Earnings Call: Q2 2021

Jul 26, 2021

Good morning, everybody. Thanks for joining us for iFAST Corp's second quarter and first half 2021 results presentation. My name is Jean Paul from the corporate communications team. Together with me, we have Mr. David Yeap, who will be going through the financial results later on, and our Chairman and CEO, Mr. Lim Chung Chun, who will be running through the business updates as well as the Q&A afterwards. I will start with the key summary points. Our group's assets under administration, or AUA, continue to register new record levels. It reached SGD 17.54 billion as at June 30. This is a growth rate of 57.3% year-on-year and 21.4% year-to-date. The AUA of unit trust, our key investment asset class, in fact, the largest investment asset class contributor to our AUA, that grew to a record SGD 12.87 billion, which is a growth rate of 48.7% year-on-year and 18% year-to-date. As a result of the increasing AUA, our group's recurring net revenue has continued to grow at a robust pace. It increased 39.2% year-on-year in second quarter and 34.3% year-on-year in the first half of 2021. The growth in non-recurring net revenue has moderated in second quarter, increasing by 15.3% year-on-year in 2Q 2021, compared to a more robust growth rate of 59.8% year-on-year for the first half of 2021 as a whole. Trading activities were generally more subdued in second quarter of this year compared to first quarter of this year, given that the general financial market conditions were more cautious during the period. The net inflows of client assets remained very healthy at SGD 0.84 billion in second quarter 2021, which leads to total net inflows of USD 2.12 billion for the whole of the first half of this year. Net profit grew 55% year-on-year to SGD 7.02 million in second quarter 2021. For first half, net profit grew 94% year-on-year to SGD 15.84 million. Reflecting the positive operating leverage of our business model, the PBT margin has continued to increase to 34.2% for first half 2021, compared to 29.6% for the whole of last year. iFAST Corp believes that the robust growth that we have seen in recent times is a result from hard investment that we have made to build up the strong integrated digital wealth management platform. We will continue to work hard on the various initiatives in all our existing markets that we operate in to ensure that our medium to long-term growth prospects remain strong. Barring unforeseen circumstances, we expect business performance for full year 2021 to show healthy growth compared to last year. In addition, we expect to increase our dividend per share in 2021 compared to last year. For the second interim dividend for second quarter 2021, the Directors declared a dividend of 1.1 cent per ordinary share, which is an increase of 46.7% year-on-year compared to the second interim dividend payout for second quarter of last year, which was at 0.75 cents per ordinary share. A couple more points on the key summary. As announced by the group on June 30 this year, we have led a consortium in the submission of an application for a digital bank license in Malaysia. This continues our efforts in seeking to tap into global digital banking and fintech opportunity trends. In Hong Kong, discussions with the industry players have been ongoing as part of our preparatory work for the eMPF project. By the end of this year, the group targets to be able to give some guidance on the potential growth of its overall Hong Kong business for 2023/2024 and beyond. Looking at our AUA chart, that has grown to a record high level of SGD 17.54 billion as of June 30, 2021. This represents a year-on-year growth rate of 57.3%, as announced just now, and 21.4% year-to-date. We show the split between B2B and B2C, so the majority contributed by B2B, at roughly about 68%, and the remaining 32% from the B2C business divisions. on this slide, we will be showing the net inflows numbers. Second quarter of this year, we saw net inflows of SGD 0.84 billion. For the full first half, the total net inflows are at USD 2.12 billion, significantly higher than the first half of last year. Looking at the gross UT subscriptions, a very similar trend, where we see second quarter net inflows for UT, or the gross UT subscription inflows rather, that are pretty strong as well in second quarter at USD 1.76 billion. The full half of this year, we are at USD 3.97 billion. I will now invite our CFO, David, to run through section 1 which is the financial results. David. Good morning, ladies and gentlemen. I am now presenting the financial results for the group for the second quarter 2021 versus second quarter 2020. Our gross revenue increased by 31.7% to SGD 50.8 million. Our net revenue increased by 32% to about SGD 26.2 million, mainly due to the growth of our AUA and also the increase in stock and ETF processing fee and FX margin income. Our other income dropped by about 73% to about SGD 0.49 million. This is mainly due to the decrease in the receipt of the government grant in this year compared with last year. Our operating expenses increased close to 15%, to about SGD 18.25 million. Our PBT increased by 46.3%, to about SGD 8.4 million PAT, a 55.5% increase to close to SGD 7 million. Our net profit attribute to owners of the company for the second quarter of this year increased by 55% to SGD 7.02 million. EPS for second quarter 2021 is 2.54 cents, represent a 52.1% growth. The dividend per share is 1.1 cents, represent a 46.7% growth. Next is the comparison of the first half financial result for 2021 versus 2020. Our gross revenue for the first half of this year achieved a close to 38% growth to about SGD 106.12 million. Net revenue increased by 41% growth to about SGD 54.66 million. Other income, as mentioned earlier, due to the decrease in the receipt of a government grant, there is a drop of 39%, about SGD 1.44 million. Operating expenses increased by 30.6% to SGD 37.3 million. We record a smaller finance income, only about SGD 50,000 due to the decrease in the bank interest rates since last year. We record a small share of the Solomon Islands Associate, about SGD 80,000. Our PBT for the first half of 2021 achieved a close to 85% growth to about SGD 18.7 million. Our PAT increased by 95% growth to about SGD 15.7 million. Net profit attribute to owners of the company for the first half of 2021 achieved a 94% growth, about SGD 15.84 million. EPS for the first half of 2021 is 5.76 cents, representing a close to 90% growth. Dividend per share for the first half of this year is 2.1 cents. It is 40% growth compared with first half 2020. This table shows the financial result for 2017 to 2020 at the first half of 2021. This chart shows the PBT margin for the group based on net revenue. Our PBT margin for the group for the first half of 2021 achieved about 34.2%. Return on equity represents the net profit divided by the average shareholders' equity during the year. For the first half of 2021, we achieved a 28% of return on equity. Some financial indicator. Our EBITDA is SGD 23.1 million. Our net cash position is about SGD 60.91 million. Our operating cash flow for the first half of this year is SGD 23.94 million. Capital expenditure for the first half, we spent about SGD 5.3 million. Our net current asset is SGD 72.07 million. Our shareholders' equity is SGD 119 million