Earnings Call: Q3 2020

Oct 23, 2020

Hi, everyone. Welcome to iFAST Corp's third quarter 2020 and nine months 2020 results briefing. Thank you for joining us, and I hope you are all doing well. My name is Jean Paul. I'm from the corp comms team, and I'll be running through the key summary today. Together with me, I have also Mr. Lim Chung Chun, our CEO, and Mr. David Leung, our CFO, and they'll be going through the sections one and two respectively later on. We'll wrap up with the Q&A session. Going into the key summary, the group reported a new record quarterly net profit of SGD 6.16 million in the third quarter. This is an increase of 150.6% compared to third quarter last year. This was achieved on the back of a 35% year-on-year increase in net revenue and a 33% year-on-year increase in gross revenue. For the nine months of this year, net profit grew 119.9% year-on-year on the back of a 27.5% year-on-year increase in net revenue and a 33% year-on-year increase in gross revenue. The growth in profit was substantially higher than the growth in revenue. This shows the positive operating leverage and scalability of the group's business model. Our PBT, profit before tax margin, as a percentage of net revenue increased from 17% in 2019 to 28.3% in the nine months of this year. The improvement in the group's business shows that iFAST Corp continues to be a beneficiary of increased digital adoption in the wealth management industry. We have seen improvements across both our B2C business as well as our B2B business. The net inflows registered a record high level of SGD 1.07 billion in third Q, raising the group's AUA to a record high of SGD 12.59 billion as at 30th of September. Out of the net inflows of SGD 1.07 billion that we've seen, 60.5% came from unit trust. Our operating cash flow rose from SGD 19.38 million in the full year of 2019 to SGD 30.82 million in nine months of this year. iFAST Corp believes that the robust growth seen this year has resulted from our past investments in building up a strong, integrated digital wealth management platform. We believe we will continue to work hard on various initiatives in all existing markets that we operate in to ensure that our medium to long-term growth prospects will remain strong. Barring unforeseen circumstances, we expect full year 2020 performance to show robust growth in profit and revenue compared to last year. For the third interim dividend for full year 2020, the directors have declared an increase in dividend from SGD 0.75 cents share in third Q of last year to SGD 0.8 cents for ordinary share in third Q 2020. This decision takes into consideration a balance between rewarding shareholders and retaining sufficient capital in the event of a need for expansion, such as the launch of the digital bank business in Singapore if the application is successful. Our AUA chart shows that we've grown 25.9% year to date and 33% year-on-year to a record high level of SGD 12.59 billion as at 30th of September, contributed by both B2B and B2C and about 69% there coming from B2B and the remaining from B2C. The next slide shows the net inflows number that we shared just now. We had a record high in third Q for net inflows of SGD 1.07 billion. For the nine months of this year, we are at SGD 2.3 billion, substantially higher than the nine months of last year. Similarly, for subscription excluding switching, we have also hit a record high in third Q this year as well as nine months of this year. I will now invite David Leung, our CFO, to cover the section one on the financial results. Good morning, ladies and gentlemen. I am going to present the third quarter 2022 result and the nine months 2022 result. For the financial result of the group between third quarter 2000 and third quarter 2019, our revenue increased by 33% to 45%. Our net revenue increased by 35.7% to 22.87%. Our other income increased by 150% to about SGD 1.27 million. Operating expenses increased by about 15% to about SGD 16.7 million. We have a small finance cost, about SGD 60,000, and a small share result associated, the loss of about SGD 0.07 million. Our PBT increased by 100.9% of SGD 7.31 million. Our PAT increased by about 154% or SGD 6.1 million. The net profit attribute of owners for the company increased by 150%, about SGD 6.16 million. EPS for third quarter is 2.27 cents per cent, 147% increase. While the dividend per shares for the third interim dividend is SGD 0.8 cents per shares. For the nine months result, our gross revenue increased by about 33% to SGD 122 million. The net revenue increased by 27.5% above SGD 61.5 million. The increase in the revenue and the net revenue is mainly because of the significant growth and improvement in the stock and ETF processing business and also due to increase in the currency conversion administration service. Besides, the growth of the AUA also contributed increase of the revenue and the net revenue. Other income increased by about 139%, about SGD 3.65 million. This year, the other income mainly including the government grant from the Singapore and Hong Kong government, and this contributed increase in the other income. Operating expenses increased by 14%, about