iFAST Corporation Ltd. (AIY) Earnings Call Transcript & Summary

Hi, everyone. Welcome to IFAST Corporation's Second Quarter 2026 and First Half 2026 Results Presentation. Today from the FA team, we have Chung Chun, our Group CEO; Terence, our Group CFO; as well as members from our finance and Corporate Communications team. So I am JP. I'm from the corporate team at FA. So what I'll do today is I'll run through the key summary and the business update. And Terence, our Group CFO, will give more colors and details on the group's financial results before we all proceed to our Q&A. So in our key summary, I think we've seen strong growth across the board for FA in second quarter of 2026. So if you look at some of the key numbers we've shared here, so total revenue was at $162.4 million, that's 34.8% higher year-on-year. Net profit was up 35% year-on-year to $29.8 million. EBITDA was up 32.7% year-on-year to $48.8 million. So all these numbers are for second quarter of this year. Group AUA reached a record new high of $36.13 billion. That's 32.8% higher compared to last year. In terms of the net inflows trend, we continue to see good momentum. So net inflows for second quarter was at $1.31 billion. That's 2.2% year-on-year growth. And regarding dividend, so our second interim dividend for FY 2026 is at $0.03 per ordinary share. That's 50% higher compared to last year. So we've seen increased profitability driven by growth across various divisions. So firstly, robust growth in AUA across the wealth management platforms in the group. Secondly, we've also seen record profit before tax at our bank division, IFAST Bank in the U.K. And we've also seen growth from our Hong Kong ePension division. So for the Hong Kong ePension division, an important milestone has been crossed in April of this year. So all 12 trustees and a total of 24 schemes have been successfully onboarded to the Hong Kong pension platform. So as mentioned just now, iFAST Global Bank saw higher and record pretax profit of $1.9 million in second quarter of this year. That's a year-on-year growth of 174.5% -- and the bank has continued to build on its first full year of profitability that we saw last year. In terms of the customer accounts, they have increased by over 50% year-on-year to more than 1.5 million accounts as of end of June 2026. So as I mentioned, for second interim dividend for FY 2026, the directors declared a dividend of $0.03 per share, so that's 50% higher compared to last year. And for full year of FY 2026, the directors expect to propose a total dividend of $0.12 per share or higher, which represents a 43% increase compared to FY 2025. So this is actually an increase compared to the previous guidance given, which was at $0.105 per share or higher, and we communicated that previously in April. As the group's overall profitability increases and the group's shareholder equity continues to grow, the directors are comfortable with increasing the dividend payout ratios gradually. We'll talk a bit more about that in the business update later. Barring unforeseen circumstances, the group expects 2026 to see healthy growth rates in revenues and profitability. The group is embracing AI to achieve the various objectives while having a lower group headcount. So overall group headcount has peaked in the middle of 2026 and is expected to be at a lower level at the end of 2028 as we work on achieving the various objectives that we have communicated in IF 3-year plan. So this will pave the way towards improving profit margins from next year onwards. So looking at our group AUA trend, so we saw record AUA level of $36.13 billion. So that's 32.8% higher year-on-year and also represents a robust 10.7% Q-on-Q growth. So both the B2B and the B2C divisions have seen strong year-on-year growth in their respective AUA. So B2B still continues to contribute about 65% of total group AUA with the remaining 35% coming from our B2C division. The other interesting thing to note is that record high AUA was observed across all the various geographical segments. In terms of the AUA breakdown by market -- so we can see that Singapore continues to be the core market with a contribution of about 69%, followed by Malaysia and Hong Kong at about 11-plus percent each and others, which is made up of China and U.K. In terms of products, Unit Trust remain the largest product contributor at 55% roughly, followed by stocks and ETFs and bonds as well as cash account and deposits. In terms of the various products, they also saw a strong year-on-year growth, whether it's across unit trust, stocks and ETFs as well as cash account and deposits. So I'll be going through the business updates where we are touching on a couple of key main points. before getting Terence to share more on the financial results. So I think in April of this year, we talked about IF 3-year plan. There are 6 strategic pillars in that plan and management team had given more colors on those 6 pillars in April of this year. So for this quarter, what we wanted to do was to see whether any of the pillars have seen any progress. And on this slide, we wanted to highlight these 3 points. I think firstly for Vision 2030, where we're talking about AUA target of $100 billion by 2030, which represents a CAGR of 25.6% over the next 5 years. So we wanted to also share that, as you've noticed, AUA trends remain very strong. So we saw the 32.8% year-on-year growth in group AUA. So we will continue to work towards building