Netwealth Group Limited
NWL Details
Quarterly Outlook Updates: Netwealth Group Limited (ASX: NWL) provides financial services to financial intermediaries and investors, including managed funds, superannuation master fund, separately managed accounts, investor directed portfolio services, and self-managed superannuation administration services. On 14th April 2022, the company released updates on its quarterly business and outlook:
- NWL ‘s market share got enhanced to ~5.5% as on 31st December 2021, up by ~1.1% from 12 months. The total accounts of NWL increased by ~20.8% from 92,008 to 111,130 in 3QFY22 on pcp basis.
- As per the report, NWL is termed as the fastest growing platform provider in Australia and its managed account balance increased by ~34.5% to $11.7 billion as on 31st March 2022.
Key Metrics (Source: Analysis by Kalkine Group)
Key Risks: The company’s business growth could be impacted by extreme volatility in the investment market. Also, the other risks are competition from Peers, as NWL operates in a very competitive environment; hence rising market share of peers could impact the business growth.
Outlook: The company seemed quite confident about its pipeline and win rate related to new business and expects to launch non-custodial administration service in 4QFY22, which will thereby improve its capabilities in the Key High Net Worth and Ultra High Net Worth market. The company is positive on achieving its FUA net inflows guidance more than ~$13.5 billion.
Valuation Methodology: Price/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of NWL is trading below its 52-week low-high average of $12.200 - $18.250, respectively. The stock has been corrected by ~16.61% in the past three months. The stock has been valued using a Price/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers, considering the investment market volatility, lowering EBITDA margin and other material business risks, etc. For the purpose of valuation, a few peers like Pinnacle Investment Management Group Ltd (ASX: PNI) and Hub24 Ltd (ASX: HUB) and others have been considered. Considering the expected upside in valuation, rising total accounts (number), FUM and FUA, growing market share, optimistic long-term outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $13.200, down by ~0.901% as on 14 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
NWL Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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