IFAST Corporation Ltd
SGX:AIY
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Hi, everyone. Welcome to iFAST Corp's Third Quarter 2020 and 9 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. And 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 1 and 2, respectively, later on, and we'll wrap up with the Q&A session.
So going into the key summary. The group reported a new record quarterly net profit of $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 9 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 9 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 30 September. Of the net inflows of $1.07 billion that we've seen, 60.5% came from unit trusts. Our operating cash flow rose from $19.38 million in the full year of 2019 to $30.82 million in 9 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 declared an increase in dividend from $0.0075 per share in third Q of last year to $0.008 per 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 $12.59 billion as at 30th of September, contributed by both B2B and B2C and about 69% coming from B2B and the remaining from B2C.
The next slide shows the net inflows number that we shared just now. So we had a record high in third Q for net inflows of $1.07 billion. So for the 9 months of this year, we're at $2.3 billion, substantially higher than the 9 months of last year. Similarly, for subscription, excluding switching, we've also hit a record high in third Q this year as well as 9 months of this year.
I'll now invite David Leung, our CFO, to cover the Section 1 on the financial results.
Good morning, ladies and gentlemen. I'm going to present the third quarter 2020 results and the 9 months 2020 results.
For the financial result for the group between third quarter 2020 and third quarter 2019, our revenue increased by 33% to 45% (sic) [ $45 million ]. Our net revenue increased by 35.7% to 22.87% (sic) [ $22.87 million ]. Our other income increased by 188% to about $1.27 million. Operating expenses increased by about 15% to about $16.7 million. We have a small finance cost of $60,000, and a small share of results of associates about -- a lot about a $0.07 million. Our PBT increased by 149% or $7.31 million. Our PAT increased by about 154% or $6.11 million.
The net profit attributable to owners of the company increased by 150%, about $6.16 million. EPS for third quarter is $0.0227, a 147% increase, while the dividend per share [indiscernible] $0.008 per share.
For the 9 months result, our gross revenue increased by about 33% to $122 million. The net revenue increased by 27.5% to $61.5 million. The increase in revenue and net revenue is mainly because of the significant growth and improvement in the stock and ETF processing business and also due to an 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 139% about $3.65 million. This year, other income mainly including the government grant from the Singapore and Hong Kong government, and this contributed to increase in the other income.
Operating expenses increased by 14%, about $47.7 million, mainly due to our effort to continue to enhance to build our investment platform and also some additional vision for staff bonus to recognize and appreciate the effort of the staff who help to continue to support the business during the COVID-19 period.
We have a small finance income of about $80,000. The share of loss of results of associates for 9 months this year is about $140,000 loss. PBT increased by about 127%, about $17.4 million. Our PAT increased by 123%, about $14.12 billion -- sorry, PBT is $17.4 million, and the profit after tax is about $14.2 million.
Net profit attributable owners of the company increased close to 120%, about $14.33 million. EPS is $0.0529, about 117% increase. And the total dividend per share for 9 months is about -- is $0.023.
This show the financial result for 2016 to 2019 full year and 9 months for 2020 including the China operation. Our operating cash flow for 9 months is about $30.82 million, while the dividend per share is about $0.023.
If we're excluding the China operation, the revenue is about $120.9 million. Our net revenue is $60.42 million. Other income, $3.64 million. Operating expenses, $42.85 million.
Net finance income is about $130,000. The share of loss of results of associates is about $140,000. Profit before tax is $21.14 million, while the profit after tax is about $17.9 million. EPS exclude China operation is $0.0661, and operating cash flow excluding China operation is about $33.56 million.
This chart is showing the PBT margin for the group based on the net revenue. For both including and excluding China operation, you notice that there's quite a significant increase. For the PBT margin including China operation is 28.3%, while the PBT margin excluding China operation is about 35%.
