Netwealth Group Limited

NWL Details

September 2021 Quarter Update: Netwealth Group Limited (ASX: NWL) provides financial services to its clients that comprise of managed funds, portfolio services, superannuation master fund, to name a few. The company has recently provided its September 2021 quarterly update and business outlook.

• It reported impressive growth in Funds Under Administration (FUA) by 52.7% to $52 billion as of 30 September 2021, when compared to the pcp. The increase also reflects a positive market movement of $6 billion.
• FUA net inflows during the quarter were at $4 billion for the September quarter, reflecting an increase of ~111% over the pcp.
• There has also been an increase in FUM of the company to $12.6 billion as of 30 September 2021, reflecting an increase of ~57% on the pcp.
• NWL has launched its new iOS and Android Mobile App for advisers and their clients in July 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

AGM Updates:

The company has recently held its AGM on 27 October 2021, where it has re-emphasized on its resilient performance during FY21, amidst the COVID-19 pandemic. It reported significant uplift in revenue by 16.9% in FY21 to $144.9 million, driven by increase in funds under administration to $47.1 billion as of 30 June 2021. NWL is also focused on enhancing the user experience and has made developments to XWrap.

Key Risks: The company’s line of business makes it prone to the risk of macro factors which might impact the economic environment. This can lead to a major upset in the investment markets, which can in turn impact the company’s performance.

Outlook: The company is optimistic on its prospects going forward, as it expects to benefit from the ongoing structural changes in the financial services industry. On the back of its robust performance during the September 2021 quarter, it has upgraded its FUA net inflow guidance to $12.5 billion from $10 billion in FY22.

Valuation Methodology: EV/Sales 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 above its average 52-weeks' levels of $12.540-$18.710. The stock of NWL gave a positive return of ~23.98% in the past six months and a positive return of ~20.26% in the past three months. The stock has a support level of ~$15.86 and a resistance level of ~$18.66. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a correction of high single-digit (in % terms). The company might trade at a slight premium to its peers, considering the impressive performance, increase in FUM & FUA levels, and upgrade in guidance levels. For the purpose of valuation, peers such as Magellan Financial Group Ltd (ASX: MFG), Platinum Asset Management Ltd (ASX: PTM), Pinnacle Investment Management Group Ltd (ASX: PNI), have been considered. Considering recent rally in the stock price, high trading levels, increase in debt-to-equity ratio and the other key risks associated with the business, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the current market price of $18.160, as on October 27, 2021, 14:30 PM, (GMT+10), Sydney, Eastern Australia.

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 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.

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