IFAST Corporation Ltd
SGX:AIY
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IFAST Corporation Ltd
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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. And together with me, we have Mr. David Leung, who will be going through the financial results in the call; and our Chairman and CEO, Mr. Lim Chung Chun, who will be running through the business updates as well as the [ training ] afterwards.
So I will start with the key summary points. So our group's asset under administration, or AUA, continued to register new record levels, in which SGD 17.54 billion as at 30th of June. 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 trust, contributed to our AUA. That grew to a record SGD 12.87 million, which is a growth rate of 48.7% year-on-year and 18% year-to-date.
As a result, 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 2021. The growth in nonrecurring net revenue has moderated in second quarter, increasing by 15.3% year-on-year in second Q 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 the 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 SGD 2.12 billion for the whole of the first year of this year -- for 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 part investment that we have made to develop 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. Borrowing our [indiscernible] 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 expect dividend of SGD 0.011 per ordinary share, which is an increase of 46.7% year-on-year compared to the second interim dividend in our second quarter of last year, which was at SGD 0.075 per ordinary share.
A couple more points on the key summary. So as announced by the group on 30th of June this year, we have led a consortium in the submission of an application for additional bank license in Malaysia. This continues our efforts in seeking to tap into global digital banking and fintech opportunities. And in Hong Kong, discussions with 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 total business for 2023/2024 and beyond.
Looking at our AUA chart, so that's grown to a record high level of SGD 17.54 billion as of 30 of June 2021. This represents a year-on-year growth rate of 57.3% as announced just now and 21.4% year-to-date. So we showed a [ steady ] 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'll be showing the net inflows numbers. So second quarter of this year, we saw net inflows of SGD 0.84 billion. For the full first half, the total net inflows of at SGD 2.12 billion, significantly higher than the first half of last year. And 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's pretty strong as well in second quarter at SGD 1.76 billion, and the full half of this year were at SGD 3.97 billion.
And 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 second quarter of 2021 versus second quarter of 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 store and retail processing fee and gross margin income. Our other income dropped by about 73% to about SGD 0.49 million. It's 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%, up SGD 18.25 billion, and our PBT increased by 46.3% or up SGD 8.4 million. PAT, a 55.5% increase to close to SGD 7 million, and our net profit attributable 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 SGD 0.0254, represents a 52.1% growth. And the dividend per share is SGD 0.011, represent a 46.7% growth.
Next is the comparison of the first half financial results 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 billion (sic) [ SGD 106.12 million ]. Net revenue increased by 41% growth to about SGD 54.68 million. Other income, as mentioned earlier, due to the decrease in the receipt of the government grant, had a drop of 39%, about SGD 1.44 million. Operating expenses increased by 20.6% to SGD 37.3 million, and we recorded a smaller finance income only about SGD 50,000, mainly due to the decrease in the bank interest rate since last year.
We record a small share of results of associates about SGD 80,000. And our -- but our PBT for the first half of 2021 is achieved a close to 85% growth to about SGD 18.7 million. Our PAT increased by 95% growth to SGD 15.7 million. Net properties attributable to owners of the company for the first half of 2021 achieved a 94% to about SGD 15.84 million. EPS for the first half of 2021 is about SGD 0.0576, representing close to 91% growth. Dividend per share for the first half of this year is SGD 0.021, it's 40% growth compared with the first half 2020.
So this table shows the financial result of 2017 to 2020 at the first half of 2021. This chart show the PBT margin for the group based on net revenue. Our PBT margin for the group for the first half of 2021 achieved around 34.2%. Return on equity represent a net profit divided by the average shareholders' equity during the year for the first half of 2021, we achieved 28% of return on equity.
Some financial indicators. Our EBITDA is SGD 23.1 million. Our net cash position is about SGD 60.91 million and 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, and our shareholders' equity is SGD 119 million for the first half of 2021.
This is a further breakdown of our net cash position. So our cash and cash equivalent is about SGD 41.59 million, other investments included investment and financial assets that are under the current assets of about SGD 19.3 million. So 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 for 2017 to 2020 to 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 shares at the end of June 2021 is about 276.5 million.
So this our consolidated financial position at the end of June. So at the end of June 2021, our total noncurrent assets is about SGD 57.4 million, and our total current asset is about SGD 210.4 million. So total asset for -- at the end of June total is about SGD 267.8 million.
Our shareholders' equity, as mentioned earlier, is SGD 119 million. Excluding the non-controlling interest it's about lower SGD 118.2 million. Our total non-current liability is about SGD 11.2 billion, while the total current liability is about SGD 11.2 million, while the total current liability is about SGD 138.3 million. So our total equity is SGD 149.5 million. So total equity and liability is SGD 267.8 million. And our held bank and client trust account as at end of June is about SGD 983 million.
