iFAST

[Curiousparty]

iFast clientele base is around the whole world. Singapore market is just one part of the ecosystem..

FAQ - For iFAST Global Bank, what do you think is the most significant growth driver for deposits, as you will need over $750 million new deposits to breakeven by the end of this year?

Answer -

iFAST Global Bank (iGB) consists of 3 business division, namely (i) Digital Personal Banking (“DPB”), (ii) Digital Transaction Banking (“DTB”); and (iii) EzRemit business.

In my opinion, the division with the biggest potential will be from the Digital Personal Banking. This is the part of the business where we are looking to be able to attract customers from all over the world to open account with iGB and put deposits in.

Currently we have customers from over 70 countries with accounts opened with iGB. The deposit base is more concentrated from a few countries, about one-third of deposits is from UK residents, and the remaining from other regions.

What we are seeing is, the demand that we are expecting from customers who want to open bank accounts outside their home country has proven to be true, and we are seeing deposits coming in. Some digital banks tend to burn huge amounts of money to acquire business before seeing the inflows, while for iGB, we are able to see natural demand bringing in deposits, and this is the premise that we actually have when we acquired the bank and set up the division.

From our perspective, a Bank is an institution that allows us to let various customers from around the world to open account and to deposit cash, where we then collect the deposits and we make a spread of around 1%, 1.25%, to 1.5%, and we have taken a low-risk approach with a conservative balance sheet strategy. With the ability to collect deposits from around the world, and given the potential upside, DPB is the biggest driver that we are looking at going forward.

While we expect the other parts of iGB to grow, including Digital Transaction Banking and EzRemit, the key reason as to why the bank was acquired was for personal banking, which is also synergistic with our wealth management platform business.

We have already seen some customers who have open accounts with iGB who have also realised that they are able to transfer monies to a Singapore platform, where we have made it seamless for them to also do their investments with iFAST.

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By Q4 2024 or Q1 2025, iGB should breakeven. We will know soon...

[dreamybear]

Rather interesting approach by formulating open questions .... perhaps shareholders can take the opportunity to validate their understanding or consider adapting these questions for the next AGM Q&A.

https://sakuraresearch.com/?p=22

[weijian]

Rather interesting approach by formulating open questions .... perhaps shareholders can take the opportunity to validate their understanding or consider adapting these questions for the next AGM Q&A.

https://sakuraresearch.com/?p=22

With the exception of the HK ePension revenue durability beyond 2025, I do not really agree with most of SR's points:

(1) Big increase of trade receivables turnover days I am puzzled why "uncompleted contract receivables" are added as part of receivables consideration. These sums are not part of revenue as they are simply money that is in transition between buyer/seller via its brokerages. Matter of fact is a growing "uncompleted contract receivables" means business activity is growing.

(2) Flattering cashflows by adding customer deposits When a brokerage adds a bank to its business, it has to add the accounting as well. The auditors probably wouldn't sign off if you don't do so! If cashflows are flattered, it is only the result, not the reason. There is a big difference in reviewing the cashflow of a brokerage VS brokerage/bank.

(3) Taking longer to pay its suppliers due to cashflow issue This is a classic example of trying to fit an observation into one's pre-conceived conclusion, I suppose. There are tons of reasons for taking longer to pay suppliers. IMHO, we have to look at all the components in the working capital (inventories, contract assets/liabilities and receivables/payables) for a holistic understanding.

[Curiousparty]

i do have a different perspective.

i was wondering why will the average person not go to his/her local banks with a strong local presence (i.e. singaporean will think about dbs, ocbc, uob) and instead choose to bank with this "Global bank"? Is the global bank accepting customers that the local banks dont want?

i also dont see small digital banks compete successfully with incumbent banks. Digital banks dont seem to be able to scale effectively. Say different people from country A, country B, country C...., country Z want to take up loan, i will be skeptical that the small digital bank can underwrite all the loans smartly and efficiently. You will need to train personnel to be familiar with the rules and regulation in different countries, all of these cost money and i would say that small digital banks wont be able to do it effectively

iFast clientele base is around the whole world. Singapore market is just one part of the ecosystem..

FAQ - For iFAST Global Bank, what do you think is the most significant growth driver for deposits, as you will need over $750 million new deposits to breakeven by the end of this year?

Answer -

iFAST Global Bank (iGB) consists of 3 business division, namely (i) Digital Personal Banking (“DPB”), (ii) Digital Transaction Banking (“DTB”); and (iii) EzRemit business.

In my opinion, the division with the biggest potential will be from the Digital Personal Banking. This is the part of the business where we are looking to be able to attract customers from all over the world to open account with iGB and put deposits in.

Currently we have customers from over 70 countries with accounts opened with iGB. The deposit base is more concentrated from a few countries, about one-third of deposits is from UK residents, and the remaining from other regions.

What we are seeing is, the demand that we are expecting from customers who want to open bank accounts outside their home country has proven to be true, and we are seeing deposits coming in. Some digital banks tend to burn huge amounts of money to acquire business before seeing the inflows, while for iGB, we are able to see natural demand bringing in deposits, and this is the premise that we actually have when we acquired the bank and set up the division.