Some financial indicators. For the 9 months of 2020, our EBITDA is about $22.91 million. Net cash position is $48.28 million. Operating cash flow $30.2 million. And operating cash flow excluding China operation is $33.56 million. Capital expenditure is about $7.07 million, and the net current asset is $55.51 million. Our shareholders' equity as at end of September 2020 is about $100.42 million.
The net cash position as at end of September 2020. Our cash and cash equivalents is $32.51 million and other investment consists of investments in financial asset under current asset is about $18.13 million. So the total cash and other investment is $50.64 million. After the minus of bank loans of about $2.36 million, net cash position is about $48.28 million, and the gross debt-to-equity ratio is 2.35%. And we are in a net cash position.
This chart is showing the group operating cash flow for 2016 to 2019 and 9 months of 2020. So our operating cash flow excluding China is $33.56 million, including China is $30.82 million. Capital expenditure for 9 months this year, we spent about $7.068 million.
Number of issued share as at end of September 2020 are about 271.85 million. And this is our consolidated financial position. As at end of September 2020, our total noncurrent asset is about $60.3 million, mainly consists of the right-of-use asset which is the office about $20.5 million, intangible asset and goodwill of about $23.3 million.
Current asset is about $168 million, mainly including the trade and other receivable of $43.67 million and uncompleted contract buyers of about $71.65 million. Our trust account as at end of September is about close to $797 million. Total asset, $228 million.
Our shareholder equity is about $100.42 million as at end of September. Including the noncontrolling interest, the total equity is about $99.86 million. Our noncurrent asset (sic) [ liability ] is about $16 million, mainly due to the lease liabilities for the office. And our current liability is about $112 million, mainly including the trade and other payable of about $28 million and uncompleted contracts sellers about $71 million. So total liability is about $128 million.
Lastly is some info about the third interim dividend. So the dividend purchase per share is $0.008 per share. Ex-dividend date will be on 2nd of November. Record date and time on 3rd November, and the payment date will be 13th of November 2020. That's all from me.
Thanks Yes. Now I'll -- now I'll move on to cover Section 2 on the performance trends. No -- yes, the first -- this slide here, Slide 23, shows the AUA breakdown by market. As you can see, Singapore continues to be our key market, accounting for 67% of 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, we have net inflow of $1 billion -- over $1 billion, 60.5% of the net inflow was from unit trust. So unit trust continue to be the core product for us.
This chart here, we're 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'll notice that the proportion contributed by nonrecurring income has increased compared to the past. But as far as our recurring income is concerned, there 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. Yes, if you look at 9 months result, you actually find that, 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 nonrecurring income. And that's why the percentage contribution from that component 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. Net recurring income versus nonrecurring income for the last 4, 5 years. I'll leave it to 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 net revenue for us.
This table and the next one actually shows further details on B2B and B2C numbers. I'll leave it to you to study it further. As far as profitability is concerned, we note that during this period, there's been a strong increase in profitability for Singapore -- yes, 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. So you actually find that in the first 9 months of this year, pretax profit has actually grown by 91%. And we've seen the growth from Hong Kong and Malaysia.
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 and revenue are concerned because I think we're still in very early days as far as the potential for China market is concerned.
Yes. So 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. But I would say that we are still -- this business is moving 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, yes, in the quarters ahead that we hope to be able to show more significant progress for this business soon.
I think as a group, over the years, we have always been pushing ahead to launch new products because I think in the Fintech business world, 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. And from time to time, we made some progress, and we accordingly make some of this announcement. So we recently announced that for Malaysia, we have obtained the in-principle approval for the license to deal in stocks in Malaysia. And for this business, we hope to launch in early 2021.
And in China, we have recently obtained 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 -- some limits on the top clients that we can cater to. Essentially, the limit in China would be that it need to be considered as a high-net-worth individual. And the definition of that is you need to -- the minimum investment amount per client need to be RMB 1 million, which in the context of China is still a very big market because I think lots of people can invest more than RMB 1 million in China today. For this, we hope to launch in early 2021 as well. And yes, in the quarters ahead, we will give further details.
