Netwealth Group Limited

FY19 NPAT increased by 23.9% on previous year:Netwealth Group Limited (ASX: NWL) is involved in providing the financial intermediaries and investors with financial services including managed funds, investor directed portfolio services, a superannuation master fund, separately managed accounts and self-managed superannuation administration services. Recently, S&P Dow Jones Indices announced September 2019 Quarterly Rebalance of the S&P/ASX Indices, wherein NWL was added into S&P/ASX 200 Index, effective from September 23, 2019.

FY19 Key Highlights:NPAT for the period increased by 23.9% to $36 Mn as compared to the previous year. EBITDA for the period increased by 22.9% to $52 Mn as compared to previous year. Total revenue increased by 18.6% to $98.8 Mn, majorly due to the continued strong FUA (Fund Under Administration) growth and increased transactional revenue and other ancillaries. Total operating expenses for the period increased by 14.2% to $46.8 Mn in FY19. During the period, the company delivered high cash conversion ratio of 95.3%. EPS for the period was reported at 14.8 cents per share, an increase of 24.4% on previous year. The Board of Directors declared a fully franked final dividend of 6.6 cents per share, totalling $15.7 Mn and 12.1 cents per share for the full year, with record date and payment date on August 27, 2019 and September 26, 2019, respectively.


FY19 Key Highlights (Source: Company Reports)
What to expect:As per the release, FUA net inflows in FY2020 is expected to exceed $7 Bn and at the end of FY2020, FUA is expected to exceed by $30 Bn. This would be majorly driven by the strong pipeline of new business won and opportunities. Winning clients from third party and in-house administration systems increase the opportunities for growth beyond existing platform users. EBITDA margin is likely to be marginally below FY2019 due to the overall reduction in bps from pricing strategies and new business weighted towards the affluent and HNW sectors; and the strategic increase in the investment in the IT infrastructure, people and software combined with full year impact of new hires in FY2019.
Stock Recommendation:NWL’ share generated a positive return of 10.93% in last one month. Its gross margin and EBITDA Margin for FY19 stood at 51.4% and 49.5%, lower than the industry median of 59.8% and 57.9%, respectively. However, its net margin for FY19 stood at 36.5%, better than the industry median of 21.3%. Its ROE for FY19 stood at 53.6%, better than the industry median of 6.2%. Its current ratio for FY19 stood at 4.36x, better than the industry median of 1.46x. Hence, considering the forecast for FY20 in terms of net inflows, company’s focus on diversifying revenue stream, competitive pricing model, etc., we have a watch stance at the current market price of $8.220, up 3.396% on September 6, 2019 and suggest investors to wait for better entry level.
 

Navigator Global Investments Limited

FY19 Revenue Increased by 28% on Previous Year:Navigator Global Investments Limited (ASX: NGI) is involved in the provision of investment management products and services to investors globally through wholly owned subsidiary, Lighthouse Investment Partners, LLC. The company recently announced a change in the substantial holding of UBS Group AG and its related bodies corporate from 9.25% to 7.59%, effective from August 27, 2019.In another update, the Board of Directors paid a final dividend of US 9.0 cents per share on August 30, 2019.

FY19 Key Highlights:Revenue from ordinary activities for the period was reported at US$114.87 Mn, an increase of 28%. Earnings before interest, tax, depreciation, amortisation and impairment increased by 10% to US$37.65 Mn as compared to previous year. Statutory profit increased by 306% to US$26.84 Mn as compared to previous year.


FY19 Key Metrics (Source: Company Reports)

What to expect:As per the release, the company expects to promote its managed account platform with a better model for investing in hedge funds. Its approach towards the business, infrastructure, and risk management system together provide a structural advantage that is rare in the alternative asset management sector, which has allowed the company to build differentiated alternative asset portfolios with exclusive exposure.

Stock Recommendation:NGI’ share generated a positive return of 8.03%. Its net margin for FY19 stood at 23.4%, better than the industry median of 21.3%. Its ROE for FY19 stood at 12.5%, better than the industry median of 6.2%, which implies that the company generated better returns for its shareholders than its peer group. Its current ratio for FY19 stood at 12.27x, better than the industry median of 1.46x, which implies that the company is in a better position to address its short-term obligations than its peer group. Considering its strategic goals center around growing AUM through a quality client base, diversification of product and service offerings by leveraging its capabilities of proprietary Managed Account Program, etc., along with current trading levels, we recommend a “Buy” rating on the stock at the current market price of $3.230, up 5.212% on September 6, 2019.

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