Upbeat on digital banking license prospects

CGS-CIMB Securities is reiterating its “add” call and target price on iFast Corp at $1.65, say analysts Andrea Choong and Caleb Pang in a July 1 note.

Their price target is based on the sum of parts 26x price-to-earnings forecast for FY21F and a $100 million minimum paid-up capital for its digital wholesale banking (DWB) license.

iFast confirmed on June 18 that it has proceeded to the next stage of assessment for a DWB licence. It is the only DWB applicant listed on the Singapore Exchange (SGX).

It is joined by eight other DWB applicants and five digital full bank (DFB) applicants, the Monetary Authority of Singapore (MAS) announced. These companies comprise Chinese players looking to break into Singapore’s banking scene.

iFast believes it has “more than a 1-in-3 probability” of being awarded the licence for its status as a homegrown player and operating track record in handling cash through its wealth business.

The company intends to reach out to SMEs with good credit ratings, upon commencement of its lending operations.

For this, it plans to extend lower-quantum loans to smaller SMEs — a segment it says is presently underserved by banks, due to its perceived riskiness and limited operating track record.

Meanwhile, it is looking to raise $80 million in capital through internal sources, borrowings and equity raisings, to fund the 65% stake in its consortium with China-based Yillion Group and Hande Group.

Yillion Group operates one of four digital banks in China while Hande Group is dubbed the superpower’s fastest growing and leading FinTech company.

For now, iFast is seeing revenue growth from stock broking, particularly in US equities, which has mitigated the 7% q-o-q decline securities daily average value traded on SGX.

Meanwhile, the digitalisation push from Covid-19 has boosted its net assets under administration (AUA) inflows by 224% y-o-y in 1Q20 to $590 million. Account openings have also increased in this time.

“We remain positive on [iFast] as it is a profitable FinTech player, has a proven track record of growing its AUA, and has strong levels of recurring revenue (>80% of income),” say Choong and Pang. —