From our perspective, a Bank is an institution that allows us to let various customers from around the world to open account and to deposit cash, where we then collect the deposits and we make a spread of around 1%, 1.25%, to 1.5%, and we have taken a low-risk approach with a conservative balance sheet strategy. With the ability to collect deposits from around the world, and given the potential upside, DPB is the biggest driver that we are looking at going forward.

While we expect the other parts of iGB to grow, including Digital Transaction Banking and EzRemit, the key reason as to why the bank was acquired was for personal banking, which is also synergistic with our wealth management platform business.

We have already seen some customers who have open accounts with iGB who have also realised that they are able to transfer monies to a Singapore platform, where we have made it seamless for them to also do their investments with iFAST.

====

By Q4 2024 or Q1 2025, iGB should breakeven. We will know soon...

[Curiousparty]

Rather interesting approach by formulating open questions .... perhaps shareholders can take the opportunity to validate their understanding or consider adapting these questions for the next AGM Q&A.

https://sakuraresearch.com/?p=22

With the exception of the HK ePension revenue durability beyond 2025, I do not really agree with most of SR's points:

(1) Big increase of trade receivables turnover days I am puzzled why "uncompleted contract receivables" are added as part of receivables consideration. These sums are not part of revenue as they are simply money that is in transition between buyer/seller via its brokerages. Matter of fact is a growing "uncompleted contract receivables" means business activity is growing.

(2) Flattering cashflows by adding customer deposits When a brokerage adds a bank to its business, it has to add the accounting as well. The auditors probably wouldn't sign off if you don't do so! If cashflows are flattered, it is only the result, not the reason. There is a big difference in reviewing the cashflow of a brokerage VS brokerage/bank.

(3) Taking longer to pay its suppliers due to cashflow issue This is a classic example of trying to fit an observation into one's pre-conceived conclusion, I suppose. There are tons of reasons for taking longer to pay suppliers. IMHO, we have to look at all the components in the working capital (inventories, contract assets/liabilities and receivables/payables) for a holistic understanding.

The net margin showed improvement in 2023 and remained high in 1Q2024. Do you see more operating leverage in your business and do you expect to net margins to improve in the rest of 2024 or will it remain at current levels?

In 2024, the increase in profit, to a substantial extent, is because of the ePension project starting to contribute to the improvement in the overall margin for the Group. As we go through the year, the margin may be similar to the 1Q, but in the next couple of years, there may be room to see further improvement as the growth of the various segments of the business is expected to improve further.

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For the ePension project, understand that the onboarding schedule has been finalised. Would be great if you could share some information such as the expectation on how to look at the onboarding schedule.

In terms of Opex, is the old Opex over the years dependent on the onboarding schedule of the ePension business or will there be a new run rate that we should be using?

The onboarding will start in 2Q2024. The bigger ramp up in the revenue can be expected in 2025, but in the next couple of quarters, you will not be seeing too much of a ramp up in terms of revenue.
In term of expenses, there will be some ramp up for the ePension business as we increase the onboarding rate. Going into 2025, the increase in revenue should be more than able to offset expenses, so this is not too much of an issue. For 2024, the overall profitability should be quite healthy as well.

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Please give an update on Hong Kong ePension and ORSO project.


For Hong Kong ePension project, the development of the platform has been completed as officially announced in February 2024, and now we are working on the onboarding process. There were some initial delays which has been sorted out by now, and the timeline has been fixed and has seen good progress.

For ORSO project, we expect this project to start contributing by the end of 2024, or from 1Q2025 onwards, which will add on to our business. Currently, it is in the midst of preparation for the official start date for this part of the ORSO business.

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With regard to Hong Kong ePension, the guidance was for PBT to reach HKD 100 million in 2023, HKD 250 million in 2024 and HKD 500 million in 2025. Is the target still on-track given the delay in the project? Has the onboarding issue been resolved? Are there any variable component after 2025 besides service fee?

For the Hong Kong ePension division, there are two main parts, and the biggest is the eMPF project, and the other part is ORSO (Occupational Retirement Schemes). After the onboarding of eMPF, the majority of revenue contribution to

Hong Kong operations will be from the eMPF project especially in 2024.
In addition, the Company is also working on the ORSO business and we expect to see some contribution from ORSO.

For the ePension business, the revenue is earned from fixed service fee decided beforehand and is not subject to fluctuations in the stock market or the Group’s AUA. 

For the ORSO part of the business, iFAST handles the IT platform and the ongoing administration, and the revenue earned will be a certain proportion of AUM, and hence there might be variability based on overall market conditions. 

Going forward, in the next few years, it can be assumed that there will be limited fluctuations due to stock market movements for the majority of the ePension revenue.

Guidance provided by the Company included delay in the project and there is no change to the guidance provided earlier. Despite the delay, work is ongoing, including the onboarding and preparation process, and we will continue to see contribution coming in later this year.

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