Netwealth Group Limited
NWL Details
March 2022 Quarterly Business Update: 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.
- Funds Under Administration (FUA): The FUA, as of 31 March 2022, stood at $57.6 billion, up by $0.9 billion or 1.6% for Q3FY22 following the negative market movement of $1.7 billion alongside an increase of $15.7 billion or 37.6% relative to 31 March 2021.
- Fund Flow: FUA net inflows stood at $2.6 billion for the quarter, up by 16% PcP. Funds Under Management were registered at $13.8 billion as of 31 March 2022. FUM net inflows stood at $0.5 billion, and managed account balance was reported at $11.7 billion, up by 34.5% PcP.
FUM Quarterly Movement; Analysis by Kalkine Group
Key Risks and Challenges
The company is exposed to risks arising from the change in policies by the authorities. NWL’s performance could be affected by high market volatility and increased interest rates affecting asset allocation strategies.
Outlook
The company holds a pipeline, and the win rate for new business remains robust across all the market segments. NWL stays confident about surpassing FYA net inflow of $13.5 billion in FY22, subject to no deterioration in market conditions and timing of client transactions.
Valuation Methodology: Price to 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 gave a negative return of ~21.02% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $11.720 - $18.250. The stock has been valued using the Price to Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the high market volatility and considerable asset movements due to interest rate hikes, the company might trade at a slight discount to its peers’ Price to Earnings multiple average. For valuation, a few peers like Perpetual Ltd (ASX: PPT), Pacific Current Group Ltd (ASX: PAC), Pengana Capital Group Ltd (ASX: PCG), and others have been considered. Given the decent FUA and FUM levels, rising market standing, decent fundamentals, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the current market price of $11.800, as of 10 June 2022, 10:40 AM (GMT+10), Sydney, Eastern Australia.
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
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 for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and is 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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