a truly global business with our digital banking and wealth management platforms. And we intend, of course, to continue delivering value for clients and partners worldwide. The second pillar that we updated just now as well is the ePension. So we've seen that milestone that has been crossed in April of this year. So all trustees as well as their respective schemes have been successfully onboarded. We will continue to focus on improving our service quality and operational efficiency. On the third point here, so we communicated, I think, last quarter that we expect to see group headcount peaking. So we are confirming that group headcount has peaked as of this quarter's update. We will continue to adopt AI across the various business units and also improving profit margins, supported by operating leverage. We will expect that to be observed from 2027 onwards. And regarding group headcount, we expect that to be at a lower level by end of 2028. So on the next slide, so a reiteration of the various pillars, the 6 key points of how the management team is looking at the 3-year plan and the longer-term trajectory for the company. So I won't go through that because we have updated 3 of the pillars already. On the next slide for the individual market update. So I've mentioned just now all markets recorded record high AUA levels across Singapore, Hong Kong, Malaysia, China and the U.K. In terms of the various business divisions, I think within Singapore, Hong Kong, Malaysia and China, they've also seen strong and robust AUA growth rates, whether it's B2B, B2C or our Fast Global Markets division. For the profit and net revenue trends, robust growth for the key wealth management centers of Singapore, Hong Kong and Malaysia. We continue to observe the losses in our China operation narrowing. And the U.K., as I mentioned just now as well, so record quarterly profit in the second quarter of this year. Regarding net inflows, so they stood at $1.31 billion in second quarter of this year, bringing our first half 2026 net inflows to $2.56 billion. That's 15% higher compared to last year. We also see a very strong momentum regarding our key product, which is Unit Trust. So subscriptions were very strong in second quarter of this year at $3.67 billion. So that brings our first half 2026 number to $7 billion for UT subscription. That's 52% higher compared to last year. So we want to spend a bit of time talking about the bank as well because we've seen the latest progress from the bank. So record profit in second Q at $1.92 million, that's 174% higher year-on-year. So first half profit for the bank is at $2.61 million. That's 53% higher year-on-year. So for the bank, we also saw customer deposits reaching a record high level of $1.8 billion as of end of second quarter. So that's 25% higher year-on-year. So we wanted to just go back to how the bank has progressed with the deposit taking business, which was launched in April 2023. So in the last 3 years or so, the AUA has progressed. The deposit amount has reached a record high level, as I said. And also interest -- net interest revenue growth continues to grow strongly. So we saw net interest revenue grow by 37.9% year-on-year. The other division in the bank that's also seen a good growth momentum is actually the B2B business, which we call the business banking division. So I think in recent quarters, we have been seeing stronger business account openings and increased usage of the various services that the bank provides to its customers. And the third point here is really to just go back to how with the deposit taking business, with the growth in customer deposits, the net interest revenue has exceeded the noninterest commission and fee income that comes from the remittance business, which we call Easy Remit. So I think for EasyRemit, remittance volumes were actually higher in first half of this year year-on-year, but the revenue per transaction figures have moderated compared to a year ago because a year ago, the numbers or the revenue per transaction numbers were actually higher than normal. I think in previous quarters, our group CFO had also talked about that. So the last point in the business update here is regarding the management team's outlook for the dividend up. So I think in terms of the approach, the group as the group's profitability continues to improve and our shareholders' equity grows, so the directors are comfortable with gradually increasing the dividend payout while maintaining flexibility to support future growth opportunities, capital requirements and also business needs. So regarding the dividend trend. So in first half of 2026, the dividend payout ratio was at 28.9% compared to 26.3% in first half of last year. So the directors expect to propose a total dividend of SGD 0.12 per share for this year, which is at least 43% higher year-on-year. Regarding the long-term payout direction, the directors believe there may be scope to actually gradually increase the dividend payout ratio to 40% as the group's shareholders' equity moves closer to SGD $1 billion. The next couple of slides are a repeat of what I've shared. So I won't be really going through a lot of the details, essentially second interim dividend, SGD 0.03, so that's 50% higher compared to last year. And regarding the dividend schedule on the last slide here. So the payment date will be 20th of August. So I'll now invite Per, our Group CFO, to run through some of the key financial results.

