A proper investment thesis should include the company’s competitive moat, its catalysts, and its risks.
The moat protects a company from competitors and is a major reason the company is attractive.
Catalysts are the growth drivers of the business.
The risks indicate what could go wrong and what could affect the company’s growth plans.
When looking for growth, the focus should be on the type and type of catalysts.
Some catalysts can take a long time while others can be more immediate.
As an investor, it’s important to study each catalyst carefully to determine its impact on the company.
If you look at companies, the best type of catalyst is one that will kick in pretty soon and will also have a significant positive impact on the business.
Here are two Singapore companies that we believe have such catalysts and that could provide excellent returns for their investors.
1. iFAST Corporation Limited
iFAST is a financial technology company with assets under management (AUA) of $ 11.15 billion as of June 30, 2020.
The group offers access to over 11,000 investment products, including over 7,500 funds from over 270 fund houses and over 1,400 bonds and stocks.
iFAST is represented in Singapore, Malaysia, Hong Kong, India and China.
The inflow of money into Asia has improved the group’s outlook, pushing AUA to record highs.
In the first half of 2020, revenue rose 33.2 percent year over year to $ 77 million, while net income after tax doubled from $ 4.1 million to $ 8.2 million.
The acceleration of digital adoption in the wealth management industry continues to be a catalyst for the group’s long-term growth.
iFAST has also applied for a digital wholesale banking license in Singapore.
To this end, the company has entered into a partnership with the Yillion Group and the Hande Group from China.
Should iFAST receive this license, it will significantly accelerate the inflow of assets and increase the AUA even further.
The group can develop new sources of income by lending and generate interest income similar to that of a bank.
In addition, a third catalyst is the selection of the finalists for the digitization of the pension fund system in Hong Kong.
It is rumored that the telecommunications provider PCCW Limited works with iFAST as a technology partner for its offer.
The Hong Kong Compulsory Retirement Fund Authority is looking to upgrade its systems by creating an electronic platform for members.
Revenue of approximately HK $ 37 billion (S $ 7 billion) is at stake over the next ten years, of which iFAST will cut if PCCW wins the offer.
2. AEM Holdings Ltd.
AEM provides application-specific intelligent system test and handling solutions for semiconductor and electronics companies serving the 5G and artificial intelligence (AI) market.
The group has five production facilities in Singapore, Malaysia, China, France and Finland.
AEM has just announced excellent earnings performance for the first half of 2020.
Revenue rose 81.7 percent year over year to $ 273.7 million.
Net income more than doubled from $ 22.3 million last year to $ 55.3 million.
Revenue grew in all businesses and demand for the group’s semiconductor test solutions remains robust.
Although the pandemic disrupted global supply chains, AEM was minimally affected.
With both the 5G and AI markets showing promising future growth, this long-term catalyst should benefit AEM.
In addition to organic growth, AEM is also growing through acquisitions.
In July, the group announced the acquisition of DB Design Group, Inc. DB is a world-renowned supplier of automation equipment and other test-related products.
This acquisition will help expand AEM’s design and application engineering capabilities and add other names in the semiconductor and electronics industries to its customer base.
In December last year, AEM acquired Mu-TEST, an automated test equipment company, for EUR 7.5 million (S $ 12 million).
The acquisition added bespoke test development capabilities to AEM’s growing list.
These acquisitions will expand AEM’s product and service offerings and act as a powerful catalyst for the group to attract more companies and customers in the years to come.
This article was first published in The Smart Investor. Disclaimer: Royston Yang owns shares in iFAST Corporation Limited