for the first half of 2021. This is the further breakdown of our net cash position. Our cash and cash equivalent is about SGD 41.59 million. Other investment, including investment in financial assets that are under the current asset, about SGD 90.3 million. Total cash and other investment is SGD 60.91 million, and we are in a net cash position. This chart shows the group operating cash flow from 2017 to 2020 and first half of 2021. Our group operating cash flow for the first half of 2021 is about SGD 23.94 million. Capital expenditure, the spending for the first half of 2021 is SGD 5.31 million. Our number of issued share as at end of June 2021 is about 266.5 million. This is our consolidated financial position as at end of June. As at end of June 2021, our total non-current asset is about SGD 57.4 million. Our total current asset is about SGD 210.4 million. Total asset as at end of June 2020 is about SGD 267.8 million. Our shareholders' equity, as mentioned earlier, is SGD 119 million. Excluding the non-controlling interest, is about SGD 118.2 million. Our total non-current liability is about SGD 11.2 million, while the total current liability is about SGD 138.3 million. Our total liability is SGD 149.58 million. Total equity and liability is SGD 267.8 million. Our client trust account as at end of June is about SGD 983 million. Lastly will be some info about the second interim dividend for financial year 2021. Our dividend per share, 1.1 cents per share. Ex-dividend date is August 2021. Record date and time at 5:00 P.M. for 4th August 2021. The payment date is 17th of August 2021. As mentioned earlier, our second interim dividend is 1.1 cents. That represents increase of 46.7% growth compared with second quarter 2020, which is 0.75 cents per ordinary shares. That is all from me. Thank you. Hi, everyone. Now I would like to move on to the next section. We'll talk about the performance trend. This slide here, we see the breakdown in terms of the AUA. First chart will be in terms of the market. Second chart will be in terms of the product category. As you can see, Singapore continues to be a key contributor to the overall market. Singapore currently contributes 69.5% of the overall AUA. In terms of the products, unit trust continues to be our key product category, contributing 73% of the overall AUA for us. An ETF basically accounted for about 16.5% and then you have cash and bonds contributing the rest. This chart we've been showing every quarter, essentially it shows that over the years, the net revenue for the group has continued to grow. We have categorized the net revenue into two components. One's a recurring, the other one is non-recurring. As you can see, non-recurring can tend to be a bit more volatile. This particular chart shows the ratio of the net revenue, especially AUA. As you are aware, we have the AUA as a key KPI for ourselves. We generally aim to continue to grow the AUA. I think we have also stated previously that we have a target of 100 billion AUA by 2028. We're really committed to that as a group. This particular chart then shows all the AUA on average, what kind of net revenue are we actually seeing. So in the first half of this year, we saw that net revenue as a proportion of AUA was about 69 basis point. It's lower than what it was last year, and I think the main reason is because certain new asset class, particularly stocks and ETF, that doesn't affect the direct net revenue. Because of that, you find that it doesn't attract the recurring net income. Because of that, recurring net revenue as a proportion of AUA has been lower than it was last year because the stocks and ETF categories are actually growing faster. But I think what's important from our perspective is that overall net revenue continues to grow at a robust pace, including the recurring net. We'll look at some of the numbers for that in the subsequent slides. This particular slide shows the recurring and net recurring net revenue number. As you can see, in the first half of this year, we continued to see quite good growth in terms of the overall net revenue. Recurring net revenue grew 34% in the first half of this year. If I take the number for the second quarter, it was actually about 39%. Non-recurring income, which depends more on the actual level of transactions, for the first half it grew almost 60%. But if I look at the quarterly breakdown, the second quarter, the growth was slower. The growth was only about 15% year-on-year. But because first year was very strong, the first half growth was over 60%. This particular set of number will tend to fluctuate more, the non-recurring net revenue. And the main reason is because financial market conditions tend to change along the way. Sometimes the market can be very bullish, sometimes the market going through corrections, sometimes bear market. The non-recurring net revenue tends to be more volatile. But importantly, we have continued to be able to grow our AUA as a group, and as a result of that, we have been able to continue to grow our recurring net revenue as well. This slide shows the breakdown in net revenue for the different markets. As you can see, Singapore continued to be very strong. It grew 46% year-on-year for the first half, and that drive growth of 41% overall for the program. These are the numbers of the breakdown for the B2B business, and then next slide for the B2C business. I will leave it to you to look through in more detail. In terms of P&L, we essentially have a growth of 94% in terms of the net profit for the group in the first half. Profit before tax grew 84%, and as you can see, the various key markets saw an improved profitability as well. Singapore, Hong Kong and Malaysia all showed improved profitability. The losses from China was a bit higher. But I think as I have mentioned in previous quarter, we feel that China is at a point where we would like to ensure that overall growth for China business will continue. We think that that will be the right strategy for us in years ahead, because I think the potential for China is actually very high. Okay. I would just like to give a bit of update on some of the new initiative that actually the group had. I think earlier on in the year, on January 30, we announced that we have participated in a successful tender for eMPF Platform project with our PCCW Solutions, as a prime subcontractor for the Category C of the work, which includes MPF scheme operation services, transformation services, and user delivery services. Recall that back then, MPFA announced that they have appointed us. I think recently we had a query from SGX about the movement in our share price, and we responded by saying that we feel that part of the reason for the share price increase in recent times could be the fact that we have actually been having regular discussions with the industry in Hong Kong regarding this eMPF project with a view to finalize the key contractual terms of the work that we potentially will be undertaking. We hope to be able to finalize that. At this point in time, we are not able to announce too much further detail, but we hope to be able to give some guidance on the potential growth of our overall Hong Kong business for 2023/2024 and beyond. There is also the recent announcement that we have made, whereby we announced that we have led a consortium in the