SGD 47.7 million, mainly due to our effort to continue to enhance to build our investment platform and also some additional provision for staff bonus to recognize and appreciate the effort of the staff who continue to support the business during the COVID-19 period. We have a small finance income, about SGD 80,000. The share and loss of results, so say for nine months, this is about SGD 140,000 loss. Our PBT increased by about 127%, about SGD 13.4 million. Our PAT increased by about 123%, about SGD 14.12 million. So the PBT is SGD 17.4 million, and the profit after tax is about SGD 14.2 million. Our net profit attribute owners of the company increased close to 120%, about SGD 14.33 million. EPS is SGD 5.29 cents, about 117% increase, and the total dividend per share for nine months is SGD 2.3 cents. This shows the financial result for 2016 to 2019, the full year and the nine months for 2020, including the China operation. Our operating cash flow for nine months is about SGD 30.82 million, while the dividend per share is about SGD 2.3 cents. Excluding the China operation, the revenue is about SGD 120.9 million. Our net revenue is SGD 60.42 million. Other income, SGD 3.64 million. Operating expenses, SGD 42.85 million. Net finance income is about SGD 130,000. The share and loss of results is about SGD 140,000. Profit before tax is SGD 21.14 million, while the profit after tax is about SGD 17.9 million. EPS excluding China operation is SGD 6.61 cents, and operating cash flow excluding China operation is about SGD 33.56 million. This chart shows the PBT margin for the group based on the net revenue. For both including and excluding China operation, you notice that there's quite significant increase. The PBT margin including China operation is 28.3%, while the PBT margin excluding China operation is about 35%. Some financial indicators for the nine months of 2020. Our EBITDA is about SGD 22.91 million. Net cash position is SGD 48.28 million. Operating cash flow, SGD 30.2 million, and operating cash flow excluding China operation is SGD 33.56 million. Capital expenditure is about SGD 7.07 million, and the net current asset is SGD 55.51 million. Our shareholders' equity as at end of September 2020 is about SGD 100.42 million. The net cash position as at end of September 2020. Our cash and cash equivalent is SGD 32.51 million and other investment consists of investment in financial assets under current assets is about SGD 18.13 million. So the total cash and other investment is SGD 50.64 million. After minus the bank loan, about SGD 2.36 million, our net cash position is about SGD 48.28 million, and the gross debt to equity ratio is 2.35%, and we are in a net cash position. This chart shows the group operating cash flow for 2016 to 2019 and nine months of 2020. Our operating cash flow excluding China is SGD 33.56 million, including China is SGD 30.82 million. Capital expenditure for nine months this year, we spent about SGD 7.068 million. Number of issued share as at end of September 2020 is about 271.85 million. This is our consolidated financial position. As at end of September 2020, our total non-current asset is about SGD 60.3 million, mainly consists of the right-of-use asset, which is the office, about SGD 20.5 million. Intangible asset, goodwill, about SGD 23.3 million. Current asset is about SGD 166 million, mainly including the trade and other receivable of SGD 43.67 million and uncompleted contract buyers, about SGD 71.65 million. Our trust account at the end of September is about close to SGD 797 million. Total asset, SGD 228 million. Our shareholders' equity is about SGD 100.42 million as at end of September, including the non-controlling interest, the total equity is about SGD 99.66 million. Our non-current asset is about SGD 60 million, mainly due to these liabilities for the office, and our current liability is about SGD 112 million, mainly including the trade and other payable of about SGD 28 million and uncompleted contract sellers, about SGD 71 million. So total liability is about SGD 198 million. Lastly is some info about the third interim dividend. The dividend per share is SGD 0.8 cents per share. Ex-dividend date will be on 2nd of November. Record date and time on 3rd November. The payment date will be 13th of November 2020. That is all from me. Thanks. Now I will move on to cover section 2 on the performance trends. This slide here, on slide 23, shows the AUA breakdown by market. As you can see, Singapore continues to be our key market, accounting for 67% of our AUA. Unit trust is still our key product at 76.6%, even though in recent times we have seen more contributions from other products. But as we noted in our commentary, when we released this result, in third quarter 2020, where we have a net inflow of over SGD 1 billion, 60.5% of the net inflow was from unit trust. So unit trust continued to be the core product for us. This chart here, we have been showing every quarter, essentially, it shows the trend of our net revenue over the years. In the first 9 months, I think we have had a good growth year-on-year. For the periods in recent times, you will notice that the proportion contributed by