iFAST Corporation: Riding the wave of Asia's rising wealth
- Asia's wealth boom fuels iFAST's projected 30% annual AUA growth, based on SGD100bn AUA target by 2028-30
- Digital bank a valuation catalyst, a fully integrated global ecosystem drives significant value
- Gateway to Hong Kong’s retirement market; eMPF to provide sustainable revenue
- SOTP valuation boosts TP to SGD10.88
Riding Asia's wealth wave. iFAST's growth is fuelled by Asia's rising wealth and its expanding wealth management platform and product suite, targeting approximately 30% annual AUA growth for the next five years, based on the group’s target AUA of SGD100bn by 2028-2030. iFAST's dominant market share in Singapore (c.60%, up from 50% few years ago), with only three competitors after a decade, highlights significant barriers to entry.
IGB: A valuation catalyst. iFAST Global Bank's (IGB) potential for value creation is significant, with UK peers like Monzo, Starling Bank, and Revolut valued at over GBP1bn. A fully integrated ecosystem combining iFAST and the digital bank offers considerable synergistic benefits, promising faster growth, reduced costs, streamlined operations, expanded reach, and enhanced profitability. Benchmarking the bank's valuation against UK competitors, we have derived three scenarios, valuing IGB at between SGD250mn-1bn (or about ~SGD0.85 – SGD3.30 per share).
Gateway to Hong Kong’s retirement market. Hong Kong's eMPF and (electronic Mandatory Provident Fund) ORSO (Occupational Retirement Scheme Ordinance) retirement projects present a significant opportunity for iFAST, projected to drive the group’s revenue by close to 50% and 20% earnings growth in FY25F and FY26F, respectively. Long-term operational contracts for the eMPF project will ensure a steady revenue stream, with stronger growth anticipated in 2H25. Similar opportunities in Macau are also being explored.
Riding Asia's wealth wave
Huge potential for wealth management business; iFAST’s current AUA only accounts for a small share. The total addressable market (TAM) for wealth management platforms in Singapore is substantial and projected to grow significantly in the coming years. As of 2023, Singapore's wealth management sector recorded over 10% y/y growth in assets under management (AUM) to SGD5.4tn, with a five-year compounded annual growth rate (CAGR) of around 10%, according to data from MAS. iFAST’ s overall AUA of SGD25.01bn as at end-2024 only accounts for less than 1% of the total AUM.
The Collective Investment Schemes (CIS) market sub segment, encompassing products such as unit trusts, ETFs, and mutual funds, grew by 15% y/y in 2023 to SGD146bn. iFAST’s AUA accounts for approximately 17% of this segment’s AUM.
iFAST dominates Singapore’s wealth management platform market, holding a roughly 60% market share based on the company’s own estimates. High barriers to entry are evident in the sustained presence of only three competitors (iFAST, POEMS, and GROW) over the past decade.
Expecting strong AUA growth. iFAST has set a target to reach SGD100bn in AUA by 2028-2030, from SGD25.01bn as of end-December 2024. AUA for iFAST has grown at a CAGR of 20% between FY14-24, as the group continues to add new products and services on its platforms. We have assumed conservative long-term AUA growth of 20%. However, reaching SGD100bn AUA by 2028-2030 will likely require inorganic growth drivers such as M&As, in our view. Nevertheless, we believe a 20% growth rate per annum is achievable.
IGB: A valuation catalyst
iFAST Global Bank (iGB) has demonstrated significant growth potential, marked by two key developments:
- Achieving profitability within three years upon acquisition.
In 4Q24, iGB reported a net profit of SGD0.30mn, a notable turnaround from a loss of SGD2.57mn in 4Q23. iFAST acquired an 85% stake in UK-based BFC Bank for GBP25mn (approximately SGD45.9mn) in January 2022. The acquisition allows iFAST to tap into new revenue sources, such as interest from banking products (loans, deposits) and digital banking fees, in addition to its existing wealth management and investment-related revenue streams. The scalable nature of the digital bank allows iFAST to grow its client base without the same level of infrastructure costs associated with traditional banking models, further enhancing profitability, positioning it as a leading digital financial platform. - Improving metrics.
Customer deposits surpassed SGD1.01bn by the end of 2024, reflecting a 182.6% increase y/y. In the same quarter, gross revenue increased by 163.7% y/y to SSGD17.2mn, with net revenue rising 136.4% to SGD7.7mn.
The group has put in place various growth initiatives for sustained profitability and market expansion:
- Expanding products and services to create synergistic impact with a full ecosystem, providing one-stop solution: IGB is focusing on expanding its Digital Personal Banking (DPB) division, launching new products like a debit card to enhance local presence, and growing its EzRemit and Digital Transaction Banking (DTB) services. These developments position iFAST Global Bank for continued growth, with expectations of sustained profitability and market expansion in the coming years.
With IGB’s digital banking capabilities, iFAST can offer more integrated financial solutions to its clients, combining wealth management, investment platforms, and banking services like savings, loans, and payments, all under one roof. By combining digital banking with its existing investment and financial platforms, iFAST can further automate customer onboarding, account management, and transactions, reducing operational costs and improving the customer experience. - Targeting new customers and new markets. With the digital bank, iFAST can attract a broader customer base, including retail clients who are looking for digital banking solutions in addition to their investment needs. This can drive both new deposits and new investment opportunities. iFAST can also cross-sell banking products (e.g., savings accounts, digital wallets) to its existing wealth management and investment clients. Likewise, it can offer investment products to clients who use the digital bank for their everyday banking.