submission of an application for a digital bank license in Malaysia. We believe that we have formed a strong consortium to apply for the license. We have several partners, and we expect to have a 40% stake in the digital bank if we are successful, the consortium is successful. And the consortium comprises both local and foreign shareholders, but the Malaysian shareholding will be the majority. The application that we have put in for Malaysia continues our overall pursuit of a digital banking license. We believe that the fintech industry globally is still in the early stages of transforming, because I think that fintech has a long way more to go. Fintech has actually not gone as global as what it eventually will be, and being able to have a digital bank license will actually help us to better realize some potential that we foresee in the fintech industry. The subsequent slides give some further detail on the individual markets. I will not go through the detail. I will leave it to investors to look at the individual markets. With that, we will stop the formal presentation here, and we will be happy to take the questions that you may have. Attendees, you can actually. Hi, everyone. Now we are in for our Q&A session. What you can do is actually you can use the raise hand function or type your questions in the Q&A function box to let us know the questions that you may have. For those who have raised your hand, then we will read out your name before allowing you to talk. We have our very first question from Aakash from UBS. Aakash, you may unmute yourself to ask your question. Hi, great, thank you for the presentation. Can you hear me all right? Yes. Okay, great. My first question, referring to the non-recurring margin decline in general, and more specifically on the B2C side. I think the decline in this non-recurring margin on the B2C side, as you said, it was largely due to financial market conditions. But I think it does seem a little bit more excessive, even if we take into account the trading activity decline that happened Q2. I am just wondering if there is some sort of seasoning of the AUA issue here at play as well. For example, the AUA that you had prior to FY20 still is generating what, 90 basis point revenues that you used to see. And then the AUA that you have got in the last 12, 18 months is probably not seasoned enough to be able to generate that kind of income. Is that sort of a fair assessment? How do you think about these things? If you could give some color on that would be very useful. That is the first question. The second one is just on China. I think the growth seems to have slowed down in terms of AUA. Is that sort of the new normal, or do you think it probably can pick back up again in the coming quarters? Then the third question is on OpEx. I think compared to your guidance, it does look like the OpEx was quite low this quarter. A bit surprised. How should we think about it for the rest of the year? Those are the three questions from me. Thank you. Okay. Yes, so as far as net revenue is concerned for the non-recurring item, that is actually an item that tends to be more volatile. So for the non-recurring net revenue, there are a few main components. The biggest component will be the transaction commission from both stocks and unit trusts. The other component will be actually the FX that we actually earned. The first component in terms of the commissions from stocks transactions and unit trust transaction, that item tends to be somewhat volatile depending on the market condition. So if you look at the overall situation, you actually find that first quarter is actually the period whereby trading income generally around the world actually tend to be. It was actually hitting a high. Second quarter, the general trading activity, both for stocks as well as unit trusts, actually saw some decline. I believe that that is a trend that you probably see as you see more financial institutions announcing their results for second quarter. I think we have seen that some banks have reported some trading account that tend to be lower than the first quarter of this year, and we are currently seeing a similar trend. I don't think there is any particular seasonal factor in terms of calendar year effect. I would say that it was mainly largely a result of the overall financial market condition. Like first Q, the market was going up in a big way. Second Q, we saw the effect of the correction in a number of different market, particularly in China. So actually that affected the overall volume for both stocks and unit trusts. I think the U.S. market may be hitting a record high, but if you look at some of the most speculative counter, that has sort of eased off in second quarter compared to this quarter. So basically, we were coming from a situation where first Q was stronger than what you normally would expect, and then second Q, you saw the correction from that high level. That I would say would be the real game. As far as the FX margin is concerned, that was also down because that is also somewhat correlated to the amount of transaction that we have each quarter, because as investors buy into, say, U.S. or Hong Kong stocks, or they buy into the unit trust in different currency, then there is some FX conversion that we actually do on behalf of investors. When the level of transactions go down, that actually gets affected as well. But we see this as a set of number that will, in a sense, will be bouncing around. We don't see that as something that is a structural trend. We see that as largely a financial market effect. That's the first part of the question. Second part, regarding China, in terms of growth rate, I would say that there's some of that effect happening as well, because China actually saw a substantial decline or substantial correction during the second quarter. That actually have a tendency historically to affect the overall volume that we see in the short term. So year on year, we're still growing very strongly. Quarter on quarter, the growth rate can be significantly affected by some of this short-term market situation. But I think importantly, as I was mentioning, the key number for us is the overall AUA. I think that continues to grow at a very healthy pace. The net sales for us at SGD 840 million for second quarter continues to be very healthy as well. And we see some of this weakness as more of a shorter term kind of a situation that is dependent on shorter market condition. The next part of the question relates to operating expense. You're mentioning that that is a bit lower. I'll say that on average, on a year-on-year basis, there's some growth in operating expense because we continue to grow our overall efforts in enhancing our overall services as a group. On a quarterly basis, there can be some moderation in the operating expense when the net revenue number as a whole ease off because there's some, perhaps, component in the net revenue number that's dependent on that sort of performance base. So when the net revenue number tends to be lower, then some of the variable components, such as performance-based incentive and so on, will be a bit lower. And I would say that's probably the key reason why our operating expense was lower this year. Great. Thank you very much for that. If I could just follow up on the first question, regarding the