The application for digital bank wholesale license has been in progress. I think MAS has 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, this project whereby the MPF -- MPF is equivalent of CPF for Hong Kong. They basically want to create eMPF platform. But we would like to note that at this point in time, we're not able to give much detail to comment very much about that, mainly because I think typically such a involvement in projects or tenders and especially at the initial stage will be confidential. So we can't 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. And it's a project that will involve 2 years of preparation when the consortium build a system. And then the actual running of the -- of that platform will subsequently be for a minimum of 7 years.
I'll 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 stock broking firms around the world, when the COVID first hit in first quarter, trading volume surge and 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. And then quite encouragingly we did find that our core business of unit trust actually continue to grow and third Q has been particularly strong quarter for us. We saw record net inflow as a group, as we mentioned. And Singapore has been a key contributor or the key contributor to that overall inflow. Yes. So that's regarding Singapore.
In Hong Kong, Hong Kong, we continue to grow even though the numbers were not as strong as for Singapore and Malaysia. But I think the B2C business for us in Hong Kong has been actually quite robust. B2B wasn't 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 if market conditions seem a bit more uncertain, then there can actually be some outflow from some of the channels. But -- so as I mentioned, overall, we continue to grow just that Hong Kong wasn't as strong as some of the other markets.
Malaysia has been -- has seen a strong quarter. So we continue to record increases -- strong increases in AUA as well as, yes, revenue. And we've seen 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 working to actually engage us to help them to build some of the tax solutions module as well. So that segment have also done quite well for this year.
China. 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 RMB 1 billion. We know that it's still a very small number for the China market, but at least we are encouraged by clear signs that the business model that we're putting in, the services we're rolling out actually gaining traction and momentum. And we're continuing to invest in China to ensure that we can have potentially exciting growth in the future.
India is our associate. Currently, we own 39% effective stake in iFAST India. I would say that India, among the different markets we're in, has not -- 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, so far this year, the progress hasn't been great, but we certainly will continue to look on improving our services, and we look forward to a much better growth in the future.
So with that, yes, we've come to the end of formal presentation. That -- yes, we would like to run through the other subsequent slides. I'll leave it to the, yes, investors to look through on your own.
And with that now we'll open -- yes, open the session to question-and-answer. So can we have the questions from you?
[Operator Instructions] We have a question from [ Paul Chu ]. So he says what has to be some macro or micro reasons driving that inflow in third Q 2020, especially from unit trust? Was this due to -- was this due to B2C and B2B inflows?
Yes. So in third quarter -- you can go to the slide on net inflow. So in third quarter, we saw that the net inflow was slightly over $1 billion. This came about after $590 million in first quarter and $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, the -- we saw that in third quarter, we saw sort of an extra boost in terms of the net inflow.
And I think the reason is because for the B2B side of the business, it pick up quite strongly. I think the financial advisers who are doing more business hit our deadline of 1st October, whereby after 1st October, the upfront service charge from CPF investment will become 0. Previously, it was 1.5%. So after 1st October, it becomes 0. So I think that has led to some additional increase in the inflow.
So I think that is the one that give you the extra push. But 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. And B2B in Malaysia has been strong. And I think B2B Hong Kong, not particularly strong. So these are the what has actually happened during the quarter.
So regarding the factor about the CPF investment, but I think even after the deadline, we expect that the inflow will continue to come in, even though it won't be -- it probably won't be at the same pace as the third quarter number that we actually saw, but I think it will continue to be healthy. So that's probably the way to look at it.
We have a question from [ Umar Ali ].
Can you guys hear me?
Yes.
Yes. Okay. And congratulations on the results, by the way. So I think I have a couple of questions. The first one is regarding margins. So as your revenue rise -- as revenue rises, right, your commissions are going to increase in tandem with that. So this could potentially eat into the group's margin. So 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? And if so, right, 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? Yes, those are my 2 questions.