non-recurring income has increased compared to the past. But as far as our recurring income is concerned, that continues to be a substantial proportion. More importantly, the recurring income itself is still growing year-on-year. Net revenue as a proportion of average AUA. If you look at 9 months result, you actually find that has actually increased. But as I noted, we have more contribution from other products like stocks, which actually lead to a better increase in the non-recurring income. And that is why the percentage contribution from the two components has shifted a bit. But on an overall basis, I think the numbers are quite healthy. The subsequent few slides shows the contribution from different components of net recurring income versus non-recurring income for 5 years. I will leave it to the shareholders to look through in more detail. As far as contribution from different markets are concerned, Singapore continue to be the main one, and I think as you can see from this table, all the 4 markets are actually showing the increases in the net revenue for us. This table and the next one actually shows the further details on the B2B and B2C numbers. I will leave it to you to study it further. As far as profitability is concerned, we note that during this period, there has been a strong increase in profitability for Singapore. For Singapore, which has been our core market, I think in previous years, it tended to grow at a slower pace. But I think this year particularly, we have seen a very strong performance from Singapore. You actually find that in the first 9 months of this year, pre-tax profit have actually grown by 91%. We have seen the growth from Hong Kong and Malaysia as well. China continues to incur the losses. I would say that we are certainly watching the bottom line for China, but at the same time, we also know that at this point in time, it's more important to ensure that we are doing enough to ensure that China can grow quite substantially as far as the AUA revenue are concerned, because I think we're still in very early days as far as the potential for China market is concerned. This is a 5-year performance of the different markets. This table on slide 32 shows the volume that we're getting from the bonds. It has been growing over the years. It continues to grow this year. I would say that this is still a business that is a work in progress in our view, because I think the potential for this business can be much higher than what we're seeing today. I think in the quarters ahead, then we hope to be able to show more significant progress for this business as well. I think as a group, over the years, we have always been pushing ahead to launch new product because I think the Fintech business world, the wealth management industry is changing quite rapidly. The way to ensure that we can remain competitive in the long run and to perhaps become a more relevant player in the long run is to constantly be looking at how to improve the range and depth of services that we offer. From time to time, we made some progress, and we accordingly make some of this announcement. We recently announced that for Malaysia, we have obtained the in-principle approval for the License to deal in stocks in Malaysia. For this business, we hope to launch in early 2021. In China, we have recently obtained a private fund management license, and we can soon be starting off on this business. This is a license that allow us to undertake fund management, but there's some limits on the type of client that we can cater to. Essentially, the limit in China would be that it need to be considered as a high net worth individual. The definition of that is, the minimum investment amount per client need to be one million RMB. Which, in the context of China, is still a very big market because I think lots of people can invest more than one million RMB in China today. For this, we hope to launch in early 2021 as well. In the quarters ahead, we'll give further details. The application for digital wholesale bank licence has been in progress. I think MAS have indicated that the winners will be known by the end of this year, so we are still awaiting that. We are hopeful of a potential success, but at the same time, we can't be completely certain. If we are successful, then we expect to launch the services by end of 2021. I think in recent times, there's also been some media report about the involvement of iFAST Corp. in the eMPF project in Hong Kong. Essentially, it is a project whereby the MPF. MPF is the equivalent of CPF. For Hong Kong, they basically want to create eMPF platform. We would like to note that at this point in time, we are not able to give much detail or to comment very much about that, mainly because I think typically, such involvement in projects or tenders, especially at the initial stage, will be confidential. We cannot comment too much. But I think if you refer to some available information from MPFA itself in Hong Kong, then you actually find that this is a project that essentially aims to digitalize the administration for the industry. It is a project that will involve 2 year of preparation when the consortium build the