So lastly will be the -- some intro about the second interim dividend for financial year 2021. Our dividend per share of SGD 0.011 per share, ex-dividend date of August 2021, record date and time 5:00 p.m. for 4 August 2021, and the payment date is 17th of August 2021. As mentioned earlier, our second interim dividend is SGD 0.011, a recent increase of 46.7% growth compared with same quarter of 2020, which is SGD 0.0075 per ordinary share.
That's all from me. Thank you.
Hi, everyone. Now I'd like to move on to the next session, where we talk about the performance trend. So this slide here, we see the breakdown in terms of the AUA. First chart will be in terms of the market. Second chart in terms of the product category. So as you can see, Singapore is a key contributor to the overall market. Singapore currently contributes 69.5% of the overall AUA. In terms of the products, unit trusts continues to be our key product category, contributing 73% of the overall AUA for us. Stocks & ETFs basically contribute for 16.5%, effective 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 net revenue into two [ sources ]: one's the recurring, the other one is nonrecurring. As you can see, nonrecurring, that can tend to be a bit more for the top.
This other chart shows the ratio of the net revenue, especially here we -- as you are aware, we have the AUA as a key KPI for ourself. We generally aim to continue to grow the AUA. I think that we have also stated previously that we have added of SGD 100 million AUA when we [ recommitted that have to approve ]. So this was the chart that shows all the AUA average, what kind of net revenue we actually receive.
So again, first half of this year, we saw that net revenue as a proportion of AUA was 69 basis points. It's lower than where it was last year. And I think the main reason is because certain new asset class [ naturally soften ETN ], that doesn't affect net revenue. So because of that, you find that it doesn't attract recurrent net income, right. So 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 [ generally ] faster. But I think what's important from our perspective is that overall net revenue continues to grow at -- from our space, including the recurring net. We'll look at some of the numbers on subsequent slides.
So this slide shows the recurring and non-recurring revenue number. As you can see, in the first half of this year, we continue to see net good growth in terms of overall net revenue. Recurring income -- 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%. Nonrecurring income, which depends more on the actual level of transactions, for the first half, it grew over 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 Q was very strong, the first half growth was almost 60%.
So this [ put a sale ] number will tend to fluctuate more in nonrecurring net revenue and the main reason is because financial market conditions tend to change along the way. Sometimes market can be very bullish, sometimes market do corrections. So that's [ bear markets ]. So the nonrecurring net revenue tend to be more over the top. But importantly, we continue to be able to grow our AUA as a group. And as a result, that we have been able to continue to grow our recurring net revenue as well.
So this slide show the breakdown in net revenue for the different market. As you can see, Singapore continue to be very strong, grew 46% year-on-year for the first half and that drive growth of 41% overall for the group.
These are numbers or the breakdown for the B2B business and then next slide, the B2C business. We need to look fully in more detail. So for 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 I say, Singapore, Hong Kong and Malaysia showed improved profitably, but also China was a bit -- 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 the China business will continue. We think that there will be the right strategy for us in [indiscernible] because I think the potential of China is [ still great ].
Okay. Yes. I just like to give a bit of update on some of the new initiatives that actually the group has. I think early on in the year, on January 30, we have announced that we have participated in a successful tender for eMPF Platform project with PCCW Solutions as their prime subcontractor for Category C, which includes MPF scheme operation services, transformation services and user delivery services. Recall the fact that MDF did announce it [indiscernible]. I think recently, we had a query from SGX RegCo relating to the share price and we responded by saying that we feel that our reason for the share price increase is [indiscernible]. The fact that we have actually been having regular discussions in the industry in Hong Kong regarding this [ platform ] project with a view to finalize on key contractual terms of the [indiscernible]. We hope to be able to finalize that at this point in time, we're 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's also the recent announcement that we have made, whereby we announced that we have led consortium in the submission of an application for 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 [ risk and transactions grew ], and consortium comprises both local and foreign shareholder, but the Malaysian shareholding will be the majority.
The application that we are putting from Malaysia continues our overall pursuit of a digital banking license. We believe that the fintech industry globally is in the early stages of transforming because I think that fintech has a long way more to go. Fintech has actually gone as global as what eventually will be and being able to have a digital banking license will help us to better realize some potential that we foresee in the fintech industry.
The subsequent last slides gives some further detail on the individual markets. I'll not go through the detail. I'll leave it to investors [indiscernible] the individual markets.
With that, we'll stop our presentation here, and we'll be happy to take the questions that you gave.
So [indiscernible] you can actually [indiscernible]. Hi, everyone. So now we are here for our Q&A session. [Operator Instructions]
So we have our very first question from Aakash from UBS.