margins. So I'm just going to refer to some numbers here. So if I look at the non-recurring, sorry, if I look at the B2C net revenue to AUA, so that's B2C margins, right? They were in the range of 90-95 basis points last year, every quarter. Then in Q1 this year, they jumped up to 1% because the trading activity was obviously, it was a very active quarter. This quarter, this number fell down to 70 basis points. So even if I, what I'm saying is, if I take into account this decline in trading activity, we've probably gone back to a 2, 3 level of last year. Why is this number not 90 basis points? Why is this number 70 basis points? Is there something one-off this quarter which will change next quarter? Or should this 70 basis point kind of be the number that we keep in mind for the rest of the quarter? You're referring to the non-recurring net revenue margin for 2Q for 2Q. So 2Q number, right? In terms of, that's what I'm referring to. 2Q number, and I'm actually referring to B2C total, not I'm looking at the B2C margins overall. B2C revenue divided by AUA. What I'm saying is it used to be 0.90-0.95 last year, every quarter. Then it went up to 1% 1Q this year because of pretty hot listing markets. And then it's come down to 70 basis points now. Which is the reason I say that, just trading activity seems to be hard to explain all of it. Mm-hmm. Okay. I would say that in terms of net revenue here as a whole, probably two main effects. One is a decline in trading activity, and I think for B2C particularly, that accounts for, I think, a bigger part of the stockbroking activities actually comes from the B2C side of the business. As a result of that, B2C then tend to see a bigger decline, when the stockbroking side is not doing that well. That's one consideration. The other consideration would actually be, if you are talking about the recurring part as well, the lower interest rate. I think interest rate have actually seen a decline globally. As a result of that, we actually find that the net interest income from client assets that we are able to derive have also seen some reduction. That has been the trend that we saw in the last couple of quarter. I suppose, probably, in Q2 we saw a bigger impact coming from that. So I suppose the combined effect of the two probably contributed to a bigger reduction for the B2C side of the business. Okay, got it. Thank you for that. That's all for me. Thank you, Aakash. So I think we have our first text question. The first one is from Royston. So Royston would like to ask two questions. The first one is regarding the acquisition of the fund management business from DWS, which was announced in April. How will iFAST benefit from this acquisition, higher fees from co-branding this new fund or having a larger stake of funds to offer to clients? Yeah. For this particular acquisition, yeah. I would say that the main intention isn't really higher margin, even though we expect that there will be the positive revenue effect for us overall. We are actually taking a broader look at the overall industry. I think for people who understand the fund management industry quite well, we actually find that, in the unit trust business, you have the fund manager who manage the funds, then you have the distributors. The fund managers who manage the fund, who create the fund, there's actually, in a sense, two part of their work. One part really is the actual investment management, decision-making, what stocks to buy and so forth. That is something that most fund manager set up to do. But in order to do this first part of the work, the investment management, the fund managers actually have to do quite a bit of other work related to administration, compliance, and the ongoing, perhaps, IT-related work just to be able to manage the fund. If you look at what happens in Singapore, actually, there aren't that many local fund manager who are able to have a retail fund management license, a retail unit trust license. You have the bank-backed fund manager. We have quite a long list of local, whether you call it boutique fund manager or otherwise, but among the local boutique fund manager, you actually find that most of them have a restricted license that allow them to distribute funds to accredited investors, but not to retail investors. We look at the industry, we know that this is actually an underdeveloped segment of the overall industry. It is a situation whereby you may have very good fund managers among many of these local boutique fund management firms, but they're held back from being able to distribute retail funds because of the fact that distribution is extremely. Distribution of retail funds creation and maintaining retail fund is actually a very expensive exercise. Expensive, not just in terms of having to do the stock picking, but expensive in terms of all the administration and the compliance work that actually needs to be done. We look at the industry, and we feel that, as a distributor, as a platform, there is room for us to look at how to combine the fact that we are a platform that is already doing the IT administration work on behalf of the distributor. How can we combine that with the fund management side of the business to create a business model that will allow the whole process to be a lot more efficient? That is really the starting point in terms of how we look at this. If you look at this particular acquisition of the DWS fund that we are making, you notice that we are buying over the unit trust part of the business, but we are actually still sub-delegating the management of the fund back to DWS. The actual investment management decision doesn't change, but we actually take over the legal ownership of the fund. We take over the legal management of the fund. We take over the administration of the fund. That is something that we believe can help us strengthen our overall capability as a platform that actually try to serve investors as efficiently as possible. In other words, we are looking beyond just being able to have our own iFAST branded fund, because we are already having thousands of funds. What we truly want to do is to be able to play a bigger role in deriving extra efficiency from the overall business model that will help investors, and that will help the fund managers and our partners themselves. That along the way have a lot of synergistic benefit to us as a platform. We are coming from that perspective when we look at this particular I know that it is not easy to understand offhand, but hopefully, over time, we can explain more in terms of how that truly works, how that enhances the overall business. The second question from Arthur is, could you explain the new revenue streams from the U.S. stockbroking service in the India market? How will this work, and how much will iFAST benefit from it? Yeah. If you look at our business for, let us say, whether it is Singapore or Hong Kong, and coming up, Malaysia, we actually find that in addition to having access to local market, local stock market, we also link up the access to the U.S. market, and Hong Kong, and Vietnam, China market and so on. I think the way investors invest are changing quite rapidly. Investors are no longer just investing in the market that they are essentially present in. Singapore investors are increasingly investing outside of Singapore. They are buying