On Friday evening, MAS announced that it will award full digital banking licences to Internet firm Sea and the Grab-Singtel consortium, as well as DWB licences to China’s Ant Group and a consortium led by Greenland Financial. The iFast’s consortium, with China’s Yillion Group and Hande Group, fails bid for digital wholesale bank (DWB) licence and its share price is down 30% today.

1. To say the least, I am very disappointed that iFast did not get the WDB license.

2. While I understand that Ant was a firm favorite and they won, I don’t quite understand why only 2 WDB licenses were awarded when they had planned for up to 3. Did iFast fail to even meet the WDB requirements? I thought its unlikely since Lim CC would be experienced enough to satisfy all the requirements before bidding. Maybe MAS wants the company to already have at least S$100m in cash now? iFast’s thinking was that it could easily raise S$100m from consortium partners and the market if it wins.

Also, I scratch my head why the consortium led by Greenland could win. Greenland’s parent company is among the biggest property developers in China but it is also heavily indebted, highly geared. I believe its financial arm also does not have much track record in the finance business, especially in South East Asia.

Why give it to Greenland? Why MAS does not award to one of the biggest, best run, most promising home-grown fintech companies in Singapore?

3. To be fair to iFast, part of the reasons why its share price soared in the last few months was because its existing businesses have done very well. The business units continued to register strong growth and higher profits throughout the Covid-19 pandemic. AUA continues to rise to record levels quarter after quarter.

Indeed, it also just won licenses to operate its platform for stocks trading in Malaysia and to operate as a private fund manager in China. Both these new business lines will commence operations in Q1 2021 and start to bring more revenues for FY21.

iFast has also slightly increased its dividend payout. It could pay out more if not for capital conservation consideration in anticipation of capex for the WDB license business. Now that it did not win the license, there will be no major capex and it will likely increase dividend payouts from this quarter onwards. Indeed, iFast is one of the few companies that pay dividends quarterly despite being an asset-light, growth company.

4. It looks like it is not inconceivable for Ant Group to list in SGX! They have already done all the paperwork for a HKEx listing, so they would just need to adapt to the SGX regulatory requirement. Now with a WBD license in Singapore, it provides ample justification for Ant Group to list here! Also, Alibaba has big investments in Singapore, after buying over Lazada (which can also be spin-off and be listed here eventually) and buying a 50% stake in AXA Tower.

It would be very exciting if Ant Group really lists in SGX. It would propel SGX and Singapore as a more respected securities trading centre once again. Our garmen and SGX have every incentive to make this a reality. Furthermore, I believe they want Singapore based unicorns like Grab and Carousell to also list here. They have already missed SEA Ltd and Razer Inc.

To attract these unicorns to list here, SGX has to show that such companies, such new business models, can attain world class valuations here. That’s why I believe SGX wants Nanofilm to be a poster boy for them. It wants Nanofilm to have valuations on par with leading global exchanges, attract big global funds to be active in SGX stocks again. If Nanofilm can achieve high growth and be valued highly by the market here, then other unicorns would have more confidence to list here.

5. Since I mentioned SEA Ltd, take a look at the US market’s response to its winning the DB license. It jumped 8.3% on Friday, adding US$7.5b (or S$10.0b) to its market cap (almost US$100b now) in a day!

All these years, SEA Ltd’s existing businesses have been reporting net losses but its share price has rocketed more than 5x from Mar 2020 lows ! FY2019 Net LOSS was US$1.4b!! So how to explain? If SEA Ltd had listed in SGX, it will never achieve this kind of market cap!

Noting that SEA Ltd won the full DB license, which requires a paid up capital of S$1b, can we imagine that if iFast had won the wholesale DB license (requires paid up capital S$100m), its market cap could jump possibly S$1b in a day? DOUBLE! Sigh…… what a waste.

6. So how will the market react on Monday? Surely a gap down, sell down. But to where? In my opinion, it is very hard to determine.

On the one hand, there is great disappointment. Many traders/investors had bought in anticipation of it winning the license. I reckon there are not many contra traders because daily volumes have not been very big in the last 5 days, except for Friday. Volumes were 961k, 555k, 1,447k, 255k and 3,380k.

Some of those who have bought and paid up earlier may also want to sell but I believe most them would want to hold because iFast’s existing businesses still offer growth and it pays quarterly dividend.

Then, it is hard to say at what level will bargain hunters be attracted to enter and absorb the selling interests. I hope directors or current substantial shareholders use the fall to buy and provide confidence.

Also, there is still a chance that the PCCW-iFast consortium can win Hong Kong’s eMPF tender contract. If they win, then it will be a consolation for iFast and the price will jump. Result could be out this week.

It will be a volatile trading day for iFast with a big day range.

Once again, this article is a guest post and was originally posted on @Sweeswee‘s profile on InvestingNote.

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