Can you hear me all right?
Yes.
Okay, great. My first question, referring to the nonrecurring margin decline in general and more specifically on the B2C side. So I think the decline in this nonworking margin on the B2C side, as you've said, it was largely due to financial market conditions. I think it does seem a little bit more excessive even if we take into account the trading activity decline that happened Q-on-Q. So I'm just wondering if there is some sort of seasoning of the AUA issue here at play as well. So for example, the AUA that you had prior to FY '20 still is generating, what, 90 basis point revenues that you used to see. And then the AUA that you've gotten 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? What -- how do you think about these things? If you could give some color on that, that would be very useful. That's the first question.
The second one is just on China. I think the growth seems to have slowed down in terms of AUA. So is that sort of a new normal? Or do you think it probably can pick back up again in the coming quarters?
And then the third question is on OpEx. I mean, I think compared to your guidance, it does look like that 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 3 questions for me.
Okay. Yes. So as far as net revenue is concerned for the nonrecurring, right, that is actually item that tends to be more volatile. So for the nonrecurring net revenue, there are few main component. The biggest component will be the transaction commission from both stocks and unit trust. The other component will be actually the ForEx that we actually [ done ]. The -- first component in terms of commissions or 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 should find that first quarter is actually the period whereby trading income generally in -- around the world actually tend to be -- it was actually pretty high.
Second quarter, the general trading activity, both of 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 are now saving via their results for the second quarter. I think we've seen that some banks have [ orders ] on trading that tend to be lower than the first quarter of this year, and we are -- currently this trend. I don't think there's any particular seasonal factor in terms of prior year impact. I would say that it was mainly largely a result of the overall financial market condition.
I think 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 markets, 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 more speculative counter that had sort of eased off the second quarter compared to [indiscernible]. So basically, we were coming from a situation where first Q was stronger than what you normally would expect. And the second Q, you saw the corrected one for guide. That, I would say, would be the way to look it.
As far as the ForEx margin is concerned, that was also down because that is also somewhat correlated to the amount of transaction that we had each quarter because as investors buy into, say, U.S., Hong Kong stocks for the right to do unit trusts in different currencies, then there is some ForEx conversion. And we actually do have our investors, go on their level transactions go down, that the trade event affected as well.
Obviously, this, as I said, our number that will, in the sense, will be bouncing around. We don't see that as something that is a structural trend. We see that as largely financial market effect.
So that's first part of question. Second part, regarding China, in terms of growth rate, I would say that some of that is happening as well. Because China, you saw a substantial decline or substantial correction that during the second quarter, they actually had a tendency historically to the affect the overall value that we see in the short term. So year-on-year, we still grow very strongly, but quarter-on-quarter, the growth rate and the [indiscernible] factor by itself is short-term market fluctuation.
I think importantly, as I was mentioning, the key number for us is overall AUA. We 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 absolutely, we see some of these weakness as more shorter-term kind of a situation that is dependent on [ share. ]
The next part of the question relates to operating expense. You're mentioning that, that is a bit low. I would 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 the [ content of one service ] as a group.
On a quarterly basis, there can be some moderation in operation -- operating expense with the net revenue number as a whole ease off because there's some perhaps component in the net revenue number is dependent on [indiscernible] performance fees. So like net revenue number tends to be lower than some other area [indiscernible] [ components ] such as performance-based incentive, [ incentive for the bit of work ]. And I would say that it's probably the key reason why operating expense was lower now in [indiscernible].
If I could just follow-up on the first question, right, regarding the margins. So I'm just going to refer to some numbers here, right? So if I look at the nonrecurring -- so if I look at the B2C net revenue to AUA, so that's B2C margins, right? So they're in the range of 90 to 95 basis points last year, every quarter. And in Q1 this year, they jumped up to like 1% because the trading activity was obviously -- it was a very active quarter. This quarter, this number fell down to like 70 basis points. So even if I -- what I'm saying is if I take into account this decline in trading activity, you've probably gone back to like a 2 or 3 level of last year. Why is this number not 90 basis points? Why is this number 70 basis points? So is there something one-off this quarter, which will sort of change next quarter? Or should this 70 basis point kind of be the number that you keep in mind for the rest of the quarter?
We're referring to the nonrecurring net revenue margin for second Q number, right, in terms of FY...
Second quarter number. And I mentioned referring B2C total, not -- I'm looking at the B2C margins overall. So B2C revenue divided by AUA. What I'm saying is it used to be 90, 95 last year, every quarter, then it went up to 1% first quarter this year because of pretty hot existing 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.