system, and then the actual running of the platform will subsequently be for a minimum of 7 years. I will move on now to just quickly talk briefly about each individual market. This is a chart for the Singapore market. As you can see, the numbers have been strong this year, particularly strong this year in the last 3 quarters. I would say that if you look at what happened in stockbroking firms around the world when the COVID-19 first hit, in first quarter, trading volume surged in first Q, and then it remained very high in second Q. Third Q, probably there was some slowdown in trading volume generally. But I think for us as a whole, we actually found that our overall inflow in third Q actually improved. I think, quite encouragingly, we actually find that our core business of unit trust actually continue to grow, and third Q has been a particularly strong quarter for us. We saw record net inflow as a group, as we mentioned, and Singapore has been the key contributor to that overall inflow. So that is regarding Singapore. In Hong Kong, we continue to grow, even though the numbers were not as strong as for Singapore and, say, Malaysia. But I think the B2C business for us in Hong Kong has been actually quite robust. B2B was not as strong during the quarter. Our observation in the past have tended to be that, I think in Hong Kong, the investors tend to be a bit more reactive to stock market condition. So when market condition seem a bit more uncertain, then there can actually be some outflow from some of the channels. As I mentioned, overall, we continue to grow, just that Hong Kong was not as strong as some of the other markets. Malaysia has seen a strong quarter, so we continue to record strong increases in AUA as well as revenue. We are seeing the growth coming quite strongly for both the B2C and B2B part of the business. Malaysia as well is a market whereby we are actually seeing quite a significant contribution from Fintech solutions, because we have been building some Fintech solutions for some of the financial institutions, especially after we did a project for the EPF, then we actually find that the other fund houses subsequently are very keen to actually engage us to help them to build some of the tech solutions module as well. So that segment has also done quite well for this year. China, as I noted in previous quarter, we had a tough year in 2019 last year. But I think encouragingly, this year we have found that the momentum has picked up and I think third quarter itself, we have actually seen quite a strong momentum. Our AUA have crossed CNY 1 billion. We know that is still a very small number for the China market, but at least we are encouraged by, clarify that the business model that we're putting in, the services that we're rolling out are actually gaining traction and momentum and we're continuing to invest in China to ensure that we can have a potentially exciting growth in the future. India is an associate. Currently, we own 39% effective stake in iFAST India. I would say that India, among the different markets we're in, is the one that hasn't progressed as well this year. I think the COVID-19 has hit India particularly hard, and I think the level of lockdown in India is actually more so than in other countries. So far this year, the progress hasn't been great, but we certainly will continue to work on improving our services, and we look forward to a much better growth there in the future. With that, we've come to the end of a formal presentation, that we would like to run through. The other subsequent slides I'll leave to investors to look through on their own. And, with that, now we'll open the session to question and answer. Can we have the questions from you? Currently, we have no questions yet. So, hi, everyone. If you have any questions, do remember to either type in the chat or you can actually click on the raise hand button and we will unmute you for you to ask the question. We have a question from Paul Chu. He says, what has been some macro or micro reasons driving that record inflows in Q3 2020, especially for unit trust? Was this due to B2C or B2B flows? Yeah. So in third quarter, can you go to the slide on the net inflow? So in third quarter, we saw that the net inflow was slightly over SGD 1 billion. This came about after SGD 590 million in first quarter and SGD 650 million in second quarter. So third quarter, actually, we saw the momentum improving. If we talk about any abnormal factor, I would say that one abnormal factor perhaps to point to was the fact that for the CPF business in Singapore, we saw that in third quarter, we saw an extra boost in terms of the net inflow. And I think the reason is because, for the B2B side of the business, it picked up quite strongly. I think the financial advisors were doing more business to hit our deadline of 1st October, whereby after 1st October, the upfront sales charge from CPF investment will become zero. Previously, it was 1.5%. After October 1, it becomes zero. I think that has led to some additional increase in the inflow. I think that is the one that gave it the extra push. Having said that, we actually note that the other business segment