Thanks, JP, and a very good morning to everyone. Yes. So for the financial results, I'm not going to run through every line. Otherwise, we won't get to the Q&A. So I just want to take you through a couple of just key highlights from the latest quarter results. So I think you heard earlier from JP that I think we've had a very strong growth demonstrated in the Wealth Management division. I think we have record high AUAs across all the geographies. And of course, that very strong momentum has continued from the first quarter to the second quarter. And we have also recorded a very strong growth in net revenue that also flowed down to the bottom line, also demonstrating, I think, in excess of 30-plus percent year-on-year increases in both revenue as well as in profit. The other highlight probably on the OpEx side, which is something that we have had a lot of questions on recently -- so I think on the OpEx, I think we've tried to give you some color in terms of what we expect to happen. I think one of the items mentioned earlier by JP was that headcount has peaked, right? I think we did mention that we expect headcount to peak in the middle of this year. So if you look at the operating expenses line for second quarter, I think we're still seeing quite strong increases on a year-on-year basis. But of course, that has moderated quite a bit from the first quarter, right? So I think some of that base effects are kind of coming off. But more importantly, I think on a Q-on-Q basis, we're actually seeing a bit of a flat lining of expenses as well. I think OpEx across the group was up something like about 2% or 2.2% Q-on-Q, right? So I think that's something that we expect to make more progress on as we talk about headcount related to 2028 being lower as well as some of the margin expansion we expect to see going into 2027. I think related to this also the other observation on the operating leverage. I think this is something that we would expect to show or demonstrate as a wealth platform that scales up with AUA. And of course, as net revenue increases, we then expect to see some of that flowing through in the PBT margins. So I think you will see a slide on the PBT margins where that number, at least on the Kitline side doesn't really show up, but it kind of -- it's also because we have this very sizable business in the Hong Kong side of things on the ePension division. So of course, on the PBT margins, if you were to look at the individual geographies, I think you will then very clearly see that for the likes of Singapore, Malaysia, even for the U.K., which is actually a deposit-taking business, you will see that actually we have made quite good progress on the PBT margins in those markets. Of course, Hong Kong has its own specific nuances because of that ePension project. And of course, we have talked about the headcount just very briefly earlier on. right? So I think these are some of the key highlights from the financial results. Not wanting to go through all the key numbers from each side. But just one point to perhaps on the ROE side as well, right? So this is on Slide 24. I think we continue to generate or demonstrate very high levels of ROE, so 27.2% even for a business that has a bank within the ecosystem. So just as a reminder, we make in excess of 95% or rather almost 95% of our net revenue coming from fee-based income sources. So the net interest income at the bank is still currently just over 5% of our overall net revenue. So moving on to the geographical segments on Slide 25, right? So I think you can clearly see the strength in the Wealth Management divisions from Singapore, Malaysia, even Hong Kong was continuing to demonstrate very good growth year-on-year. The kind of an unusual number there for Malaysia. I think Malaysia has demonstrated really strong growth in the second quarter. So I just wanted to highlight also that there was a bit of a benefit from some IT development revenue that has come in, in Malaysia. But even if you take that out then I think Malaysia Wealth Management stand-alone also demonstrated very good growth. I just want to point you to the tax expense line, just as a reminder that since the bank became profitable, I think we have started recognizing a deferred tax asset at the U.K. bank entity. So we have continued to recognize that. And therefore, you can see that the tax expenses have not grown as quickly, right, as the growth in PBT right? So this is really the deferred tax asset that we have started to recognize actually since the fourth quarter of 2025. So just moving on very quickly to the last slide in this section on Slide 28, right? So again, this is the different geographies demonstrating very good progress. I just want to point you to the U.K. line, right? So the U.K. line has a bit of a lower rate of growth there. You can see on the net revenue side. So that plus 3.8% actually, this is a combination of very good growth on the deposit taking business. So we saw over 36% growth in net interest income at the bank. Of course, on the EasyRemit division, which was actually the largest business within the bank, that is now a smaller part of the bank's net revenue contributor. So this actually -- this business actually experienced higher than normal margins in the year ago period, right? So I think you will see some of that coming off in the third quarter and beyond. But based on the second quarter's number, if you compare that on a year-on-year basis, you're still seeing a bit of a decrease, even though transaction revenue -- transaction volumes were actually higher, right? So you put that together, you're actually looking at not a very strong growth number for net revenue, but actually that kind of -- it's not a true representation of the underlying business right? So I just wanted to make those points before we move on to the Q&A.