Okay. I would say that in terms of net revenue as a whole, probably to me, if that one is a line trajectory, and I think for B2C particularly, that accounts for -- I think a bigger part, the stockbroking activities actually comes from the B2C side of the business. And as a result, B2C then tend to see a bigger decline when the stockbroking side result to [indiscernible]. That's one consideration. The consideration would actually be [indiscernible] the recurring part as well.
The lower interest rate. I think interest rate has actually seen a decline globally. And as a result, we actually find that the net interest income of client assets that we are able to derive have also seen down reduction. And that has been the trend that we saw in the last couple of quarters. And I suppose, probably in second Q, we saw a bigger impact coming from that. So I suppose a combined effect on the two fronts probably contributed to a bigger reduction with B2C side of the business.
[indiscernible] together. So next question. So the first one is from [ Bryceton ]. So I'd like to ask the question. 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 slate of funds to offer the clients?
Yes. So for this particular acquisition, yes. Well, I would say that the main -- the big intention is not really high margin, even though we expect that. Yes, there will be a positive driving impact for us. We are actually taking a broader look at the overall industry. So I think for people who understand the fund management industry quite well, you actually find that in the unit trust business, you have the fund manager who manage our funds and then you have the distributors.
The fund managers who manage a fund will create a fund that's actually, in a sense, 2-part network. One part really is the actual investment management, decision making [ works of ] supplier 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 ongoing, yes, perhaps some IT-related work just to be able to manage the fund. So if you look at all our funds in Singapore, actually, there aren't that many local fund manager who are able to have a retail fund management license, retail unit trust license. You have the bank-backed account manager. We have quite a long list of local fund manager or otherwise. But among the local fund manager, you actually find that most of them have a restricted license that allows them to distribute funds to credited investors but not to retail investors.
If 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 fund management firms, but they are held back from being able to distribute their funds because of the fact that distribution is extremely -- distribution and retail price creation and maintaining the retail price is actually a very expensive exercise. Expensive not just in terms of the -- adding to the stock picking but expensive in terms of all the administration and the compliance work that actually needs to be done. So 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 ready to be the IP administration work on behalf of the distributor.
How can we combine the fund management side of the business to create a business model that will allow the whole process to be a lot more efficient. So that is really the starting point in terms of how we look at it. So if you look at this acquisition of the DWS funds that we are making, you notice that we are titled on the unit trust part of business, but we actually still sub-delegating the management of 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. So that is something that we believe can help us strengthen our overall capability as a platform that actually try to serve investors efficiently and [indiscernible].
So in other words, we are looking beyond just being able to have our own [ equity ] traded fund because we have already trading 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 we have investors, and they will help their family [indiscernible] [ and themselves ].
That or that along the way and some a lot of certain synergistic benefit [indiscernible]. So we're coming from that perspective when we look at this part there. Now I know that it's not easy to understand off hand, but hopefully, over time, we can explain more in terms of how that truly worked there, how that enhances the overall [ business ].
So the next second question from your [ listeners ], could you explain the new revenue streams from the U.S. [indiscernible] to -- in the India market, how will this work? And how much will iFAST benefit from it?
Yes. So if you look at our business for, let's say, whether Singapore or Hong Kong and coming up Malaysia, you should find that in addition to having access to local market, local stock market, we also linked up access to the U.S. market at [ overall mesh ] in the China market so. I think the way investors invest are changing quite rapidly. Investors are no longer just investing in the markets that we are essentially present in. So Singapore investors are increasingly investing outside of Singapore. They're buying not just Singapore stocks, they're also buying U.S. stocks and Hong Kong stocks and in the future, I think increasingly China stock. And for that reason, if you look at how we have our stockbroking business as much part of the business as we have the U.S. one.
So we are looking at basically doing a similar thing for our India business, which currently is only under so stock exchanges. So there is demand from our investors and advisers in India to actually have [ to engage ] to the U.S. market. That is a very key intention.
The next session is from [ Uma ]. She has 2 questions. So the first one is how much of a dividend increase can shareholder expect from FY 2021 compared to FY 2020? And beyond FY 2021, will iFAST continue to give out more dividends to shareholders?
The next question is as iFAST key markets have different effects 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 -- yes, give similar percentage decrease to the second quarter. Yes. [indiscernible] for the full year that gives a single percentage increase as the first [ quarter ].
Of course, in area, it depends on the actual results that we have. Second question, effects of different impact from the virus. Yes, we don't really, yes, give the exact guidance for the short-term on that basis. To be honest, quite difficult to give a -- predict the very short-term performance on the digital [ front ]. Yes, so I think we probably have to be precise on this [indiscernible].
[indiscernible] function. So [ Yung Hong ] has a question for us. [ Yung Hong ], you may unmute yourself to ask your question.
Hi, can you hear me? Sorry.
