarship in 1975 and holds a Bachelor of Commerce (Honours) from the University of
Birmingham in the UK in 1978.

Mr Wong is responsible for the day-to-day management as the Group COO. He is also the Group Chief Risk Officer. Prior to
joining the company, Mr Wong was with a well-known fund management company as a manager responsible for the
marketing, product development, as well as sales administration and sales in respect of funds from 1994 to 2000. From
Mr Wong Soon Shyan COO
1989-91, he worked briefly as an external auditor before joining a foreign bank as a credit analyst and worked as an
accountant at an undisclosed firm from 1992-94. Mr Wong graduated with a Bachelor of Accountancy degree from the
National University of Singapore in 1989. He is also a Chartered Financial Analyst.

Mr Leung joined the company in Aug 06 and is responsible for its financial and accounting matters. He has more than 20
years of experience in auditing, accounting, taxation and financial management. Prior to joining the company, Mr Leung
worked as an auditor in the Hong Kong and Singapore offices of an international accounting firm from 1991-98 and was
promoted to assistant manager in 1996. From 1999 to 2006, he held various financial and accounting positions in companies
in different industries. This includes companies in the business of machinery and equipment manufacturing, the provision of
Mr Leung Fung Yat David CFO e-commerce services, investment holdings, electronics and semiconductors, retail and the manufacture and trading of health
food products.
Mr Leung graduated with a Bachelor of Arts in Accountancy with Honours degree from The Hong Kong Polytechnic
University in 1991 and obtained a Master of Business Administration from the Imperial College London in the UK. In 2019,
he was named Best CFO for listed companies with less than $300m in market capitalisation at the Singapore Corporate
Awards.
Source: iFAST

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S i n g a p o r e Tuesday, 13 October 2020

