WEALTH management platform iFast Corporation is taking over the investment and insurance business of financial advisory company MoneyOwl.

 

The latter &ndash which had been operating as a social enterprise &ndash had decided to wind down its business after five years of operations, citing high operating costs and low revenue.

 

The two companies already had a prior relationship, with MoneyOwl using iFast&rsquo s B2B platform and custodian services.

 

The transfer would see MoneyOwl&rsquo s clients transacting on iFast&rsquo s portal starting from next month. Such an arrangement may be helpful for iFast&rsquo s ambitions to build a &ldquo truly global&rdquo business with new services being offered to its clients.

 

New clients

Taking over a business that is being wound down may come with challenges, especially since the previous operations were already assessed as not commercially viable.

 

The move could, however, make sense for iFast, which is on a mission to grow its assets under administration (AUA), as well as its digital banking business.

 

MoneyOwl built a contact base of 91,000 &ndash including those in its e-mail list &ndash over its five years of operations.

 

Only around half of these had accounts, and slightly more than 10 per cent &ndash or 9,700 &ndash opted for a revenue-generating service with MoneyOwl.

 

This suggests few prospective customers acted on their financial plans. Still, these clients may be helpful as iFast executes its growth strategy.

 

The company has over 800,000 customer accounts in five markets, with some S$18.8 billion in AUA. It aims to grow its AUA to S$100 billion by 2028.

 

Reaching a broader pool of customers is crucial as the group strives to grow the platform further and build up its digital banking business.

 

Growth drivers

Increased trading activity during the pandemic years pushed iFast&rsquo s shares from under S$0.80 in April 2020 to a high of S$9.94 in October 2021, as earnings and AUA grew.

 

The share price corrected shortly after &ndash amid headwinds from higher inflation and interest rates that resulted in a correction in global markets, and investor aversion to growth stocks.

 

Investors appear to be paying attention to iFast once again, though. Over the past year, its share price has climbed over 25 per cent.

 

For the first half of 2023, AUA grew 8 per cent to S$18.8 billion &ndash not far from the record of S$19 billion at end-2021 &ndash and the company managed to record net inflows.

 

Net profit more than doubled on the year to S$6.6 million and the group expects overall revenue and profitability to show &ldquo marked improvements&rdquo , starting with the second half of this year.

 

Driving the improved profitability in the near term would be the ePension division in Hong Kong.

 

In 2021, PCCW Solutions won the tender for Hong Kong&rsquo s eMPF platform. iFast is PCCW Solutions&rsquo prime subcontractor for a category that includes Mandatory Provident Fund scheme operation services, transformation services and user delivery services.

 

The company has guided for the ePension segment to achieve more than HK$400 million (S$69.5 million) gross revenue this year, with over HK$100 million in profit before taxes (PBT).

 

This is higher than the total revenue of S$42.8 million and S$8.1 million in PBT that its Hong Kong business generated in FY22, and the growth is expected to accelerate.

 

By 2025, iFast targets for the Hong Kong business to achieve PBT of over HK$500 million. The figure is substantially higher than iFast&rsquo s record S$36 million PBT in FY21.

 

Beyond the substantial boost that the ePension business would bring in the coming years, iFast is also betting on digital banking to bring even more significant growth in the long run.

 

In 2022, iFast announced that it would acquire BFC Bank in the UK. It renamed the bank iFast Global Bank, and launched digital personal banking services in April this year.

 

With the banking business still in the early stages of development, the segment is still loss-making &ndash with a loss of S$2.2 million in the second quarter.

 

The group nevertheless expects iFast Global Bank to play a &ldquo major role in the growth of the group in the medium to long term, particularly beyond 2025&rdquo .

 

Chief executive Lim Chung Chun told The Business Times in July that getting one million clients for the bank in five years is a reasonable target.

 

Each client depositing just S$10,000 to S$20,000 would represent S$10 billion to S$20 billion in client assets, he added.

 

If iFast can successfully deliver strong performance on both its growth pillars of ePension and banking, the group&rsquo s earnings could expand significantly from current levels.

 

This may make the counter particularly compelling for growth-oriented investors.

 

Valuations

At its closing price of S$5.82 on Sep 7, iFast trades at a price-to-book ratio of 7.5 and a price-to-earnings (PE) ratio of 171.7, Bloomberg data showed. The group&rsquo s current dividend yield is 0.8 per cent.

 

Such numbers are unlikely to excite value investors, and suggest that many are already pricing in some of the group&rsquo s growth prospects in the coming years.

 

Of the four analysts who cover the stock, Bloomberg data indicated two &ldquo sell&rdquo and two &ldquo hold&rdquo calls, with price targets between S$3.70 and S$4.90.

 

CGS-CIMB analyst Andrea Choong in July upgraded iFast to &ldquo hold&rdquo , with a S$4.90 target, factoring stronger ePension contributions. Her projections include a 30 per cent discount to management&rsquo s guidance to account for &ldquo potential operational bumps&rdquo .

 

Without the discount, the target price computation would be S$5.60, implying 22 times the forecasted PE ratio for financial year (FY) 2025.

 

Choong expects the banking division to be loss-making. &ldquo While management expects this segment to break even in FY2024, we think this may take some time as the losses have yet to narrow,&rdquo she said.