Yes. Thanks, Terence. So we'll now move on to the Q&A segment. So as always, we have attendees here at the board room as well as those who have joined us virtually. [Operator Instructions]. So does anyone want to start the Q&A session?

I would like to ask about the Hong Kong -- so how are you going to recognize the...

Business, we are at this point in time end of this year -- in terms of revenue, it will be will be earning revenue in terms of a percent...

[indiscernible].

I think you're referring to the previous -- quite conservative in our opinion. So we essentially look at our existing wealth management platform, we have the business coming up and we basically assume some growth. But generally speaking, we didn't assume a big growth on the side. So as we mentioned, this is a scenario analysis that we put up. It's not actually a projection target, but we basically a possible scenario for how those numbers actually arrive at assuming.

And on the payment side, you received the license in almost a year, but you haven't launched. So where are you going to launch?

Yes. We expect to launch it in the fourth quarter of this the owner license in Malaysia. So that's not -- they do on small stake as a share, -- and do you expect to receive license in Singapore or Hong Kong Singapore, we have been and we are hoping to make a lot more progress Hong Kong, we don't have.

And for China, we still targeting breakeven next year?

We are...

And is it more like you expect any revenue...

Segment of the business that provides support to Hong Kong business. I think we give a chance to other people.

I think previously you mentioned that you update

Officially earlier preparing this whole thing has been delayed because of the question is question Global Bank given that there's a lot of Chinese offshore I guess it's part the Chinese overall deposit actually quite small percentage currently. I think you probably see some of that because it is a service that a lot of Chinese services something that they would like to actually have that -- but I think in terms of the actual contribution to us to actually a small percentage. And more importantly, on an ongoing basis, it's about doing a business that doesn't violate the regulation. I think the Global Bank caters to consumers who actually want the money offshore. And there are some actually official regulations that officially deposits to be sent from Chinese bank overseas and that's within the limits of USD 50,000. And we don't go beyond any official limits and so on. So that being the case, we...

Another question on trade receivables. It has been higher than last year with cash from the project...

Maybe I'll take this question because we typically have a lot of discussions on trade receivables I think previously, the main item in there, as you will see from our financials, which we have really split out in the first quarter was actually the margin financing receivables, right? So I think once you take that out, you can really see that impact from the -- what is essentially a new business to us. I think we're quite one of the last few brokers to get into margin financing. But of course, yes, that line has grown quite strongly. I think the rest of the trade receivables other than the BAU that we have from the traditional wealth business, I think, of course, the Hong Kong project that we have done or we're still working on does have an element of our receivables position. So that, of course, as the business has scaled up, of course, with revenue growing as well, that has also grown. But I just want to mention earlier, I think this division we also talked about, which is the Easy Remit division. So this division is actually a remittance business. It is also a prefunded business because that's the nature of how remittance works, right? So I think on this part, earlier, I think we made the comment that while we have seen some declines in the margins on the business, we are actually executing more remittance transaction volumes, right? So with that, I think you can also see there's been some addition of working capital. So on the working capital side, that actually adds to the receivables position by nature of how remittances are accounted for. So actually, that has also been a contributor to that increase. So I think it's a combination of all these different businesses. And yes, so I just wanted to give some color on the trade receivables.

That the AUA is up by 3% to what degree is the increase in AUA due to revaluation versus organic new customer -- the changes in AUA is essentially a function of the net inflow and the market effect. So these are essentially the 2 components. And if you look at the net, which is a number that we release every quarter and then you just do the sums in, you'll find that the rest are essentially changes in guidance on headcount.

Give us a sense of in terms of percentage of the total and also the nature of the headcount decrease, how much do we need to pay out so-called termination rationalize expenses versus natural rolling off of...

I think, we're not looking at a huge percentage in terms of reduction. I think we're making the point really is that last 5, 10 years, we have been growing last 5 years, growing quite significant as we grow expenses continue to grow. And that growth was sharp in the last 2 years as we as we have a more policy. But given that the most difficult part of the growth process in terms of execution has happened, then we feel that there is room for us to essentially gradually reduce the number. So while we say that yes, we are not looking at a very sharp reduction in -- that's the first point. Second point is actually we are not doing any retreninkroup mentioned that we generally have a -- we expect that headcount reduction will happen solely through the fact that some of the position on a contract basis. So as they expire, then we won't. Secondly, attrition. I think every year, there's a certain level of reattrition. Each time that happens, then we take a chance to review the number. And over time, then that will allow us to achieve a certain reduction that we are aiming for. I know that in today's world, businesses generally look at retrenchment as something that is part of our business or even a good thing shareholders tend to remote management when we believe that management of headcount should be done properly and that is part of the required things that ensure that we have a certain corporate culture allow us to really grow in I guess any update on the U.S. I guess what's -- so that is something that. Yes. So we -- first couple of years, we are waiting for the licensing and so on the end of last year, it was approved. And then in the last 9 months, we have been basically getting ready to the testing and so on. So internally, we have started to start to some transactions to our own securities directly. So that has started to happen this month in a gradual basis, but it's not something that we are trying to rush in a big way. We make sure that everything is fully tested transact. But essentially, this is we're starting to actually transact through that, and we do expect that activity going forward will happen a lot more. Having said that, I also want to remind sharely [indiscernible] US customers. This is more a link that allow us to directly access the U.S. exchanges without having to go through another broker. And that will put us a position that is -- that will allow us to be more competitive over time because we do have additional l sort open up the possibility of having different kind of business.