Appendix V: Corporate Milestones

MAJOR CORPORATE MILESTONES
- Fundsupermart.com was incorporated in Singapore in Jan 2000 (subsequently renamed iFAST Financial in Apr 03)
- Fundsupermart Holdings was incorporated in Singapore in Sep 2000 (subsequently renamed iFAST Corporation in Mar 03)
- iFAST Platform Services (B2B) was launched in Singapore to provide a dedicated unit trust investment platform and custodian services to Independent
2000-06
Financial Advisers and their respective clients
- FSM Singapore started distributing Singapore Government Securities
- The Chinese version of FSM SG was launched as the first player in the unit trust retail market to target Chinese investors
- iFAST began operations in Hong Kong with the launch of FSM Hong Kong in Jul 07; the B2B business was launched in Jul 08
- iFAST Malaysia launched FSM Malaysia in Sep 08 and the iFAST Platform services for corporate unit trust advisers in Oct 08
2007-11 - Acquisition of ING Platform Services, a Hong Kong-based platform (subsequently renamed iFAST Platform Services (HK)) in 2009
- iFAST Global Prestige platform was first launched in Singapore in 2009 before beginning operations in Hong Kong in Jul 10
- “FSM Mobile” App was launched in Singapore, Hong Kong and Malaysia
- FSM SG launched its Where Income & Savings are Enhanced programme in 2012, offering over 50 bond funds at 0% sales charge. Subsequently, the
“Bond Funds at 0%” initiative began on FSM HK in 2012 and FSM MY in 2013
- iFAST China was incorporated in Jul 14
- iFAST was officially listed on the SGX-ST Mainboard on 11 Dec 14
- Launch of Bondsupermart in 2015
2012-15 - iFAST Singapore began the distribution of bonds and ETFs in May 15
- iFAST HK received approval to carry out Type 9 Regulated Activities, after which the online DPMS (Discretionary Portfolio Management Solutions) was
launched on FSM HK
- iFAST China received the Funds Distributor Qualification
- iFAST was awarded “Best Investor Relations - Merit Award” at the Singapore Corporate Awards 2015 under the First-Year Listed Companies category, as
well as the “Most Transparent Company Award 2015, New Issues Category” at the SIAS Investors’ Choice Awards 2015
- Acquisition of Hong Kong securities firm in 2016, which was subsequently renamed iFAST Securities (HK)
- Acquisition of a stake in the holding company of iFAST’s India platform business in 2016
- iFAST Singapore received approval to include fund management in its Capital Markets Services licence in 2016, and to include listed stocks in its conduct of
dealing in securities and providing of custodial services for securities
- Acquisition of an insurance brokerage firm in Hong Kong in 2016, which was subsequently renamed iFAST Insurance Brokers (HK)
- FSMOne was launched in Singapore in 2016, offering products and services such as HKEX Stocks/ETFs, online DPMS (Discretionary Portfolio Management
Solutions), all funds at 0%, Bond Express, and insurance products
- iFAST Singapore was admitted as a trading member of SGX-ST and a clearing member of The Central Depository in 2017, while SGX trading capabilities
and US stockbroking services were subsequently launched in Singapore
- FSMOne was launched in Hong Kong following the launch of stocks and ETFs on FSM HK in 2017
- Launch of bonds and online DPMS on FSM MY in 2017
- Launch of iFAST Fintech Solutions in 2017
2016-19
- Launch of US stockbroking capabilities in Hong Kong in 2018
- iFAST won the “Best Investor Relations - Silver Award” in the companies with less than $300 million in the market capitalisation category at the Singapore
Corporate Awards 2018
- FSMOne was launched in Malaysia in 2018
- iFAST was accorded the “Best Investor Relations - Bronze Award”, while the CFO, Mr David Leung, was named “Best Chief Financial Officer” under the
companies with less than $300 million in the market capitalisation category at the Singapore Corporate Awards 2019
- FSMOne MY lowered the sales charge for all EPF-approved unit trusts to 0% in Aug 19 following its appointment as one of the distributors on the Employees
Provident Fund of Malaysia’s i-Invest platform
- iFAST China and Raffles Family Office announced to establish a joint venture named Raffles Family Office China in Oct 19
- FSMOne SG launched the new regular savings plan on selected ETFs in November
- iFAST was selected as one of the 36 listed companies to be included in the SGX Fast Track Programme in 2019
- iGM China launched Wrap Account services in Dec 19
Source: iFAST

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Appendix VI: Indicative Timetable of Key Events

INDICATIVE TIMETABLE OF KEY EVENTS
Key Events Timeline Scope Other Info

Release of 3Q20 results End-Oct 20 Expectations: S$11.6b in AUA (+4% QoQ, 16% ytd), 9M20 earnings expected to exceed that of 2019
net profit range between S$5.5m-6m.

Expected 3Q20 dividend Early-Nov 20 Estimated DPS of S$0.02 3Q19 interim DPS of S$0.0075

Digitalise HK retirement fund system 2H 2020 Create an electronic platform to centralise data for 4.3m - Estimated revenue of HK$37b (S$6.48b) over 10 years
members by 2022, in a bid to consolidate multiple
- Up against other finalist led by Ping An’s OneConnect
accounts, switch between plans and lower fees.
Financial Technology

Digital banking license 2H 2020 Specific to the digital wholesale bank (DWB) license that - iFAST short-listed among nine other candidates, bidding
iFAST is bidding for: for three available DWB licences
- A DWB will be allowed to take deposits from and - As at Jun 20, short-listed candidates will present their:
provide banking services to SMEs and other non-retail a) value proposition and business model; b) ability to
customer segments manage a prudent and sustainable digital banking
business; and c) growth prospects and other
contributions to Singapore’s financial centre

Release of 4Q20 results Mid-Feb 21 Expectations: S$12b in AUA (+3.4% QoQ, +20% ytd), net 2020 earnings expected to be S$20.8m (+118.5%)
profit range between S$6.1m-7.1m.

Expected 4Q20 dividend End-Apr/ Early-May 21 Estimated final DPS of S$0.024, taking full-year DPS to 4Q19 final DPS of S$0.009
S$0.059

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