not just Singapore stocks. They are also buying U.S. stocks and Hong Kong stocks, and in the future, I think increasingly, Chinese stocks. For that reason, if you look at how we have our stockbroking business, a large part of the business actually comes from U.S. stock. We are looking at basically doing a similar thing for our India business, which currently is only linked up on the local stock exchanges. There is demand from our investors and advisors in India to actually have a linkage to the U.S. market. That is really the key intention. The next question is from Uma. She has 2 questions. The first one is, how much of a dividend increase can shareholders expect for FY 2021 compared to FY 2020? Beyond FY 2021, will iFAST continue to give out more dividends to shareholders? Second question is, as iFAST key markets have different impacts from the virus, which market is the group looking at for a boost for the second half of 2021, and which market will be a little more challenging? On the first question, how much of a dividend increase? I think for the second quarter, the increase was about 47% year-on-year. We haven't actually guided the actual number for the year as a whole. But I would say we hope to be able to give a similar percentage increase as the second quarter. Hope to prove that for the full year, we can give a similar percentage increase as the first second quarter. Of course, in the end, it depends on the actual results that we have. Second question, give us a different impact from the virus. We don't really give the exact guidance for the short term. On that basis, to be honest, quite difficult to be able to predict the very short-term performance on the retailer one-on. I think we probably can't be too precise on this type of question. To interrupt, a question that asked via the Raise Hand function. Yong Hong has a question for us. Yong Hong, you may unmute yourself to ask your question. Hi. Hi, can you hear me? Sorry. Yes, we can hear. Hi. Thanks for the presentation. Just have a couple of questions. Maybe again, in terms of the net revenue over AUA, could we expect the stocks and ETFs to continue growing from the current 17% level as a percentage of the total AUA, especially with the launch of these China A-share services? Any color and guidance on this would be helpful. Secondly, in terms of the recurring revenue of AUA, it does seem to be trending lower as well to the 46 basis point level. Is this also due to the lower interest rate environment, or is there any change to the fee structure? The third question would be, in the medium to long term, as you scale your AUA, what kind of overall net revenue over AUA levels are we expecting? Could we expect to revert back to the 80/20 split between the recurring and non-recurring revenue? The last question would be, in terms of your disclosure on the customer account and the number of wealth advisor, could I clarify if these are the active users? These are my questions. Thank you. Okay. On the first question, the proportion that is contributed by stock and ETF to the AUA. I would say that we do expect that the proportion contributed by this will increase as a proportion of overall AUA, because that particular segment is growing at a faster pace than what we are seeing from some of the other asset classes. So we expect this proportion to increase. However, I would also like to add that, in the end, what really is important for us is that even as this proportion increase, then the overall AUA for us from the other asset classes, particularly unit trusts, can continue to improve. That, in fact, has been the benefit that we have actually seen. We have seen in the last 2 years, 3 years, that even as the growth from stocks and ETF have been very strong, we actually find that that actually has had the impact of improving the overall growth rate for us on the unit trusts as well. That, I think, is the important point, because I think for many financial institutions, typically, they do not want to embrace people who are into unit trust, for instance, they do not really want to embrace ETF, for instance, because they feel that that asset class have lower margin and that may negatively impact their overall business scope. For iFAST, we take the view that ETF is asset class that is here to stay, and in fact, as a proportion of overall global market share in the respective market within that nation increase. The right thing to do really is to embrace this asset class. But even as we do, the key thing is, are we also able to grow the volume that we are seeing from the unit trusts? And our experience in the last 2, 3 years has been that, yes, it has been able to help us grow even faster. I think that is actually the key. The short answer is, yes, we expect the proportion to increase further from where we are. But at the same time, we still expect that unit trust as an asset class will continue to grow and will be important. Second question, I think, was regarding the recurring margin. If you look at the recurring net revenue margin as a proportion of AUA, that has seen some decline. Again, it is mainly 2 factors. One is the fact that bigger proportion of stock to ETF. And secondly, there is, in the past 1 year, some negative impact from the much lower interest rate environment. The 2 actually sort of add up. That is actually been the reason to explain the decline. The third part of question is regarding the account that we Can you repeat the question again about the account? Sorry. In terms of the customer account and the number of wealth advisor that you disclosed in your presentation, could I just clarify if these are the active users? I think this is in the last few slides. I think in your ecosystem, the 620,000 customer- Total number of users on our platform. Yeah. These actually reflect the number of customer active users? It depends on the term daily active. I think this approved account, some of them could be non-active in the sense that there is no holding. Holdings. Yeah. So it includes account without holding as well. As a financial institution, we have to do regular review for inactive accounts. So if the account continue to be inactive for a long time, then we will actually have to suspend those accounts. Actually, yeah, the short answer is it does include account that does not have any holding. Okay, got it. Thanks. I think I have also a question, in the medium to long term. As you scale your AUM, what kind of platform margins can we expect in terms of net revenue over AUM? Could we revert back to the 80/20 split between the recurring and non-recurring revenue, post the pandemic in the medium to long term? Yeah. We have not given any actual guidance on how the revenue might be in the long term. At the back of my mind, if I were to think in terms of what will happen in the next 10 years, for instance, if we move towards having that 100 billion AUA type number, I would expect that there will be some reduction in the margin. It is something along the line of, say, 60 basis points. If they have a 70 basis point, then I would say that that is probably something that doesn't sound too unreasonable. That's how I can say. Yeah, we haven't had an exact guidance forecast, but offhand, yeah, if 60 basis point, I think it is unreasonable. You got it. Yep. Thanks for that. Thank you. That's all I have. We