iFAST target price cut on digital bank acquisition by DBS

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DBS Group Research cut its target price for iFAST Corp. to S$11.37 from S$12.93 after the wealth-management platform said it would acquire a U.K.-based digital bank.

On Friday, IFAST said it entered a deal to acquire an 85 percent stake in BFC Bank, which is fully licensed in the U.K., for around 25 million British pounds, or around S$45.9 million from BFC Group, in a move to add a digital bank to its wealth management platform.

DBS pointed to initial start-up losses expected in 2022 and 2023 as well as integration costs to incorporate the digital bank as its reasoning for cutting the target price.

The research note, dated Monday, said earnings forecasts for 2022 and 2023 were cut by 21 percent and 11 percent, respectively.

But DBS also kept a Buy call on iFAST’s shares.

DBS said having a digital bank in a trusted jurisdiction was a “key missing link” in iFAST’s fintech ecosystem, and it can accelerate the growth of the overall wealth-management platform.

“Seamless access and connectivity to global products and global exchanges will be the trend going forward. There are not many players currently with a full suite of services,” DBS said. “Adding a digital bank would allow iFAST to acquire customers at a faster pace, as it taps into the growing demand of customers around the world for good wealth management and digital banking platforms.”

DBS said it was also positive on iFAST on growth from the Hong Kong business from 2024 onwards.

In January 2021, iFAST announced it participated in PCCW Solutions’ successful tender for the eMPF Platform project in Hong Kong, with the Singapore-listed company the prime subcontractor for “category C,” which includes Mandatory Provident Fund (MPF) scheme operation services, transformation services and user-delivery services.

In addition, DBS said it saw room for iFAST to grow its assets under administration (AUA), noting it has only around 10 percent of Singapore’s around S$128 billion AUA in collective investment programs.

 

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