I had a couple of questions on Hong Kong side. So as you were mentioning also onboarding will happen towards the end of the year. So then the AUA of roughly $3 billion or so that we're expecting, would that come into the second half? Or would that be pushed?

So if the timetable is as per the latest target and expectation, then we expect that the AUA will add on to the number at the end of the year, add on to the group at the end of the year, even though the actual revenue contribution, we don't expect to see too much of it.

And then next on Hong Kong in terms of the PBT, given the first half performance and second half, even if we assume it to be flat year-on-year. So still on a full year basis would be about 11% growth, which is in line with the guidance that has been given about a double-digit growth. But is that how we should be thinking about Hong Kong is that kind of assumption of 11% growth year-on-year CBT?

I suppose that's a possible way of looking at it. We have indicated that we expect or we target for Hong Kong to see double-digit growth this year compared to last year in terms of revenue and profitability. So that target remains.

Any other questions?

What is the biggest risk facing the business at the moment?

Well, I would say that -- Yes, we have gone through quite a bit and we have gone through quite a bit of a difficult time last 1, 2 years, especially as we onboarded the EPF project. I think for the EPF project onboarding was seen by the industry player is something that entails quite a bit of risk. But I think we have gone through the most difficult part. And going forward, it's about continuing to improve the service level and so on. From where we are some of the normal risk in terms of operational risk, IT risk, et cetera, remains and so on. And yes, that is something that, of course, we continue to work on strengthening and so on. The other risk that play is something that most people will think about will be the fact that we now operate as a bank. So previously, we -- as a group, we have a business model that doesn't require a big balance sheet that is cash generated, but given that now we hold the bank within the group, so you start to see that the profile of the group start to shift somewhat is a business whereby the balance sheet start to expand and bank level that required capital start to move up as well. And I think there are some banks are not managed well in terms of the balance sheet. And when that happens, then that introduce an element of risk to the group. So for us, we are very mindful that for a bank, if we take the bank in the wrong direction, then that will itself introduce quite a bit of risk to the group itself, which is why right from day 1, we've always emphasized that we take a business model for the bank that actually tries to minimize the balance sheet risk -- we don't lend to risky customers and so on. We basically have a business model for the bank that ensures that our balance sheet remains very liquid. And the assets that we own are actually very high quality, essentially mainly sovereign bond, Bank of England deposits as well as investment grade bond, of which the bank investment-grade bond will be the main one. Yes. So the rates are there if we go off track from what will be the right path. So I think it's something that we're always mindful about. And so if we continue to manage it in a very prudent manner, then I think the rates will be something that will be manageable.

We will take one last question from our physical attendees before we move to our online attendees the questions -- just a question on the operation in China. So can you share with us what is the momentum currently in terms of number of accounts should we be at the end of this year in number of accounts and what type of customers.

In terms of segment I think the China business is a business where if you look at the numbers in recent quarter, the growth is there. The growth is in percentage terms are growing quite well, quite nicely. Having said that, it remains a small percentage of the group's business. It is a business that we expect to continue to grow. And yes, we hope to get to a point not too far away where we actually start to achieve that level. The exact number of accounts and so on, we don't separately break it down, but it is a significant percentage of the accounts that we actually have. And so that's something that we will continue to -- we believe we will continue to track in the right direction. The growth is still there.

Jan, can you hear us?

Can you hear me okay?

Yes, we can hear you.

I have a few follow-up questions. So just on the Hong Kong revenues, I know that you reported on a combined basis. But if you look at Page 19, I think the total revenue for this quarter was lower than last quarter. Now we noted that obviously, the AUA in Hong Kong has gone up. But can you be sort of clear on what the driver was as to why revenues were sequentially lower? Was it from wealth? Or was it from the contract? Or was it from something else? That was my first question.