Yes, we can hear you.
So just a couple of questions. So maybe again, in terms of the net revenue or the AUA, could we expect the stocks and ETF to continue growing from the current 17% as a percentage of the total AUA, especially with the launch of these China agent services? So any color and guidance on this would be helpful.
So 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?
And the third question would be in the medium to long-term as is still your AUA, what kind of overall net revenue over AUA levels are you expecting? And could we expect to revert back the 20 split between the recurring and nonrecurring revenue?
And the last question will be, so in terms of your disclosure on the customer account and the number of wealth adviser, could I clarify if these are the active users? These are my questions.
Okay. On the first question, the proportion that's contributed by stocks 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 [ actual ] segment is growing at a faster pace. And it's great at custom base that what we are seeing from some of the other asset classes. So we expect this proportion to increase.
However, I'd also like to bet that in the end, what really is important to us is that even if this proportion increase, then the overall AUA for us of the other asset classes and actually the unit trusts can continue to improve. And that, in fact, has been the benefit efficiency. So 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 has had an impact on improving the overall growth rate of the unit trust as well. That, I think, is the important point because I think for many financial institutions [ that trade ], they want to embrace people who are into unit trust, for instance, they don't really want to embrace unit -- ETF for instance, because they feel that, that asset class have lower margin. And that may negatively impact their overall business.
For iFAST, we take the view that the ETF is a asset class that's here to stay. And, in fact, as a proportion of overall global market share in the respective market [indiscernible] are increased. So the right thing to do really is to embrace this [ path ]. But even as you do, the key thing is, are we also able to grow the volume that we are seeing from the unit trust. And our experience in the last 3 years has been that yes, it has been key to growth and has continued to grow even faster. I think that is actually -- yes.
So the short answer is yes, we expect the proportion to increase further from where we are as we seem to further accept the fact that unit trust is [indiscernible].
Second question, I think, was rebuilding recurring margin? Yes. So if you look at our recurring mixed revenue margin as a proportion of AUA, that has seen some decline. So again, it's mainly 2 factors: one is the fact that bigger proportion of [ softer ] ETF. And secondly, there is, in the past one year, some negative impact from the much lower interest rate environment. So the two actually sort of add up. Yes. That's actually the reason to actually -- and the third part of the question is regarding the account. Can you repeat the question? I can't recall.
Yes, sorry. So in terms of the customer account and the number of wealth advisers that you disclosed in your [ valuation ], could I just clarify if these are the active users? I think these in the last few slides. I think in your ecosystem...
[Foreign Language]
Yes, these actually affects a number of cost active users. It depends on the -- I think this a group account, some of them could have -- someone could be found active in the sense that there's no [ pooling ]. So it could account without pooling at all. But 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, that we'll actually have to suspend those account. But essentially, the short answer, it does include account that does not have any pooling.
Okay. Got it. I think I have also a question in the medium- to long-term. So as you scale your AUA, what kind of platform margins can you expect in terms of net revenue over AUA? And also, could we revert back to the 80-20 split between the recurring and nonrecurring revenue post the pandemic in the medium- to long-term?
Yes. We have not given any actual guidance on how the revenue might be in the long term. But at the back of my mind, if I were to think this was what will happen in the next 10 years, for instance, if we -- in our move towards having that [ 2 billion ] AUA, that number, I would expect that there will be some reduction in the margin. It is something along the line of, say, 60 basis points. The 70 basis points, and I would say that, that is probably something that is not too unreasonable. That's how I can say, yes, we haven't had an exact guidance forecast, but open -- yes, the 60 basis points, I think it is unreasonable.
And we have another question from [ Dow Lee ].
[Operator Instructions] So we have another question for [ Rosten ]. So this is -- you see that this new set, [ Tiger Broker ], spoke into offering unit trust that's -- I have seen the company as a credible competitor, and does this cause any concern?
I believe they have been in unit trust since last year. Yes, certain things I'm not at full liberty to discuss but I'll say that in today's environment, and especially for our business model, a company can be both a competitor as well as a client. And yes. So that should be the way to actually look at it. So it can actually be both a traditional competition as well as additional revenue from some of its associated institutions that are actually not -- actually we have -- [ we will look at our overall business model ]. So we -- I would say that we are not [indiscernible].
The next question from [ Gerald Stone ]. He's asked you whether we can provide some color with regards to the announcement on the 23 July on the iFAST Securities U.S. Corporation. If iFAST entering the U.S. market, will it have any material impact to the financial after the [ request is finalized ].
Yes, for this announcement, we have incorporated a company. The intention is essentially that we intend to have a direct linkage to the U.S. Exchange. We incorporated a company, we intend to put in an application for trading membership on the U.S. Exchange so that we can link up the 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 a key -- I think it become key segment of the stock broking part of this. And it is the biggest market in the world. It will continue to be a key market.
