JT 8.2016This article, written by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange), originally was published on SGX My Gateway kopi-C. The article is republished here with permission.


LimChungChun
LQM ad141eFollowing the crowd will not give you good returns in the long run.

You need to be very clear about the basis for your investment, and when you have a procedure and system in place, it can be very rewarding.


- Lim Chung Chun
Chairman and CEO

iFAST Corp

(Photo: Company)

For iFAST Corp Chairman and Chief Executive Officer Lim Chung Chun, the joy of investing lies in a smart stock-picking strategy that achieves good returns over the long term.

The co-founder of the SGX-listed Internet-based investment products distribution platform first dipped his toes into the local stock market more than two decades ago. 


"I'm pretty much an investor at heart, and I was putting the bulk of my personal money in the stock market in the 1990s, when I started my career in the stockbroking industry," Lim recalled.

"It's all about finding the winners that can make a difference and provide good returns over time - that's exciting for me."

The Electrical Engineering graduate from the National University of Singapore was an investment analyst with two stockbroking firms between 1991 and 1998, before being promoted to Head of Research at ING Barings Securities.

"When I was a sell-side analyst, I found it puzzling that not many in the investment industry genuinely believed it was possible to have a stock-picking strategy that could generate good returns over the long term, and for some, the strategies they adopted were inconsistent, which meant they made almost as much money as they lost."

Constructing a proper investment methodology is important, said Lim, who also holds a Diploma from Singapore's Institute of Banking & Finance.

"Following the crowd will not give you good returns in the long run. You need to be very clear about the basis for your investment, and when you have a procedure and system in place, it can be very rewarding," he added.

Lim, 48, thought he would be managing a small fund - consisting of his own money as well as those pooled by his friends - for the rest of his life, until the dotcom boom presented an opportunity for him to start online unit trust distributor Fundsupermart.com.

"That was when I began actively managing a business, and saw another dimension - which was the actual running of a company versus being an analyst - and how much difference management can make to a company's performance over time," he said.



Growing the Pie

Incorporated in 2000 and listed on Singapore Exchange in December 2014, iFAST has a market capitalisation of about S$245 million. Its investment offerings range from funds, bonds, Singapore Government Securities (SGS), Exchange Traded Funds (ETFs) and insurance products to online discretionary management services, financial technology solutions, as well as investment administration and transactions services.

Its customers include financial advisory firms, financial institutions, multinational companies, retail and high net worth investors in Asia. iFAST Business-to-Consumer (B2C) website Fundsupermart.com is targeted at do-it-yourself (DIY) investors, while its Business-to-Business (B2B) platform caters to the specialised needs of financial advisory firms and financial institutions. 

FundsupermartFundsupermart.com is iFAST's online investment products distribution website for Do-It-Yourself (DIY) investors.
The company averaged an annual net revenue of S$34.0 million and attributable net profit of S$8.6 million between 2012 and 2015. As at 30 June, it had total assets under administration (AUA) of approximately S$5.63 billion.

iFAST aims to grow its overall AUA by broadening the range and depth of its offerings, and adding revenue streams from new geographical markets. Apart from Singapore, it also has operations in Hong Kong, Malaysia and China.

 

LQM ad141eThe potential of the wealth management industry in Asia is certainly substantial as the amount of wealth in the region continues to grow. It's early days yet.


- Lim Chung Chun
Chairman and CEO

iFAST Corp

"If you look at Asia's wealth management industry, the potential for this business is certainly substantial, as the amount of wealth in the region continues to grow - and it's early days yet," Lim noted.

"Our business model will benefit from the overall long-term direction of the wealth management industry, which aligns the interests of our platform with that of financial advisors and end-clients."

In the short run, the company's growth momentum and profits may be impacted by the stock market's performance and higher expenses arising from investments in future growth avenues, as seen from its latest quarterly results.

"But in terms of what we are trying to achieve for the medium and longer term - there are many drivers for us to tap into, and we want to be the best in the game," Lim added.

iFAST's key competitors include Navigator, Aviva plc's integrated investment portfolio administration platform, Phillip Securities' POEMS online trading website, as well as other financial institutions - including insurers and private banks - that compete for a share of the customer's wallet.

"Rather than just focusing on grabbing more share or being the market leader, we aim to grow the overall industry pie. When you grow the total industry size, you can be assured of sustainable growth in the medium to long term," Lim said.

♦  A Clear Focus

iFAST is also eyeing suitable merger and acquisition opportunities. It completed its HK$15.8 million (S$2.7 million) purchase of Hong Kong stockbroker Winfield Securities in January to expand its range of product and service offerings.

"We are constantly on the lookout for potential acquisitions that will expedite the growth of our AUA. While there aren't many platforms to buy in Asia, there are closely related businesses that may present a good fit to our strategy, whether it be expanding our client base or AUA," Lim said.

"If those opportunities arise, we would naturally be keen to explore them."

Lim is equally focused about maintaining iFAST's raison d'etre.

iFAST seminar2iFAST has been highly successful in reaching existing and prospective customers through seminars for investor education.
Photo: Company

"We are here to help investors invest globally and profitably. While that may seem like a common mission statement, the truth is that in the wealth management industry, companies can go off track in the short or medium term if they do not keep this in mind," he said.

"In the industry, what's good for the client may not always be what's good for the distributor in the short term. We're here to help investors - that's very clear - and where we're different is that we take a long-term perspective of the business. With this long-term view, many things will change," he added.

iFAST

Stock Price

94.5c

Market Cap

S$251.7 million

52-week High Low

92c to S$1.49

Dividend Yield

2.9%

PE Ratio

31.1x

Source: SGX StockFacts
(data as of 29 Aug 2016)

While many financial institutions claim they aim to generate a decent return for investors over time, they may compromise on this longer term goal in the rush to meet short-term quarterly profit targets.