On your first question -- sorry, you were asking, as the business grow, would the margin be negatively impacted, is that what you're asking?
No. So as your revenue rises, right, your commissions are going to rise as well, which could potentially -- I'm not saying they will, but they could potentially eat into the group's margins or affect the margins adversely. So how is the group planning to deal with this in order to see that any further impact or any impact at all to the margin?
I would say that it should be the other way around as our -- the scale of our business increases, the margin for us ought to be on improving trend. I think -- so typically, when we look at the margin, we take the pretax 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 advisers. So 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.
So the nature of our platform business is such that when you first start off the business, there's a certain minimum amount -- fixed cost that you need to have. And initially, the revenue would be small. But as a scale grows, the fixed cost grows, but it won't grow at the same rate as revenue. So you actually find that over time, the margin, yes, 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 but if you take individual market that as we continue to grow, then there is potential for us to work towards a better margin in the years ahead.
On your second question, yes, 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% as our 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 additional banking license. And as we all know, banking license -- banking business is a business that requires a higher capital.
And for that reason, even though we don't know whether we are going to be successful or not, but 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 we have 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 a higher payout ratio as we try to build up the banking business. So that will be the main thinking.
I think we have some other questions. iFAST said in July it's ready to commit $80 million in upfront capital and launch a digital bank by end 2021 to be successful. Are there plans to increase this figure as MAS is ready to announce the successful applicants?
I think the $80 million that we mentioned was essentially the capital that we expect to put into the bank in the initial period as we -- before we launch the actual business. So that's an 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.
Yes. Other 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 profit -- 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 capital market license. 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, leveraging on iFAST's license operations?
Yes, it's interesting that this question comes about because that is actually one of the areas that we're 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're actually run by good fund managers, good investors. But fund management, when it comes to actually running the business, it's more than just making investment decision.
In practice, you actually have to cope with all the different administrative issues, compliance issues, IP 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 some of this group of fund managers, et cetera, who actually run the business more efficiently. But at this point in time, I'm not able to give too much detail, but probably, I think in terms of direction, that's something that we're actually looking at. And in the quarters ahead, we hope to be able to give more information.
Any update to digital -- to application on digital bank license? If we eventually get there, how significant it will contribute to the top line, what kind of synergy would there be between this segment and trading platform segment?
Update, I think I've already mentioned earlier, we expect MAS to announce who are the winners by end of this year. Yes, 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 value possibility.
What kind of synergy between this segment and the trading platform segment, I will say that there's tremendous synergy between the wealth management platform and the banking business. I think you just need to take a look at the fact that move -- in most countries, in Asia particularly, the biggest players in the wealth management industry is actually the banks. So 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 give the banks a tremendous advantage in doing wealth management business.
It does not necessarily mean that the banks are better advisers or they're selling better product. But just because of the fact that the cash sits at the banks, that gives the banks a tremendous advantage. iFAST has built our wealth management platform all these years without having the benefit of the cash sitting with us. But so we have built it, I would say, the other 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're able to also get banking license, then we certainly want to have it. And if we are able to have it, then certainly, it can bring our -- it can be a significant extra boost to the overall wealth management platform that we have built.
For China fund management, the missing piece to turn around operation, our fund management just raised fixed costs and perhaps widened 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 3 markets. But even though we have a fund management license, we don't 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. So just having the license to create additional equity fund isn't the main reason why we won the fund management license. So we're looking at using a fund management license in a way that will complement our overall wealth management platform better.
So for instance, in Singapore, in Malaysia and Hong Kong, the way we use the fund management license is we're running a discretionary portfolio of funds. We invest into some underlying unit trust as well as ETF. And that broad thinking will also apply when it comes to China. So having the fund management license in China will allow us to provide that overall platform services better. So I would say that, that in itself is the main thing that's needed, but it certainly will be something that will be helpful. And I think -- yes, so with that, we hope that the overall China business can grow even faster. There will be some increase in fixed cost as a result of this particular license, but I don't think it's 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 it's not -- a percentage term is not a huge increase relative to what we already have for our platform business.