that we actually have also show pretty strong inflow. B2C Singapore, Hong Kong, Malaysia, have all been strong. B2B in Malaysia has been strong. I think B2B Hong Kong, not particularly strong. These are what has actually happened during the quarter. Regarding these factor about CPF investment, I think even after the deadline, we expect that the inflow will continue to come in, even though it probably won't be at the same pace as the third quarter number that we actually saw. I think that it'll continue to be healthy. That's probably the way to look at it. We have a waiting question from Umar Ali. Umar, you can unmute yourself to ask the question. Yeah. Hi, can you guys hear me? Yeah. Yeah. Okay. Hi, and congratulations on the results, by the way. I think I have a couple of questions. The first one is regarding margins. As your revenue rises, your commissions are going to increase in tandem with that. This could potentially eat into the group's margin. How is iFAST planning to deal with this in order to maintain or even increase your margins further to what they are today? My second question is on dividends. Is it fair to say that iFAST perhaps held back a bit on dividends this quarter, in anticipation of the digital license? If so, what other expansion plans is the group eyeing in the near term, perhaps in the next few quarters, in terms of market, in terms of industries, in terms of services? Yeah, those are my two questions. Thank you. On your first question, you are asking, as a business grows, would the margin be negatively impacted? Is that what you are asking? No. As your revenue rises, your commissions are going to rise as well. Which could potentially, I am not saying they will, but they could potentially eat into the group's margins or affect the margins adversely. How is the group planning to deal with this in order to prevent any further impact or any impact at all to the margins? I would say that it should be the other way around. As the scale of our business increases, the margin for us ought to be on an improving trend. Typically, when we work out the margin, we take the pre-tax profit, and we divide that by net revenue. Net revenue, by the way, have already excluded the commissions that we pay out to the financial advisors. We tend to prefer to analyze the margin that way because it shows more clearly the actual things that are actually happening on the ground. Yeah. The nature of a platform business is such that when you first start off the business, there is a certain minimum amount of fixed cost that you need to have, and initially the revenue would be small. But as the scale grows, the fixed cost grows, it won't grow at the same rate as the revenue. So you actually find that over time, the margin can improve as we move on. So that is the effect that we actually saw this year, particularly in the third quarter. So, we are hopeful that if you take individual market, without considering additional new market, if you take individual market, then as we continue to grow, there is a potential for us to work towards a better margin in the years ahead. On your second question, I think, in the past, when we look at the dividend payment, before we started thinking about the possibility of becoming a bank, we have tended to have a dividend payout ratio that was relatively high, perhaps. We were looking at a ratio of 60% in the past. And we felt that we can do so comfortably because we have a business model that emphasizes being that basically is cash generative, that is basically relatively asset light. We don't need too much capital to allow us to continue to grow. So in the past, we used to pay about 60% in terms of payout ratio. That thinking about the overall platform business continues. It doesn't change. Perhaps what changes this time around is the fact that we are applying for a digital banking licence. And as we all know, a banking business is a business that requires higher capital. And for that reason, even though we don't know whether we are going to be successful or not, at this point in time, we prefer to increase the dividend but not all the way to a level that doesn't allow us to build out the recurring, the retained earnings as fast. So basically, balancing the fact that with more profits, we can reward shareholders better. But at the same time, taking into consideration that if we are actually successful, then we shouldn't be having as high a payout ratio as we try to build up the banking business. So that would be the main thinking. I think we have some other questions. "iFAST in July is ready to commit SGD 80 million in upfront capital and launch its digital bank by end 2021, should it be successful. Are there plans to increase this figure as MAS readies to announce the successful applicants?" I think the SGD 80 million that we mentioned was essentially the capital that we expect to put into the bank in the initial period before we launch the actual business. So that's the estimated amount that we expect to put in on our side for 65%. So if we are successful, then we expect that at the bank level we'll still be looking at that number at the start. Yeah. Are there plans to increase this