And as part of our overall business model within B2B or B2C, having the [ tariff ] engaged in the long run, I believe, will give us the advantage. So it's really from that perspective. Will it have any material impact to the financial or after December 2021? So for this year, no impact. For next year, I would say no substantial impact yet. So beyond that, we think that we can improve overall business for this segment beyond 2021. But does it actually impact in the short term? We don't expect that.
There are 2 questions from Andrea. So it's on the DWS agreement. Is the SGD 600 million AUA and included in your latest AUA balance of SGD 17.5 billion? Second question is does IFRS expect more AUM to come from DWS under this arrangement? And the third question is, could you share some color on the margin IFRS 16 under the arrangement compared to your conventional unit [ trustee ]?
Yes. So the first question, the SGD 600 million AUA [ expected ] for that, the answer is no. The completion is expected to be at the end of July. So that should add AUA, not the full SGD 600 million because there's some overlap because not the SGD 600 million is actually distributed [indiscernible] well. So in terms of the addition of the AUA for us, they're probably closer to acquire a new [ mass ]. That should be a number to -- that could come from DWS, not from DWS or not in terms of the -- under acquisition of DWS. It is possible that we have further collaboration with DWS going forward, but not -- also the second question is in terms of actual, we share some color on the margins.
I would say that for the margin, the margin that we will have -- so as I mentioned, there's 2 part to it. One part is the AUM that is not on our platform yet. And [ there of course ] AUM that's already on platform. So the AUM that's already on the platform will now increase our AUA, like a [indiscernible] across some additional revenue. So you add on to the margin for the -- for our existing AUA. For the part that is not on our platform yet, there will be revenue margin. I would say that because we have sort of [ outsource ] impact, with DWS, the margin that we get will be less than our average AUA margin [indiscernible].
Well, the next question from [indiscernible] is this, is it possible to quantify the net revenue impact from the decline in lower client transaction processing fee of SGD 8.80 to, obviously, clients in Singapore operations on dealing of securities listed on Singapore Exchange from April 2021? And net revenue versus AUA [indiscernible] Q-on-Q to 0.62%, which was impacted by an 11 bps Q-on-Q decline non-recurring net revenue versus AUA margins. But with the long-term net revenue/AUA margins, do you think that margins could hover around 0.6% to 0.7% in the next few quarters? What are your views on working with strategic partners in the previous key markets, especially China, to enter the costs comfortably?
For the first part of question, I'll say that the -- actually impact on us arising from SGD 8.80 is not significant, right, in terms of the overall impact of the net revenue for us. Some reduction is actually considered [indiscernible] margin. Yes. So yes, 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 it does alter longer term and if I think in terms of margin of 60 basis points in the much longer term, then yes, I think that doesn't sound unreasonable. It's not exactly guidance, but doesn't sound unreasonable.
Second part, yes, in terms of working with a very strategic partner, I would say that as part of our overall B2B business model, we are always looking at linking up with a very strategic partner. I think that is core to the overall B2B business. Strategic does not mean equity partition. Of course, sometimes, we do small -- some equity partnership, and we don't rule out the possibility of that. But I think the key really is that, that probably isn't the most important thing for us because the key about B2B business is the ability to work with various partners.
So if it's equity partnership, we plan to be able to work with only limited number of strategic partners. But it is on the basis of service levels and mutual benefit in terms of the partnership that there are many partners that we can actually work with, and that is [indiscernible] B2B business. And that is the reason it actually continues to grow, has been growing and will continue to grow further.
There is another question [indiscernible]. Just to cut on what you mentioned earlier on the market subjection, which affected nonrecurring revenue, do you think you could provide a split of the transaction fees and ex fees for the nonrecurring revenue for [indiscernible] to compare this figure provided in the annual report and a gauge of the level of margin from this transaction split [indiscernible].
Yes, we'll look into being able to go back, hunker it down, yes, going forward, especially whether it's annually -- operated annually, we will give [indiscernible] consideration.
Next is from [ Uma ] [indiscernible], is management confident that the stock can keep going at this pace [indiscernible]?
We don't actually give any forecast for share price. Certainly, we are not supposed to. But as someone who is essentially investor [indiscernible], what I'd like to say -- share with you is just some of my observation in terms of what's happening in global stock markets in recent time. I'm also analyst myself, right? And I want to continue [indiscernible] and I classify myself as value investor [indiscernible]. And because of that, I do put a lot of importance on metrics like fee ratios and so on. I understand that I -- also this point, I believe, [indiscernible] but my take on what's happening globally really is [indiscernible]. Business models are actually [indiscernible] emergence of Internet.