Does PFM allow Chinese citizen to invest in U.S., Singapore and Malaysia? PFM potentially in the -- PFM does give us that flexibility to be able to invest into overseas asset classes, which will include the U.S. assets, et cetera. So it will give us that flexibility. So the thinking is going forward into the future, we'll 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 start. But certainly, we are looking at the potential of being able to invest outside of the China onshore market as well.
Is there any credit -- job credit amount booked in third quarter? Yes, there was some. David?
Okay. If you notice in the result announcement Page 4, we have a breakdown of the other income tax. There we have a line showing the government grant. In Q3, the total government grant is $992,000. Out of it, about $600,000 is from the job credits in Singapore and the remaining $400,000 is from a government grant from the Hong Kong government during third quarter.
Yes. So we expect that in fourth quarter we'll 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 the mix of recurring income changed significantly this year causing the marginally lower margin in terms of recurring income over AUA? Yes, the -- I think if you look at what has happened this year, you'll 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 recurring income directly.
So because of that, when you work out our total recurring income and then you divide that by total AUA, then you actually find a percentage. The recurring income margin over total AUA actually saw some decline. Even though the total net revenue over AUA have, in fact, increased for us this year. So that is the effect that we have seen.
But it's 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 on a reported number didn't grow as strongly compared to first quarter. But when you look at the number for third quarter compared to second quarter, there was a very healthy rate of increase.
Next question. We have successful registration to be a private fund manager in China. How do you see your growth in China panning out? And how this change your time line of achieving breakeven 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 time line of achieving breakeven or profitability? I think that license on its own doesn't -- well, yes, we have not worked out whether that will actually change the timing of breakeven or not. But we do feel that you allow us to improve the overall growth of the China platform at a faster pace.
Next question. For China, private fund manager license is obtained. What's your business plan for this part of the business to grow? At the initial stage, we expect that we will use this license to allow us to run a portfolio of fund-of-funds. And 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 the 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. And for us, as a platform for us in this business, given that we work with so many financial advisers, I think that business model will actually be a more interesting one for us.
So we wouldn't just be like most other fund managers that we work with because as I mentioned, we're 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's the broader thinking. That will actually allow the financial advisers who use our platform to actually advise the client better and to have more efficient way of earning their recurring income and so on.
Next question. Management previously guided $63.4 million to $64.9 million in 2020 OpEx. Is this still intact? Are there benefits from the extended JSS scheme?
The guidance is still intact. Yes, 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, yes, given that the overall business has actually grown quite well.
Other benefits from the extended JSS scheme, actually, the answer is no. The JSS scheme, the way we do the accounting, it actually doesn't go to -- it doesn't reduce 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 our 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 $100 billion AUA by 2028 still valid?
I think there's 2 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. But 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 even some FX conversion margins that we make, that will be important source of income. And then 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. And 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 heading 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 who to invest? This will increase the AUA 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. This is a drop off. Can we expect a lower level of CapEx compared to past years? I would say that fourth Q, you'll probably see a higher level compared to the quarterly levels that we have seen for the first 3 quarters of this year. But our expectation is that for the whole of 2020, our CapEx as a group will be perhaps similar -- sorry, yes, similar or marginally lower than for year 2019.
Next question. Why is equity share-based payment transaction costs 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 certain share-based payment essentially refers to -- yes, share options, or we call it performance shares, share options or share grant that we give to employees. That would be where it comes from. And the amount we give, we think of it as part of employee remuneration. Yes, 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, 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, yes, reward employees with more of the share options or share grant. So you may see some increases. But I think it'll be manageable and within our control how much we want to give.
I think that is -- those are the questions that we have. And yes, is there any final question? If there isn't, we'd like to end our briefing session over here. Thank you, everybody, for attending our third Q results briefing. Thank you.
Thank you.