figure? I suppose, in terms of what we will actually try to raise, I think that's also a function of various factors, including our own level of profitability, valuation, et cetera. If we're in a position to actually strengthen our balance sheet more without diluting unnecessarily, I think that can actually be considered. Next question. Currently, iFAST has a Capital Markets Services Licence, and iFAST is also providing advisory services for some managed accounts. Is there a possibility where iFAST could work with entrepreneurs who desire to create their own funds by collaborating or leveraging on iFAST license operations?" It is interesting that this question comes about because that is actually one of the areas that we are looking at and that we expect to be working on. My view about the fund management industry is that I think there are actually quite a number of fund management firms in Singapore in different markets, whereby the scale of the business may not be as big as yet, but they are actually run by good fund managers, good investors. Fund management, when it comes to actually running the business, it is more than just making investment decisions. In practice, you actually have to cope with all the different administrative issues, compliance issues, IT issues, and that makes the business quite difficult. We feel increasingly that iFAST is actually in a position to actually develop our services further so that we can better partner and better help solve this group of boutique fund managers, et cetera, to actually run the business more efficiently. At this point in time, I am not able to give too much detail. Broadly, I think in terms of direction, that is something that we are actually looking at. In the quarters ahead, we hope to be able to give more information. "Any update to the application of digital bank license? If we eventually get it, how significantly will it contribute to the top line? What kind of synergy will there be between this segment and the trading platform segment?" Update, I think I have already mentioned earlier, we expect MAS to announce who are the winners by end of this year. If we do get it, then certainly in the years ahead, it will be a very significant contributor to the top line because I think the banking business opens up a value possibility. What kind of synergy between this segment and the trading platform segment? I will say that there is tremendous synergy between the wealth management platform and the banking business. I think you just need to take a look at the fact that in most countries, in Asia particularly, the biggest players in the wealth management industries are actually the banks. The banks are the biggest player for, I would say, for one main reason, which is that the customers' cash are residing with the bank. So that actually give the banks a tremendous advantage in doing the wealth management business. It does not necessarily mean that the banks are better advisors or they are selling better product, but just because of the fact that the cash sits with the banks, that gives the banks a tremendous advantage. iFAST have built our wealth management platform all these years without having the benefit of the cash sitting with us. So we have built it, I would say, the harder way. But we have been successful in doing so, and in a sense, we have come to a point in time where we feel that if we are able to also get a banking license, then we certainly want to have it. If we are able to have it, then certainly it can be a significant extra boost to the overall wealth management platform that we have built. For China, is fund management the missing piece to turn around operation, or will fund management just raise fixed costs and perhaps widen losses? I think, if you look at our other markets, including Singapore and Hong Kong, and Malaysia, we currently have fund management licenses in these three markets. Even though we have a fund management license, we do not actually just go out to create products in the same way that other fund managers do. We are already carrying thousands of funds on our platform. Just having the license to create additional equity fund is not the main reason why we want the fund management license. We are looking at using a fund management license in a way that will complement our overall wealth management platform better. For instance, in Singapore and Malaysia and Hong Kong, the way we use a fund management license is we are running a discretionary portfolio fund. We invest into some underlying unit trusts as well as ETF. That broad thinking will also apply when it comes to China. Having the fund management license in China will allow us to provide that overall platform services better. I would not say that that in itself is the main thing that is needed, but it certainly will be something that will be helpful. I think, with that, we hope that the overall China business can grow even faster. There will be some increase in fixed costs as a result of this particular license, but I do not think it is by a huge amount. Next question. I have a question on China iFAST PFM. Do you need to hire new staff to cater for this business? We do hire