history of AUA driven business model has relatively short history in Asia
ex-Japan. There is no other similar dominant players with an independent
investment platform provides the services to both B2B and B2C market segments.
This has put up a challenge to adopt the relative valuation for iFAST
performance because there is no direct competitors to make peer comparison.
Discount Model (DDM) is used to value iFAST based on the assumption that the
only cash flows that iFAST shareholders would receive are dividends. Even
though iFAST do not have a fixed dividend policy, however, in 2014 to 2016 (iFAST
iFAST had distributed dividends of more than 60% of net profit after tax to
return the value to shareholders in 2015 and 2016.
has a very strong and clean balance sheet, iFAST has zero debt and a positive
free cash flows even after the expansion in China. IFAST logged in S$36,141,000
in 9M2017, compared to the last 9M2016 financial period (iFAST
with the growth in profitability and AUA have provide confidence that the
company might raise the dividends in the coming fourth quarter. Assumptions
are made based on iFAST still expanding in China and would expect to harvest
the rewards in China after another two years. Not only that, iFAST’s adjusted
dividend yield is 3.21% for 2015 and 2016. By making conservative assumption on
the dividend will be growing at 3% annually, and assuming required rate of
return of 8%, the intrinsic value for iFAST would be SGD 0.56. As of 14
December 2017, the closing price for iFAST is SGD 0.87. iFAST is overpriced to
looking at the following ratios, we could further get into the nitty gritty of
has an adjusted P/E ratio of 42.27, which means with the current earnings of iFAST,
it will required at least 42 years to reach at its current market share value.
The high P/E ratio indicated that iFAST high premiums are required to pay for
the current earnings and iFAST is way too expensive to buy in for now.
have an adjusted NTA of 0.2573, which is trading over iFAST market price, this
also indicates that iFAST is overvalued. If iFAST were to liquidate, the
investors could be left holding the bag.
The ROE has declined to 6.94% in
2016. iFAST generated a 6.94% on every dollar invested by shareholders in 2016.
It could indicate iFAST had injected new equity capital to try to generate more
profits due to the negative market sentiments in 2016. By further looking at
the ROA, iFAST only generated 5.73% of return on assets in 2016. This tells us
that iFAST earned less than 1% profit on the resources it owned. (McClure)
iFAST is financially solvent to
meet its current short term debt obligations 5 times over. The cash ratio above
1 further suggests that iFAST is liquid and can easily fulfill the short term
debt servicing with only cash. (MyAccountingCourse)
It would be more significant to
compare with net revenue instead of revenue; the ratios could give more
meaningful indication to how iFAST business is doing. The Operating Cash Flow
to Net Revenue has declined to 13.84% in 2016; this shows that the ability of
iFAST to turn net revenue into cash has declined. This might due to the bad
market sentiments in 2016 as the cash generated from operation has declined.
However, iFAST has a more than 10% of surplus cash flow against the net
revenue, this indicates as a characteristic of a good quality company.
In conclusion, I do think iFAST
has a good business model. However, currently it is too expensive to buy in.
iFAST could definitely use the cash in hands to acquire any good business available
instead of holding idle cash.