Selfwealth Limited

SWF Details

Q1FY22 Operational Update: SelfWealth Ltd (ASX: SWF) provides an online trading platform to its clients and has a presence in the Australian and the US markets. It charges a flat fee of A$9.50 in ASX trades and US$9.50 for trades in the US.

• Improved Key Performance Indicators: Active traders increased by 13% and stood at 107,461. Quarterly trade volume expanded by 22% to 435,620, and client cash advanced 15% to $600 million. Key focus was on content redevelopment and investment webinars for customers.
• Topline Update: Operating revenue surged to $5.5 million, up by 8% QoQ and 32% YoY. 31% of aggregate active traders have included US trading to their portfolios. The trade volume increased to 435,620 in Q1FY22, up by 22% QoQ.
• Investing Position: In July 2021, SWF raised $11.74 million via a Placement Offer to sophisticated and institutional investors. In addition, SWF executed Share Purchase Plan (SPP) to accelerate its growth strategy via aggressive marketing initiatives and new product development.
• Financial Position: Quarterly cash outflow stood at $1.1 million. The outflow stood within company’s expectations, considering key focus on investing in growth capital. Cash and cash equivalents as of 30 September 2021 stood at $17.5 million.

Q1FY22 Key Financial Metrics, Analysis by Kalkine Group

Key Risks and Challenges

• Financial Risk: SWF is exposed to high financial risks and potential technical faults in settlements that may unveil high penalty charges.
• Competition Risk: The company’s line of business makes it prone to stiff competition from other peers to gain market share.

Outlook: The benefit of accelerated investment growth began to flow through Q1 and shall continue throughout FY22. Recent top-line growth and market share gains reflect the high potential for business model scalability with improved gross margins from international operations. In addition, an $11.74 million capital raise in August 2021 would further contribute to technological and product developments to differentiate SWF products.

Stock Recommendation: The stock of SWF gave a positive return of ~4.839% in the past one month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.285 - $0.795. On a TTM basis, the stock of SWF is trading at an EV/Sales multiple of 3.8x, lower than the industry (Investment Banking and Investment Services) median of 10.5x. Considering the current trading levels, valuation on a TTM basis, impressive top-line performance, cost control measures, and the key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the closing market price of $0.295, as of 13 December 2021.

SWF Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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