some additional staff, but in percentage term, it is not a huge increase relative to what we already have for our platform business. Does PFM allow Chinese citizens to invest in U.S., Singapore, and Malaysia? PFM does give us that flexibility to be able to invest into overseas asset classes, which will include the U.S. assets, et cetera. It will give us that flexibility. The thinking is, going forward into the future, we will be doing some of that, even though at the initial stage, we expect that we will be looking on the domestic market more significantly for a start. Certainly, we are looking at the potential of being able to invest outside of the China onshore market as well. Is any Jobs Credit Scheme amount booked in that quarter? Yes, there was some, David? Okay. If you notice in the recent announcement page 4, we have a breakdown of the other income tax. We have a line showing the government grant. In Q3, the total government grant is SGD 992,000. Out of it, about SGD 600,000 is from the Jobs Credit Scheme in Singapore, and the remaining amount of SGD 400,000 is from a government grant from the Hong Kong government during third quarter. Yeah. We expect that in fourth quarter, we will similarly be having some government grant from Singapore and Hong Kong as well. I think some of that benefit will flow all the way into first Q next year, but at a reduced amount in first Q next year. Has a mix of recurring income changed significantly this year, causing the marginally lower margin in terms of recurring income over AUA? Yeah. I think if you look at what has happened this year, you will find that we have seen quite a strong growth in terms of the AUA coming from stocks and ETF. And for stocks and ETF, we do not charge a recurring income directly. Because of that, when you work out our total recurring income, and then you divide that by total AUA, then you actually find that the percentage of the recurring income margin over total AUA actually saw some decline. Even though the total net revenue over AUA had, in fact, increased for us this year. So that is the effect that we have seen. But it is also worthwhile noting that our total recurring income continue to grow because our overall AUA for unit trust continues to grow. I think the overall recurring income in second quarter, when we reported a number, did not grow as strongly compared to first quarter. But if you look at the number for third quarter compared to second quarter, there was a very healthy rate of increase. Next question. With successful registration to be a private fund manager in China, how do you see your growth in China panning out? And how will this change your timeline of achieving breakeven or profitability? As I mentioned earlier, I think the private fund management license will allow us to offer overall service better as a platform, because we can combine the benefit of having a fund management license and the benefit of running a platform together, and that will allow us to better grow our overall China business. Does it change the timeline of achieving breakeven or profitability? I think that license on its own does not. Well, we have not enough workout, whether that will actually change the timing of breakeven or not. But we do feel that it allow us to improve the overall growth of the China platform at a faster pace. Next question. For China private fund management license you obtained, what is your business plan for this part of the business to grow it? At the initial stage, we expect that we will use this license to allow us to run a portfolio of fund of funds. That actually fits in quite well with the business model of running the B2B platform. I think if you look at fund managers around the world, most fund managers prefer to invest directly in individual securities, in stocks directly or in bonds directly. I think we certainly have the option of doing so. But what we have tended to do, if you have noticed what we do in Singapore, Hong Kong, and Malaysia, is that we have tended to use our fund management license, to invest into a portfolio of underlying funds and ETF. We feel that that is actually an opportunity that is actually not so well developed yet in the overall industry. For us as a platform, for us in this business, and given that we work with so many financial advisors, I think that business model will actually be a more interesting one for us. So we won't just be like most other fund managers that we work with, because, as I mentioned, we already carrying thousands of equity funds, bond funds on our platform. We prefer to use a fund management license in a manner that allow us to create more unique service proposition. So that is the broader thinking. That will actually allow the financial advisors who use our platform, to actually advise the client better and to have more efficient way of earning their recurring income as well. Next question. Management previously guided SGD 63.4 million to SGD 64.9 million in 2020 OPEX. Is this still intact? Are there benefits from the extended JSS scheme? The guidance is still intact. So we will still work within that range, even though at this point in time we expect that the operating