have another question from Jiai Wei. Jiai Wei, you may unmute yourself to ask the question. Hi, Jiai Wei, are you there? You may unmute yourself to ask your question. Still muted. Since Jiai Wei is not there. Yeah We will go to our text question. We have another question from Royston. He said that as this news that Tiger Brokers has moved into offering unit trust, does iFAST see the company as a credible competitor, and does this move cause any concern? I believe they have been doing unit trust since last year. Certain things I am not at full liberty to disclose, but I would say that in today's environment and especially for our business model, a company can be both a competitor as well as a client. That should be the way to actually look at it. It can actually be both a traditional competition as well as traditional revenue from some of these financial institutions that are actually out there. That should be the way to look at our business model. I would say that we are not concerned as a group. The next question from Gerald. He is asking you whether we can provide some colors with regards to the announcement on Friday, on 23rd July, on the iFAST Securities U.S. Corporation. Is iFAST entering the U.S. market, will it have any material impact to the financial after 31st December? For this particular announcement, we have incorporated a company. The intention is essentially that we intend to have a direct linkage to the U.S. exchange. We incorporate a company, we intend to put in an application for trading membership on the U.S. exchange, so that we can link up to exchange directly. The same way as we have done for Singapore and Hong Kong market, we intend to do so for the U.S. market, because U.S. is actually, today, our key I think it become a key segment of the stockbroking part of the business. It will continue to be a key market and as part of our overall business model with the B2B or B2C. Having a direct linkage, in the long run, I believe will give us the advantage. It is really from that perspective. Will it have any material impact to the financial after December 2021? For this year, no impact. For next year, I would say no substantial impact as well. Beyond that, we think that it tends to improve our overall business for this segment, beyond 2021. But in terms of actual impact in the short term, we don't expect that. We have a few questions from Andrea. From the DWS agreement, is the SGD 600 million AUM included in the latest AUM balance of SGD 17.5 billion? The second question is, does iFAST expect more AUM to come from DWS under this arrangement? Her third question is, could you share some colors on the margin iFAST received under the arrangement compared to your conventional unit trust business? On the first question, the 600 million AUA, is that included? The answer is no. The completion is expected to be at the end of July. So that should add the AUM, not the full 600 million, because there's some overlap, because some of the 600 million is actually distributed by iFAST as well. So in terms of the addition to the AUA for us, it will be probably closer to 400 million, plus. That should be a number to take note of. iFAST expects more AUM to come from DWS, not from DWS, or not in terms of the further acquisition from DWS. It is possible that we have further collaboration with DWS going forward, but not in response to the second question, is we are not in terms of actual. Could you share some color on the margins? I would say that for the margin that we will have, as I mentioned, there's two parts to it. One part is the AUM that is not on our platform yet, and the other part is the AUM that is already on the platform. So the AUM that's already on the platform will not increase our AUA, but it brings about some additional revenue. So you add on to the margin for our existing AUM. For the part that is not on our platform yet, there will be the revenue margin. I would say that because we also outsource it back to DWS, the margin that we get will be less than our average AUA margin as a platform. The next question from Benjamin. Is it possible to quantify the net revenue impact from the decline in lower flat transaction processing fee of SGD 8.80 to all B2C clients in Singapore operations on dealing of security listed on Singapore Exchange from April 2021? Net revenue versus AUA margin declined 7 basis points quarter-on-quarter to 0.62%, which was impacted by an 11 basis points quarter-on-quarter decline in non-recurring net revenue versus AUA margins. Could the long-term net revenue/AUA margins be, do you think that margins could hover around 0.6%-0.7% in the next few quarters? What are your views on working with strategic partners in the various key markets, especially China, to hasten the path to profitability? Well, first part of the question, I would say that the actual impact on us arising from SGD 8.80 is not significant, right? In terms of the overall impact on the net revenue for us. There's some reduction, but it's actually considered very minimal. Second part of the question, the decline in margin. We don't like to give the guidance in terms of next few quarters because we are also not able to predict the exact transaction volume. But I think earlier I was mentioning that, if I think in terms of the longer term, and if I think in terms of margin of 60 basis points in the much longer term, 10 years or so, I think that doesn't sound unreasonable. It's not exactly a guidance, but it doesn't sound unreasonable. Third part, in terms of working with various strategic partner, I would say that, as part of our overall B2B business model, we are always looking at linking up with various strategic partner. I think that is core to the overall B2B business. Strategic does not mean equity partnership. Of course, sometimes we do explore some equity partnership, and we don't rule out the possibility of that. But I think the key really is that probably isn't the most important thing for us, because the key of our B2B business is the ability to work with various partner. If it is equity partnership, we tend to be able to work with only limited number of equity partner. But if it's on the basis of service levels and mutual benefit in terms of the partnership, then there are many partners that we can actually work with, and that is the essence of our B2B business. That is a list that actually continues to grow. Has been growing and will continue to grow further. We have another question from Andrea. Just to touch on what you mentioned earlier on the market fluctuation which affected non-recurring revenue, do you think you could provide the split of transaction fees and FX fees for the non-recurring revenue for the first half in 2021 to compare with figures provided in the annual report, and a gauge of the level of margin from this transaction fee/commission versus- Yeah. We'll look into being able to provide more breakdown going forward, especially whether it's annually or halfway annually. We will look into that for the next one. Next, from Uma. At SGD 9 per share now, is management confident that the stock can keep going at this pace, or will this slow gradually? We don't actually give any forecast for share price. Certainly, we are not supposed to. As someone who is actually an investor at heart, what I would like to say, is just some of my