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 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 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 SGD 36,141,000
in 9M2017, compared to the last 9M2016 financial period, 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 me.
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.
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.