expense will be nearer the top end of the range. Given that the overall business have actually grown quite well. Are there benefits from the extended JSS scheme? Actually, the answer is no. The JSS scheme, the way we do the accounting, it doesn't reduce the operating expenses that we actually have. So JSS is booked as other income in the financial statement. So the JSS grant that we have does not reduce the operating expenses. Next question. Could you share when the Hong Kong government will announce a winner for the digitalization of the MPF? Is the target SGD 100 billion AUA by 2028 still valid? I think that's two separate questions. On the first question, MPFA, our expectation is that they are likely to announce it at the end of the year, possibly in December. We can't know for sure, but our best guess is perhaps in December. Second, the next question, our target AUA by 2028. Yes, that target is still valid. We will continue to work towards that. I'd like to just mention that the MPF part is a separate thing from our AUA target. Next question, in general, fees and commissions are falling globally. Is there a need to make inroads into other types of income? Example, interest income, or can fees be raised? Is there a need to make inroads into other types of income? Example, interest income. The answer is yes. We have recognized that to be one of the important sources of income that we ought to have going forward. I think if you look at some other big players in the more developed markets, such as players like Charles Schwab and so on, you find that interest income is in fact the biggest contributor to net revenue for them. My personal view is perhaps they have become a player like Charles Schwab or players in the U.S. have become way too reliant on net interest income. We think that while interest income should be a source of income that will continue to grow, we also feel that other segments of income will also be important. One example is given some FX conversion margins that we make, that will be an important source of income. Along the way, there will be other sources of income, such as IT services fee, because we have a Fintech solutions division. So we actually develop certain IT modules for our B2B partners. In doing so, we do derive some fee, both for the upfront development as well as some ongoing maintenance fee that we actually have. So the different sources of income will actually be adding up over time, and I think that will make us competitive as a platform as we move on. Can iFAST launch an ETF that tracks QQQ or SPY, which many investors can use OA to invest? This will increase the AUAs significantly. I think it is possible that in the future we can launch an ETF if we want to, even though I would say at this point in time, we don't have any immediate plan in doing so. We don't think we need to at this point in time, because there are already a lot of ETF. We feel that our value is first and foremost as a platform, and I think we probably will be able to make better margin as a platform that way, and at the same time, carry various products that allow investors to invest profitably for the long term. Next question. Your CapEx has seen a significant drop as compared to the run rate of the previous years. Is this a drop-off? Can we expect a lower level of CapEx compared to the past years? I would say that fourth Q, you'll probably see a higher level compared to the quarterly levels that we've seen for the first three quarters of this year. Our expectation is that for the whole of 2020, our CapEx as a group will be perhaps similar or Sorry? Similar or- Yeah, similar or marginally lower than for year 2019. Next question. Why is equity-settled share-based payment transaction cost flat year-on-year, despite a surge in revenue and share price? Can this fixed cost cause negative operating leverage in the future? I think equity-settled share-based payment essentially refers to- PSP and share options yeah, share options. PSP. Or we call it performance shares, share options or share grant that we give to employee. That would be where it comes from, and the amount we give, we think of it as a part of employee remuneration. Yeah, so the amount we give, we will evaluate each year in terms of how much we can actually afford to give. For this year, I think the amount we give in terms of the cost was probably quite similar to the year before, so you probably find as a result that the numbers are relatively flat. I think as we move on an ongoing basis, in the years ahead, I would expect that on an annual basis, there can be some increases in the equity share-based payment for employee. As we grow, as our number of employees grow, as our revenue and profitability grow, we can actually afford to reward employees with more of the share options or share grant. So you may see some increases, but I think it will be manageable as we did not control how much we are giving. That is all. I think those are the questions that we have. Is there any final question? If there isn't, I would like to end our briefing session over here. Thank you everybody for attending our third quarter results briefing. Thank you. Thank you.