With an enlarged customer base, iFAST can leverage analytics to understand customer behaviour better and provide personalised investment recommendations or banking services tailored to individual needs, leading to improved retention rates and higher customer satisfaction. With an expanding iFAST ecosystem, this would make it a one-stop solution for customers' financial needs and increasing brand loyalty.
iFAST’s digital bank opens opportunities to expand its services internationally, offering its innovative solutions to clients in new markets. One of the group’s strategies is to cater to the under-banked retail segment, particularly in Southeast Asia, where over 70% of the adult population lacks adequate access to financial services. By leveraging its expertise in wealth management and digital platforms, iFAST aims to bridge this gap.
Valuation for IGB
Using peers as a benchmark. IGB has no direct competitors in the UK offering the same breadth of products, leveraging its ecosystem for a wider product range vs. peers focused on fewer product segments and markets. Some of its closer peers include Monzo Bank, Starling Bank, Atom Bank, Revolut, and Wise.
- Monzo is a UK-based digital bank, with key business in retail banking, specifically focused on providing a mobile-first, digitally native banking experience. Established in 2015, it turned profitable in FY Mar 2024, with pre-tax profit of GBP15.4mn and revenue of GBP880mn. Its customer deposits are >GBP6bn. It was valued at c.GBP4bn in its last funding round in 2024.
- Starling Bank is a UK-based digital challenger bank offering personal, business, and banking-as-a-service (BaaS) solutions. Officially launched in 2016, the group turned profitable in 2022. The group reported FY Mar 24 pretax profit of c.GBP301mn (+55% y/y) on revenue of GBP682mn (+51% y/y). Customer deposits stood at c.GBP11bn as of Mar 24. It was valued at c.GBP2 to GBP3bn during fundraising exercises in 2022-2023.
- Atom Bank is a UK-based digital-only bank that focuses on mobile banking, lending, and savings products. The bank report pre-tax profit of GBP6.7mn for FY Mar 24, a turnaround from a GBP10mn loss in FY23, on net interest income of GBP100mn (+31% y/y), with customer deposits of c.GBP5.7bn (+78% y/y). It was valued at around GBP362mn in 2023.
- Revolut’s core business revolves around digital banking, payments, and financial services, catering to both individuals and businesses. It has a huge customer base of c.50mn global users and net profit of GBP344mn on the back of GBP1.80bn in revenue for 2023. It was valued at about USD50bn in 2024, according to newswire.
- Wise is a UK-based global fintech company specialising in low-cost, fast, and transparent cross-border payments and international banking solutions for individuals and businesses. It has 12.8mn (+28% y/y) active users as of FY Mar 24. The group reported net earnings of GBP354.6mn (+212% y/y) on GBP1052.0mn (+24% y/y) revenue for FY Mar 24. Current market cap is c.GBP9.8bn.
We believe a valuation of between SGD250mn to SGD1bn is possible for IGB.
Gateway to Hong Kong’s retirement market
eMPF project – 2+5-year contacts, subject to renewal. The group secured the eMPF project back in January 2021. The Mandatory Provident Fund Schemes Authority (MPFA) awarded the contract for the eMPF Platform to PCCW Solutions, with a two-year implementation period and a seven-year operation and maintenance period. The MPF system manages assets totaling approximately HKD1.2tn.
Providing operational and administration services. iFAST's role in this project is to provide MPF scheme operation services, transformation services, and user delivery services, contributing to the development and operation of the eMPF Platform.
iFAST is currently supporting the onboarding of trustees onto the eMPF platform, and is involved in backend administration processing, which is expected to streamline MPF operations and reduce costs. To date, the group has already onboarded five smaller trustees, and targets a total of 10-12 by the end of 2025. We should see higher contribution in 2H25 with the onboarding of the bigger trustees.
Long-term operational contracts to provide a steady revenue stream. The eMPF platform is not just a one-time implementation but will require ongoing operations and maintenance going forward. iFAST’s role in providing MPF scheme operation services and transformation solutions places it in a position to benefit from long-term contracts and a steady stream of business. We estimate the eMPF project accounts for c.60% of the total HK business for 2025. Through its involvement, iFAST will strengthen its capabilities in digital pension solutions, increasing its expertise in providing cloud-based and automated services. This positions iFAST as a leader in the growing market of digital financial solutions for pension funds.
ORSO to start contributing in 2Q25. The ORSO (Occupational Retirement Scheme Ordinance) business is expected to start contributing in 2Q25. The TAM for this scheme is much smaller, at about HKD300bn. Unlike the eMPF, ORSO will contribute directly to the group’s AUA. Besides ORSO, the group is also targeting the pension business in Macau, preparing for the potential collaboration with a partner.
Valuation and Recommendation
Combination of DCF and SOTP valuation to better account for the potential of the digital bank. We have switched our valuation methodology for the group from discounted cash flow (DCF) to a sum-of-the-parts (SOTP) approach to better reflect the digital bank's contribution. Our previous DCF model only considered the bank's top-line revenue, overlooking potential the bank can offer as part of the ecosystem. We maintain the DCF model for the existing wealth management business, given its recurring fee-based income, asset-light nature, strong cash generation, and long-term growth prospects. The SOTP valuation includes three scenarios (Refer to table below) for the bank, starting with a near-term (one-year) target.
Maintain BUY with a higher TP of SGD10.88. Using a sum-of-the-parts (SOTP) valuation and Scenario 1 as the base case, we raise our target price to SGD10.88 (from SGD10.23). We maintain our BUY rating.
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