"I've seen many products sold in this industry which may not be helpful to the investor," Lim said.

"They could certainly boost short-term profits for the financial institution, but may not provide a decent return for investors in the long run. These may be products that are opaque, leveraged, or have derivative elements."

In particular, iFAST's attempt to level the playing field between individual and institutional investors can be seen from its move to help connect bondholders of Swiber Holdings Ltd, following the Singapore-listed oil and gas contractor's application for judicial management.

While iFAST is not in a position to represent investors who purchased Swiber's bonds, it believes it can at least help to connect all bondholders. In this way, their creditor rights would have a more prominent voice, as Swiber continues operating under court supervision while attempting to turn around its business, Lim added.



♦  Integrity Rules

At iFAST, simplicity is crucial.

"We always target relatively simple products, such as unit trusts, bonds, ETFs and stocks. They are basic building blocks for every investor, and are all that investors require to generate decent returns for themselves in the long term," Lim noted.

"We don't feel the need to come up with all kinds of complicated products to fatten our short-term profit margins."

LQM ad141eWe don't feel the need to come up with all kinds of complicated products to fatten our short-term profit margins.

- Lim Chung Chun
Chairman and CEO

iFAST Corp

These values of honesty and openness are Lim's touchstone. "Whether in life or business, transparency is critical in fostering trust over time," said the father of twins - a son and daughter, 17.

"When my kids are older and are ready to enter the working world, I will share these values with them. For now, I try to let them enjoy their schooldays and teenhood."

Lim also believes in challenging himself, with the aim of moving beyond his comfort zone. "Whatever looks unreachable for most of us is actually achievable, once you put your mind to it - that's where commitment and planning come in."

For him, this sometimes takes the form of running marathons. "I can't say I love running or walking, and I'm not a good runner or a natural athlete. But I run marathons to challenge myself - it's all about setting a goal that's fairly high, and making it happen. What I do is be willing to undergo the challenge, and in the process, I find enjoyment in it," he added.

There's certainly no shortage of challenges in the wealth management industry, and the shifting currents within the investment world are constantly in Lim's thoughts.

"What is always at the back of my mind is where the industry is going, where the economy or stock market is headed, how we remain relevant to our clients. In the business world, just because you have done well in the past doesn't mean you will do well in the future," he said.

"But having said that, I do think we have a sticky business model that provides stability over time. We just need to continue to improve on the range and depth of services to remain a leader in the market."



Year ended 31 Dec
(S$ m)
FY2015 FY2014 FY2013 FY2012
Net Revenue 41,534 36,687 31,586 26,291
Profit before Tax 12,751 10,868 8,197 3,941
Net Profit Attributable 12,100 10,513 7,856 3,741
Quarter ended 30 Jun
(S$ m)*
2QFY2016 2QFY2015 YoY Change
Net Revenue 9.68 11.38 -14.9%
Profit before Tax 1.27 3.61 -64.9%
Net Profit Attributable 1.14 3.28 -65.2%

* Group financial results including China operations




Outlook
  • RQM ad141eThe Group has been making progress towards its long-term vision of being an integrated investment products distribution platform. We are working towards enhancing the range of investment products and services on our Malaysia, Singapore and Hong Kong platforms.
  • In China, as part of iFAST's B2B strategy, we recruited a number of wealth advisors under our "platform-cum-IFA incubator" strategy that will give them the platform and support to pursue their wealth advisory businesses, before eventually starting their own financial advisory (FA) firms. Another strategy is to partner with local Chinese entities that already have well-established online client bases (e.g. Internet companies or online media companies). This strategy will be more scalable in helping to promote the growth of the wealth advisory industry in China.
  • We have just launched our stockbroking business in Hong Kong (for the B2B platform), and we are targeting to launch our stockbroking business in Singapore by end-2016 or early 2017. Our focus is on providing an integrated wealth management platform. While we expect to have a new stream of commission income from stockbroking, our long-term focus will be on enhancing our overall platform's assets under administration (AUA), rather than trying to maximise commission incomes from short-term trading.
  • The Group has updated its dividend guidance as follows: For FY2016, our Directors intend to recommend and distribute dividends of 60% or more of our Group's net profit (excluding our China operations and exceptional items).




iFAST Corp Ltd

iFAST Corp is an Internet-based investment products distribution platform, with assets under administration (AUA) of approximately S$5.63 billion as at 30 June 2016. Incorporated in the year 2000 in Singapore and listed on SGX in December 2014, iFAST Corp is also present in Hong Kong, Malaysia and China. The Group provides a comprehensive range of investment products and services, to financial advisory (FA) firms, banks, financial institutions, multinational companies, as well as retail and high net worth (HNW) investors in Asia.

The Group offers access to over 3,500 investment products including funds, bonds and Singapore Government Securities (SGS), Exchange Traded Funds (ETFs), as well as insurance products, and services including online discretionary portfolio management services (DPMS), research and investment seminars, financial technology (fintech) solutions, investment administration and transactions services.

iFAST Corp has two main business divisions, namely its Business-to-Consumer (B2C) website, Fundsupermart.com (FSM), targeted at DIY investors; and its Business-toBusiness (B2B) platform that caters to the specialised needs of FA companies, banks and financial institutions. Over 5,500 wealth advisers from more than 170 FA companies, banks and financial institutions, use the iFAST B2B platform.

The company website is: www.ifastcorp.com

Click here for the company's StockFacts page.


For iFAST's second quarter financial results for the period ended 30 June 2016, click here.


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