Praemium Limited

Update on Board Appointment: Praemium Limited’s (ASX: PPS) stock price edged up on May 23, 2018 and it is only recently that the group announced for top management appointments. According to the release, MichaelOhanessian, CEO of the company was appointed to the board as a Managing Director, effective from May 14, 2018. During his seven years tenure, he has been instrumental in restoring Praemium to profitability and driving a strategy which has delivered significant growth and improved the value of the company for shareholders. Further, the Board welcome Michael’s ongoing leadership as a CEO and Managing Director during this time while there will be no changed to the CEO’s remuneration package, as disclosed on 1 March 2018. Besides this, the company reported strong platform inflows in the March 2018 quarter with the key milestone wherein the group recorded third highest gross inflows level and continuously enhanced its funds under administration (FUA) level from Q1FY14 to Q1FY18. FUA sits at $7.8 billion.


Quarterly Gross Inflows and FUA Movements (Source: Company Reports)

During the first quarter of FY18, the company has added 69 new models (11% increase) on the Praemium SMA (Separately Managed Accounts); expanded international models on the Australia SMA with the addition of leading global manager Franklin Templeton; introduced family pricing for Australia SMA; launched online fact find capability for Wealth Craft in the international market; and successfully completed and rolled out its international MiFID II compliance requirements. These developments ensure healthy growth of the company in years to come. In the past one year, the stock price climbed up 82.89 per cent as at May 22, 2018 and is still trading at a high PE level. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 0.700.
 

ZIP Co Limited

Solid Quarterly (FY18) Performance:ZIP Co Limited (ASX: Z1P), during Q3FY18 has registered a solid growth in its revenue of 138% (YoY) to $11.2 Mn, whereas it has seen an increase of 23% (QoQ). The number of accredited merchants during the quarter were 8,991, representing splendid growth of 181% on YoY basis. This was due to increased new merchants offering Zip, including many well-known consumer brands. The number of active customer accounts (not including Pocketbook users) grew by 217% to 627,843 in Q3FY18 as compared to the previous corresponding period (pcp).  However, receivables increased by 132% in Q3FY18 as compared to pcp because of recurring nature of the business. However, they maintained healthy repayment profile with 14% of receivables, repaid each month during the quarter. Over the period, the company has several initiatives underway that will further drive engagement in the coming periods including investment in the Zip brand and architecture; the Zip native App, and improvements to the store’s directory, which will drive a better browsing and discovery experience.

  
March Quarter Performance (Source: Company Reports)

On the other hand, the company is on track to achieve positive cash flow on a monthly basis by the end of FY18 (a cash flow breakeven on a monthly basis expected in FY18). The group had funding headroom of $133.5 Mn at the end of the quarter and continues to explore additional options to further increase and diversify the facilities available to fund its growth. The stock has moved up 21.05% in last one year, as at May 22, 2018 but down by 4.17% in the past three months. We give a “Speculative Buy” recommendation on the stock at the current market price of $ 0.800, and we justify our recommendation at the back healthy growth across all key operating metrics, steadily increasing gross revenue yield, continued introduction of merchants, large and small, who are benefiting from the Zip platform, and rapidly increasing customer numbers and engagement metrics.

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