Pinnacle Investment Management Group Limited

Key Takeaways from Annual Results Presentation: Pinnacle Investment Management Group Limited (ASX: PNI) is a small-cap multi-affiliate investment management firm with the market capitalization of ~A$780.85 Mn as of August 7, 2019. The company published its FY19 results, wherein it reported a net profit after tax amounting to $30.5 Mn from continuing operations. It reported funds under management amounting to $54.3 Bn as at 30 June 2019, which includes an amount of $6.8 Bn acquired in July 2018. The FUM of the company reflects a rise of 16.3% or $7.6 billion as compared to the FUM figure at 31 December 2018. The company further stated that it had witnessed a compounded annual growth rate of 28.5% per annum over the last 10 years and 34.6% over the last five years in FUM. The Board of the company has declared a fully franked final dividend of 9.3 cents per share to its shareholders with a record date of 21 September 2019 and payable on 4 October 2019. The following picture provides an idea of the company’s gross FUM growth:

  
FUM Growth (Source: Company Reports)

What to Expect: The company is focusing on managing the business in order to maximize profits and value over the medium term. It is planning to invest in / seed new affiliates where management teams have a strong track record and growth potential. Thecompany is continuing to deliver growth within existing affiliates and maintaining current levels of investment to deliver medium-term growth. The company is planning to continue to assess high-quality new affiliate opportunities.

Stock Recommendation: The company reported return on equity of 22.2% in FY19 in comparison to the industry median of 5.5%. This represents that the company is providing feasible returns to shareholders in comparison to the broader industry and might attract the attention of the shareholders moving forward. The current ratio of the company stood at 7.23x in FY19 against the industry median of 1.46x, which implies that PNI is in a good position to address its short-term obligations in comparison to the peer group. The asset to equity ratio stood at 1.05x in FY19 as compared to the industry median of 4.24x. On the stock’s performance front, it had produced returns of -3.83% and -26.88% in the time span of one month and three months, respectively. Currently, the stock is trading close to a 52-week low level of $3.800, indicating a decent opportunity for accumulation. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $4.630 per share (up 8.431% on 7 August 2019).
 

HUB24 Limited

Decent Outlook: HUB24 Limited (ASX: HUB) is into the provisioning of investment and superannuation portfolio administration services. The market capitalisation of the company stood at ~$694.74 Mn as on 7^th Aug 2019. Recently, the company, with the help of a release stated that UBS Group AG and its related bodies corporate have ceased to be a substantial holder in the company from 31^st July 2019. Recently, the company announced the appointment of Paul Howard as a joint Company Secretary. The company released its results for the June 2019 quarter. The company added that it maintained its 1^st place ranking for adviser primary platform advocacy and increased its overall adviser satisfaction ranking to 2^nd place in the most recent Investment Trends Planner Technology Report.

For June 2019 quarter, the company reported quarterly net inflows of $979 Mn, reflecting a rise of 32.4% on pcp basis, with gross inflows amounting to $1.5 Bn.It delivered annual net inflows amounting to $3.9 billion with an increase of 60.6% on pcp.


Monthly Net Inflows and FUA (Source: Company Reports)

Future Prospect: The HUB24 platform continues to grow at the fastest rate in the industry. The company’s strong business development pipeline is anticipated to support future adviser and Funds Under Administration growth. As stated in 1H FY 2019 presentation, the company is targeting Fund Under Administration in the range of $19bn - $23bn by June 2021. The company’s future prospects revolve around supporting its client’s transition to a post Royal Commission world through innovation, technology, and its expertise. It is planning to capitalise on its strong foundations and investment in order to maximise growth in the context of unprecedented market opportunity.

Stock Recommendation: The company reported a gross margin and EBITDA margin of 57.1% and 11.4% in 1H FY19 in comparison to the industry median of 95.8% and 58.6%, respectively. It posted a net margin of 6.7% in 1H FY19, reflecting YoY growth of 1.1%. This represents that the company has improved its capability to convert its top-line into the bottom-line. The return on equity of the company stood at 5.4% for the same time period as compared to the industry median of 2.4%, which represents that the company is providing good returns to the shareholders in comparison to the broader industry. With respect to the stock’s past performance, it had generated returns of -1.33% and -26.25% in the time span of one month and three months, respectively. Currently, the stock is trading below the average of 52 week high and low prices of around $12.70, proffering a decent opportunity for accumulation. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $11.080 (down 0.18% on 7 August 2019).

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