 

Investors may also take some comfort that iFast and its chief executive have bought shares of the company on the market this year, which may be an indication of their confidence in the group&rsquo s prospects.

 

For investors who share the same confidence in management&rsquo s ability to execute and deliver on growing a new business model, the current entry price may still provide potential upside if iFast can continue growing its client base and expand its new banking business.

 

WEALTH management platform iFast Corporation on Thursday (Aug 31) said its Singapore subsidiary &ndash iFast Financial &ndash will be taking over MoneyOwl&rsquo s investment and insurance business.

 

MoneyOwl &ndash NTUC Enterprise&rsquo s financial advisory subsidiary &ndash on Thursday said it was winding down its financial advisory business, and that all commercial activities will cease by Dec 31, 2023.

 

This came after a review concluded that the business would not be commercially viable, and a decision was made to redeploy resources to other areas where NTUC Enterprise can deliver greater social impact, MoneyOwl said.

 

As part of the winding down process, MoneyOwl will transfer its investment and insurance business to iFast Financial, with the latter already the current custodian of MoneyOwl clients&rsquo investment accounts.

 

Following the transfer, all MoneyOwl clients can access their portfolios digitally via the iFast Global Markets platform at the same level of fees, with access to more than 60 advisers on the platform.

 

They may continue to transact on MoneyOwl&rsquo s portal until Oct 24, and on iFast&rsquo s portal starting from Oct 25.

 

Clients may also continue to access MoneyOwl&rsquo s Comprehensive Financial Planning service and will-writing service online until Dec 15, after which all MoneyOwl online services and account logins will be disabled.

 

MoneyOwl will also cease to accept new insurance applications after Sep 8.

 

MoneyOwl was set up to address a gap in the mass market for comprehensive financial advice, but &ldquo there was not enough of a market in the gap&rdquo , said founding chief executive and chief investment officer Chuin Ting Weber in a statement on Thursday.

 

Weber noted that while many recognised the importance of financial planning, most did not take further action and far fewer were inclined to pay planning fees or purchase investment or insurance products.

 

Its products&rsquo low fees, coupled with high costs associated with client acquisition, technology development, and a fully-salaried workforce made it challenging to achieve commercial viability, she added.

 

&ldquo At the end of the day, we are part of a social enterprise group, and it remains vital that we continue to steward resources wisely to better serve the broader interest of the Singapore community,&rdquo Weber said.

 

With the transfer, iFast Financial will also be receiving two of MoneyOwl&rsquo s propriety technology assets, including the insurance robo-comparator and the insurance needs-analysis tool.

On Jul 26, iFast Corporation independent director David Toh Teng Peow acquired 9,000 shares of the company for a consideration of S$44,785.

 

He maintains a 0.09 per cent total interest in the wealth management and fintech business. Toh is also a director and chief technology officer at NTUitive, a wholly-owned subsidiary of the Nanyang Technological University of Singapore. NTUitive is responsible for commercialising the university&rsquo s scientific research and incubating startups.

 

Prior to his current role at NTUitive, Toh spent 11 years working in investment banks such as ING Barings and Lehman Brothers, where he was a top-rated Asia-Pacific technology sector analyst.

 

On Jul 25, iFast reported its H1 FY23 (ended Dec 31) net profit increased by 115.9 per cent from H1 FY22, to S$6.57 million. The group expects its overall revenue and profitability to show marked improvements, starting with H2 FY23, and expects profitability in FY23 to be substantially better than in FY22. The wealth management fintech platform maintains assets under administration of S$18.81 billion as of Jun 30.

 

CGS-CIMB has upgraded its call on iFast to &ldquo hold&rdquo from &ldquo reduce&rdquo , and raised its target price to S$4.90 from S$3.50, as it expects stronger contributions from the global digital banking and wealth management platform&rsquo s ePension project. 

 

The ePension project is designed to provide digital operation and administration services to Hong Kong Monetary Provident Fund (MPF) schemes. 

 

The stronger confidence comes after the MPF authority (MPFA) reaffirmed that iFast&rsquo s ePension project was progressing as planned. 

 

The MPFA said the software development of the ePension platform was largely completed last month, and that the platform is on-track to be fully operational in 2025. 

 

Analyst Andrea Choong wrote on Thursday (Jul 27) that the revised S$4.90 price target factors in the earnings visibility from the ePension project, and assumed an approximately 30 per cent discount due to potential integration challenges of the new platform. 

 

If no integration issues crop up, the target price could be raised to as high as S$5.60. 

 

The boost in confidence is further a result of iFast&rsquo s steady growth in the recent quarters, particularly the group&rsquo s positive performance for Q2 FY2023, which Choong views as confirmation that the ePension project is progressing as planned.

 

Despite the stronger price target, she expects iFast&rsquo s banking division to remain loss-making for FY2023 and FY2024, as the company expands its product suite. 

 

The revenue inflow from the new Occupational Retirement Scheme Ordinance (ORSO) project would depend on the pace of new sign-ups from trustees and partners. 

 

Contrary to iFast&rsquo s forecast that the project will become profitable in Q1 2025, Choong believes that operational delays will continue to dog the performance of iFast&rsquo s banking division. 

 

&ldquo We understand from iFast that it has secured firm indications of interest (for new sign-ups)   from several parties. Operational delays in starting up its ORSO project is a downside risk,&rdquo she said.