observation in terms of what's happening in global stock markets in recent times. I was an Analyst myself in 1991 to 2008. I have always been an investor, and I classify myself as a value investor. I look for value in stock. Because of that, I typically do put a lot of importance on metrics like P/E ratios and so on. I understand that, iFAST, at this point, if I look at current year earnings, the P/E seems very high. My take about what's happening globally really is that business models are actually with the emergence of internet, business models are changing very fast, very rapidly in the last 20 years. In recent times, I think it expedited further in terms of the change, and I would say that in the next 5 years, 10 years, it will continue to shape. As a result of that, we actually start to see the big differences in terms of valuation between one category of company and the other category. The category that benefits that will be the internet related businesses. These are commanding a huge valuation. On the other side, you actually have companies that command very low valuation, even by traditional metrics. I think that's what's happening today. In a sense, investors are gradually, increasingly recognizing the fact that things are changing in a major structural way. If I take especially the fintech sector, more and more, I've been having the feeling that we are actually still in the early stages of the changes in terms of the way the business environment is changing. I would perhaps say that some of our present shareholders are recognizing that potential for iFAST to be one of those companies that are able to embrace this major change and to actually benefit from this major change that's happening and will continue to happen, perhaps at an accelerated pace in the next 5 years, 10 years. I think that is really perhaps the difference that we're starting to see. I've mentioned a number of times in the past year or 2 that we believe that the fintech sector a long way more to go in terms of the changes. When I say that, I am also making a reference to the fact that internet businesses in other industries are. You are seeing a lot of global businesses now. I give the example of Netflix and Spotify and so on. These are global businesses. They are based in one country, and you are able to get customers from all around the world. If you think about it, you actually find that in the financial sector, that has not happened in a big way. In fact, we are in the early stages of some of these things happening. The power of the internet is the ability to cross border. Well, the ability to reach out to everybody in the same country, but I think at the same time, also the ability to cross border. Of course, in the financial sector, it does not happen in a big way because financial sector is much more highly regulated than other industry. Because of that, you actually find that the traditional financial institutions have not been able to run a global business model, a truly global business model in any meaningful way. My take is that if you have a fintech company that is able to have a business model that truly take advantage of the strength of the internet and be able to grow even more because of the open nature of the internet, then I think the potential growth rate that we are looking at should be different from the way things are looked at historically. Historically, when we look at a particular financial sector, we think in terms of the growth of that financial sector in that country. If you come from a small country like Singapore, then it looks like, hey, your potential is very limited. But you think of it as a new world that is emerging whereby you can be based in just a few country, and you can increasingly tap into an increasing customer base all around the world. Then perhaps iFAST is really still at a startup phase from a perspective of being able to run a global business. I would say that perhaps some investors are recognizing some of that potential increasingly. As a result of that, I think we are seeing some of that valuation being built in, the more premium valuation being built into that. That is my take in the support. I think the other part that I would like to mention really is, in terms of valuation, I suppose historically we tend to think in terms of the valuation this year and next year. Perhaps, we should start to think in terms of valuation, not just this year, next year, but next 5 years. There are times whereby certain things happen that will allow us to be able to make a potential more significant jump in terms of overall revenue activity. For instance, something like eMPF, which we eventually finalize that can be something that will have a very significant impact, not so much this year, next year, but perhaps in 3 years down the line and beyond. These are some of the factors to consider, I would say, for iFAST in terms of looking at the valuation. That is what I can say at this point, without trying to predict what the actual share price will be. The next one is not a question, it is a comment from a shareholder. He is saying, "I do appreciate the management for all the hard work, and I urge shareholders to not look at short-term fluctuations, but look at their overall growth." Thank you, Yong Seng. Thank you for the comment, and in a sense, a bit related to the comment that I have just made. I think, if you look at the quarterly results, there is some of this fluctuation. I do know some of the comments in the forum as well. There is some concerns about the fact that 2Q number is significantly lower than 1Q number. I personally see this as some of the fluctuation that we sometimes see on a quarterly basis. What is key to me is that the overall compound growth that we are trying to build, that does not get diminished. That is the way I actually look at the situation. If we just think in terms of how things are going to change, in not just one year or two year, but potentially the next 5, 10 years. That itself, I think, will bring about a very different perspective in terms of how to look at the valuation. Next, we have a question from Alan, regarding the fund of funds in China, just seeing whether there's any updates. We have launched our fund of funds in China. That is actually meant more for the accredited investor segment in China. We have launched that. We are gradually increasing AUM, but it's still a small number as of now. That's something that we generally expect, is like when we launch our DPMS in Singapore, Hong Kong, Malaysia, that is something that we will gradually build up in terms of AUM over time. Short term, it may look very small, but over time it will add up and become important. More importantly is the fact that we look at this service, not just as a fund management service on its own, but as an overall addition to our overall platform service to make us more competitive than before. Next question is from Calvin. He's asking, "What type of unit trust does iFAST intend to launch after buying DPMS? Perhaps I'll talk about two main areas. One area is, it could be still in a category of equity or balanced fund type of product. I'd like to stress that when we are looking at this, we are really looking at it not so much as launching something, a product of our own to replace what all the various fund managers already have today. We