I think business model are changing very faster [indiscernible] in the last 20 years. In recent times, I think it's still [indiscernible] but then it doesn't change. And I will say that in the next 5 years, 10 years, [indiscernible]. And as a result, we are just starting to see the big difference in terms of valuation from one category -- into one category company [indiscernible]. So the category that benefits that will be Internet related. These are commanding a huge valuation.
On the other side, you actually have companies that [indiscernible] valuation even by traditional metrics. I think that's what's happening today. And in a sense, investors are gradually increasingly recognizing the fact that things are changing in a major structural way. So if I think specifically the fintech sector, more and more, I mean, I think 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 valued shareholders are recognizing that potential for iFAST to be one of those companies. They're able to embrace this major change and to actually benefit from this new change. That's happening and will continue to happen perhaps at accelerated pace in the next 5 years, 10 years.
So -- and I think that is really perhaps the difference, and there's nothing to see. I mentioned a number of clients in the past year or 2 that we believe that the fintech sector, a long way more to go in terms of the changes. And when I say that, I'm also making reference to the fact that Internet businesses in other industries, you're seeing a lot of global businesses. I gave that example of Netflix [indiscernible]. So these are global businesses [indiscernible] actually. And you're able to get customers from all around the world. And if you think about it, you readily find that in the financial sector, that hasn't happened [indiscernible]. In fact, we're in the early stages [indiscernible].
The power of the Internet to cross border -- well, the ability to reach everybody in the same country, but I think in the same part also the ability to cross border. Of course, the transition in financial sector hasn't happened in a big way because financial sector is more -- much more highly regulated than other industry. And 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 anything we're doing.
My take is that if you have a fintech company that's 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 business, then I think the potential growth rate that we're looking at should be different from the way things are looked at historically. Historically, when we look at the financial sector, we think in terms of the growth of that financial sector in that country, so if you come from a small country like Singapore, then it looks like Asia potential is very limited.
[indiscernible], it can be based in just a few countries, and you can increasingly tap into an increasing customer base all around the world. And perhaps iFAST is really set as [indiscernible] from a perspective of being able to run a global business. So I would say that perhaps some investors are recognizing its enormous potential increasingly. And as a result of that, I think we're seeing some of the valuation -- the more premium valuation [indiscernible]. That is my take [indiscernible].
I think the other part, like I mentioned, really is, yes, in terms of valuation, I suppose, historically, we plan to take in terms of the valuation this year and next year. But perhaps -- yes, we should start to take total valuation, not just this year, next year, but next 5 years. And there are times whereby certain things happen that will allow us to be able to take our potential more significant jump in terms of our revenue. So for instance, something like eMPF [indiscernible] that we eventually analyze and that can be something that will [indiscernible] not so much this year, next year, but perhaps further down the line. So these are some of the factors to consider, I will say, for iFAST [indiscernible], yes. So that is what I can say at this point without trying to predict what an actual [indiscernible].
[indiscernible] I do appreciate the management for all the outlook. And as shareholders, we do not look at short conversation, but get the overall growth.
Thank you for the comment and it seems a bit related to the comment I've just made. I think, yes, if you look at quarterly results, there are some of these fluctuations. I do note some of the comments in the forum as well there's some concerns about the fact that second Q number is significantly lower than first Q number. I personally see this that some of the fluctuation that we sometimes see on a quarterly basis. What is key to me is the overall bottom growth [indiscernible] actually look at the situation. So if we just think in terms of how things started to change in not just 1 year or 2 year, but potentially next 5 years, that itself, I think, will bring about a very different perspective in terms of how to look at that message.
We have a question [indiscernible] regarding the final funds in China. [indiscernible].
We have [indiscernible] funds in China. So that is actually [indiscernible] for the creditor investor equipment in Beijing. We've launched that. We are gradually increasing AUA, but still a small number as of now. That's something that we generally expect when we launched our DPMS in Singapore and Malaysia. But that is something that we will gradually build up in terms of AUM over time. Short term, we look very small. But over time, you add up and become important. More importantly it's the fact that we look at this service not just as a management service on this one, but overall addition to our overall net of service to make us more competitive.
Next question is from [indiscernible].
Perhaps I'll talk about 2 [indiscernible]. One area is it could be still in a category of equity of balance fund type. But I'd like to stress that when we are looking at this, we're really looking at it not so much as launching something product of our own to replace what other various foundations already have today. We don't think that we can, on our [indiscernible] to do better. And all the parters just collectively look at this, obviously, not under [indiscernible]. As a platform, there will be various partners. We do have various partners. Our B2B partners who are using our platform that -- are actually by team to be able to have some of their own funds, for instance, on top of co-branded funds, where they actually have some influence on the management strategy.
