Netwealth Group Limited
NWL Details
Update on RBA Announcement: Netwealth Group Limited (ASX: NWL) provides financial services to financial intermediaries and investors, including managed funds, superannuation master funds, separately managed accounts, investor directed portfolio services, and self-managed superannuation administration services.
- Recently, the company updated the market regarding its new interest rate agreement with ANZ. The company states that the interest rate payable on cash transaction accounts will now be revised from the previous 0.50% RBA cash rate to less than 0.65%.
- Also, NWL margin on cash now stands at ~85 basis points (bps), following the RBA’s rate increase of 25 bps.
April 2022 Inflows & Outlook Updates: For the April month, the company’s net inflows stood at ~$790 million, which was slightly below expectations, owing to COVID-19 related absenteeism, volatility in the market, and interest rate fluctuations.
Financial Trend (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 remains positive about its pipeline and win rate related to new business in FY23 and beyond. NWL expects seasonal strong FUA net inflows in May and June 2022. The company has updated its FUA net inflows guidance to be more than $13 billion for FY22.
Valuation Methodology: Price/Earnings 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 $11.865 - $18.250, respectively. The stock has been corrected by ~22% in the past six months. The stock has been valued using a Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at some premium to its peers, considering rising FUM and FUA, etc. For the purpose of valuation, a few peers like Pinnacle Investment Management Group Ltd (ASX: PNI), Hub24 Ltd (ASX: HUB), EQT Holdings Ltd (ASX: EQT), and others have been considered. Considering the expected upside in valuation, rising 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 $12.73, down by ~0.933% as on 16 May 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
Pinnacle Investment Management Group Limited
PNI Details
A Quick Look at PNI’s 1HFY22 Results: Pinnacle Investment Management Group Limited (ASX: PNI) is an investment management company based in Australia. PNI’s principal activities comprise building and operating investment management businesses and offering distribution services, business support to the Pinnacle Affiliate.
- PNI has registered an increase in revenue to $21.6 million in 1HFY22, depicting a rise of 50% on pcp on the back of robust retail inflows and revenue-sharing fees.
- NPAT for the period came in at $40.1 million, an increase of 32% on pcp. Basic earnings per share rose by 23% year over year in 1HFY22. The strength of PNI’s platform and award-winning brands were key positives for the period.
- PNI’s aggregate affiliates’ Funds Under Management (FUM) stood at $93.6 billion as on 31 December 2021 against $70.5 billion as on 31 December 2020, up by 43%.
- In 1HFY22, net outflows and net retail inflows came in at $1.7 billion and $2.9 billion, respectively. Cash and Principal Investments as at 31 December 2021 stood at $176.4 million, with $100 million debt facility fully drawn down from CBA.
NPAT trend (Source: Analysis by Kalkine Group)
Key Risks: The company is engaged in investment management. Therefore, the company is exposed to funds’ performance risk for business growth. PNI may see a decline in its funds under management on the back of COVID-19 impacts on the economy.
Outlook: The company expects a robust sales pipeline across private credit, alternative public credit, Australian equities, global value equities, and emerging market equities. PNI looks forward to expanding internationally to the United States, Canada, Singapore, Hong Kong, the United Kingdom, South Africa, and Nordics. Looking forward, PNI is prepared for and seeking attractive inorganic growth.
Valuation Methodology: P/E based Relative Valuation Method (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 PNI is trading below its 52-week low-high average of $7.78 - $19.290, respectively. The stock has been corrected by ~51.11% in the past six months. The stock has been valued using a P/E 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 premium to its peers, considering robust 1HFY22 results and rising FUM, etc. For the purpose of valuation, a few peers like Hub24 Ltd (ASX: HUB), Perpetual Ltd (ASX: PPT), Netwealth Group Ltd (ASX: NWL), and others have been considered. Considering the expected upside in valuation, rising revenue and bottom line, robust retail inflows and revenue-sharing fees, decent long-term outlook, international market expansion and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $8.530, up by ~0.352% as on 16 May 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.
PNI 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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