don't think that we can, on our own as a fund manager, do better than all the fund managers collectively that we are working with. That is not the true intention. But as a platform that work with various partner, we do have various partners or B2B partners who are using our platform that are actually quite keen to be able to have some of their own funds, for instance. Some kind of co-branded funds, where they actually have some influence on the management strategy. If they do have such a product, then they are in a position to put a lot more effort on promoting that particular product because it is something that will give them the additional differentiation as a player in the wealth management industry. There is quite a bit of demand in this particular area, and we feel that iFAST is well-positioned to work with the partners in having such a product that can become a lot more efficient than how things are done today. That is one category. The other category, perhaps to think about really is in the area of cash management products. I think in the area of cash management product, whether it is a money market type fund or something close to money market, you actually find that there are still some gaps that are out there. Quite often the gap exists not because fund managers do not have expertise to invest in that. I think expertise in terms of investing in that asset class is there amongst our fund managers because we work with so many fund managers. But very often the bottleneck, the inefficiency, really is in the area of administration and settlement. How soon can the buy and redemption of the units of this cash management fund be settled? T+1, T+2 or T+0 or T+1 second. In China, they do it T+1 second. In Singapore, Hong Kong, typically they think in terms of T+2. Some funds can do T+1, T+0. But if you think about it, no one in Singapore or Hong Kong are able to do what some of the Chinese players are able to do. Alibaba with their Yu'e Bao, for instance, is essentially T+1 second or something like that. If we actually continue to do things the way it has been done historically, then you actually find that we are always limited by the inefficiency of the overall system. But a company like Alibaba or Ant, in coming out with their Yu'e Bao, they took the overall efficiency to the next level. The reason why they are able to do that is because they control a few parts of the process. They control the distribution, they have the customer base, and they control the fund management settlement process. When you can streamline all the different parts of the process, make the different parts interact a lot more seamlessly, then the efficiency can be brought to the next level. This is one of those areas that we have in our mind. How do we bring the efficiency of cash management funds to the next level? We concluded that the only way for us to be able to do that properly is to have the ability to handle not just the platform part of the business, but to have the ability to directly handle the fund management settlement process maturity as well. That is another area of the thinking that we have. These are perhaps the two probably if I have both done, you are able to understand the possibility that we are seeing. Thank you. The next question is from Victor. He is saying that Interactive Brokers recently eliminated monthly account inactivity fees. What is the management view on this? Monthly account inactivity fee. I think we do not have any monthly account inactivity fee at this moment, and we do not intend to introduce any. I believe in this new world, you should not have monthly account inactivity fees. Next question from Ruphan is, "Can you please give us some ideas of the timeline associated with the Malaysia digital banking license? By when do you expect to know the outcome? Bank Negara Malaysia has stated that they expect to announce the winners of the Malaysia digital license in the first quarter of 2022. First quarter next year. That is where we are. We have a question from Robert. First half 2021 operation cash flow is SGD 24 million, less CAPEX SGD 5 million equals to SGD 19 million. First half dividend is SGD 66 million. Balance sheet net cash SGD 61 million. Why not pay higher dividend? What's the cash flow constraint we are not seeing? I would say that we're not seeing the cash flow constraint. The main reason why we are not paying more at this point in time is because we feel that as a financial institution group that has been growing, and expect to continue to grow and have a much bigger ambition, we feel that our present balance sheet size is actually somewhat more compared to many of the big financial institutions. It is really with the thinking that, as we move forward, we want to be able to further strengthen our overall balance sheet. While we're increasing the dividend payout for this year, and we think we can continue to do so going to next year and beyond, we also want to take into account the size of our overall balance sheet as well. We also expect that as a group, we will continue to be applying for some additional licenses in different markets, different countries as we move on. When we do so, we will generally need to actually have some additional capital for that particular subsidiary that we start. That's why as a group, it's important that we have some balance sheet to allow us to work on those opportunities. It's really the intention of being able to do more of these things. Besides that, no major constraint of cash flow. Our last question for today is from Rohan. To achieve the 100 billion AUA by 2028, we are talking about 26% compound growth from the present levels over this decade. Do you see this happening from the existing organic growth from the current market/product, or is there any inorganic growth or new market product penetration built in the expectation? We think that based on the five markets that we're already in, the potential is there for us to achieve the 100 billion AUA by 2028 just based on these five markets. We think that at some point in the next 7 years, there's a good likelihood that we may enter a new market, but we have not built that in into consideration. Just based on the current market that we're in, we feel that 26% growth a year since then, that is achievable. It's executable. Here is another question from Hong. Based on your existing license across 17 markets, is there any additional products you could launch but have not done so? I suppose, based on that question on its own, I would say perhaps there are some products that we can launch but have not. It could be different areas, or it could be work in progress, for instance. Or it could be that those products may not be products that we believe in. So there can be various reasons. We think that based on the existing license, the core product that we believe to be important, that's to a large extent, there. There'll be some addition as we go on. Some are work in progress. Then some category where we believe to be more gambling products and so on, we are not touching. We can look at this. These are the questions that we have today. Okay. I think those are all the additional questions. I note that it's almost 12:00. So with that, we'll like to end the session today. Thank you everybody for dialing in, for raising your questions. Thank you. Thank you.