And if they do have such a product, then they are in a position with a lot more effort on promoting that accurate product because it's something that will give them an additional differentiation as a player in the [indiscernible] industry. So there are quite a bit of demand in this [indiscernible]. And we feel that iFAST is well positioned to grow with the partners in having some product there. Yes. We can become a lot more efficient in how things are improving. there. So that's one category.
The other category perhaps to take about really is in the area of cash management products. I think in the area of cash management product, whether it's a money market pipeline or something, including the money market, you'd actually find that they fill some gaps that are actually out there. And quite often, the gap exists not because managers don't have expertise to give [indiscernible] expertise into the -- investing in the asset class is this is -- is that [indiscernible] because we will be assuming [indiscernible]. But very often, the bottleneck, the inefficiency really is in the area of administration and settlement. The -- how soon can the buy and redemption of the units of this cash management part is standard, T+1, T+2, 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 people are able to do, [indiscernible] Europe offers. It's essentially [indiscernible] something like that. So if we actually continue to do things the way it has been done historically, then you actually find that we're always remitted by inefficiency in our growth system. But a company like Alibaba or Ant have been coming out [indiscernible], they took the overall efficiency to the next level. And the reason why they're able to do that is because they control a few part of the process.
They control the distribution. They have customer base. And they control engagement, settlement process. So when you can streamline all the different part of the process, make the different parts interact a lot more similar, then the efficiency can be brought to the next level. So this is one of those areas that we have in our mind. How do we bring the efficiency of cash management on to the next level? So we concluded that the only way for us to be able to do that is to have the ability to handle not just the type of product [indiscernible] have the ability to correctly handle the management, settlement process management as well. So that is another area of the thinking that we have. So these are perhaps the 2 [indiscernible] able to understand the possibility that we are seeing.
The next question is from [ Victor ]. He is asking -- he is saying that [indiscernible].
Firstly, accounting activity fee, I think we don't have any monthly accounting activity fee. For this one, we don't intend to introduce any. So I believe in this new model, you should not have monthly accounting activity.
The next question is from [indiscernible]. Can you please give us some ideas of the time line associated with Malaysia digital banking license? By when do you expect to go dotcom?
Bank Negara Malaysia stated that they expect to announce the business of the Asian digital license in the first quarter of 2022, so first quarter next...
[indiscernible] first half 2021 operation cash flow of SGD 24 million, less CapEx of SGD 5 million, equals to SGD 19 million. First half dividend is SGD 6 million. Balance sheet net cash is SGD 61 million. [indiscernible] higher dividend, but the cash flow constraint we're not seeing.
I would say that we are 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 small compared to many of the big financial institutions. So it's really the -- taking that -- yes, as we move forward, we want to be able to further strengthen our overall balance sheet.
So as -- so while we are increasing the dividend payout for this year and we think we are going to do so going into next year and beyond, we also want to take into account the size of our overall balance sheet as well. We also expect that, yes, as a group, we will continue to be applying for some additional licenses in different markets, different countries as we move on. And when we do so, we will generally need to actually have some additional capital for that subsidiary that we [indiscernible]. And that's why as a group it's important that we have some cash on the balance sheet to allow us to look at those opportunities. So -- but -- so it's really the intention of being able to do more of these things. And besides, no major constraint actually.
Our last question for today is from [indiscernible]. To achieve SGD 100 billion AUA by 2028, we are talking about 26% compound growth from the present levels over [indiscernible]. Do you see this happening from the existing organic growth from the current market/product? Or is there any inorganic growth on new market/product penetration built in the expectation?
We think that based on the 5 markets that we're already in, the potential is that also achieving the SGD 100 billion just based on these 5 markets. We think that at some point in the next 7 years, there's a good likelihood that we will enter a new market. We have not built that into our situation. Based on the current market that we're in, we feel that 26% growth per year [indiscernible].
We have another question from [indiscernible]. Based on your existing license across [ energy ] markets, is there any additional products you would launch, but not done so?
I suppose, yes, based on that question on its own, I would say, perhaps there are some products that we can launch, but have not. And yes, it could be different area. Or it could be volume progress, for instance. Or it could be that those products may not be products [indiscernible]. So there can be various [indiscernible]. We think that, yes, based on the existing license, the core product that we believe to be important, that's -- to a large extent, there will be some addition as we go on. Some are in progress. And some category where we used to be more [indiscernible].
It's on the mission statement, I believe.
Yes. Okay. I think those are all the additional questions. Yes, I know that we are -- it's almost 12:00. So with that, we'd like to end the session today. Thank you, everybody, for dialing in, for -- and for your questions. Thank you.