SelfWealth Ltd

SWF Details

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.

FY21 Financial Performance

• Surging Top-Line: SWF reported $18.4 million in revenue, up by 135% YoY, considerably driven by a 105% increase in active traders, 147% increase in Annual traders, 158% increase in equities under administration, and 43% increase in client cash.
• Improved Bottom-Line: EBITDA improved by $2.4 million and was reported to loss of $0.5 million. Net loss declined by $2.4 million and was registered at $0.6 million. The improved operating metrics were primarily driven by considerable volume traffic.
• Cash Flow and Financial Standing: During the period, SWF’s operating cash flow entered the positive territory and was registered at $1.1 million, up by $1.3 million YoY. The cash balance for the period stood at $7.5 million. In addition, SWF completed an $11.74 million capital raise in August 2021.

Key Business Updates

• Launch of US Trading: In December 2020, SWF launched its US Trading platform with over 29% of the Active Traders adding the US trading access within the first six months.
• International Trading: In FY21, international trading generated $1.2 million in revenue at significant gross margins relative to domestic equities.
• Gained Market Share: Addressable market has enlarged by twice the size in the past 24 months. As a result, SWF holds a high retention rate of existing customers, despite aggressive market competition.

FY21 Financial Performance Table; Analysis by Kalkine Group

Key Risks

• 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

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 SWH gave a positive return of ~16.129% in the past one month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.300 - $0.795. On a TTM basis, the stock of SWF is trading at an EV/Sales multiple of 4.7x, slightly lower than the industry (Investment Banking and Investment Services) median of 5.0x. Considering the current trading levels, valuation on a TTM basis, impressive top-line performance, cost control measures, key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the market price of $0.360, as of 28 September 2021, 01:00 PM (GMT+10), Sydney, Eastern Australia.

SWF Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart shows RSI (14 periods) and the green color line in the chart shows SMA (50 days).

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.