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Why the Praemium Ltd share price sank 5% lower today

In early trade the Praemium Ltd (ASX: PPS) share price has sunk 5% lower to 39 cents after the fintech company released its full-year results.

Here are a few key takeaways:

  • A 28% increase in funds under administration to a record $6.1 billion.
  • Revenue & other income up 17% to $35.4 million.
  • Underlying EBITDA increased 54% to $6.3 million.
  • Net profit before tax up 42% to $2.2 million.
  • Earnings per share flat at 2 cents.

Overall I felt this was a reasonably strong result from Praemium despite this year’s boardroom chaos. The highlight for me was its increase in funds under administration.

Pleasingly, growth came from both the Australian and international markets. Australian funds under administration rose 29% to $3.9 billion and international funds under administration rose 27% to $2.2 billion. This makes it five years of uninterrupted growth for both segments.

The main driver of top line growth was its Global Investment platform. Revenue from the platform rose 44% to $17.2 million thanks to a large increase in funds under administration on its SMA platform.

Elsewhere, revenue from its Portfolio Services segment increased 8% to $14.7 million. This was due to a 20% increase in billable portfolios for its administration and reporting software Praemium Portfolio.

Should you invest?

Whilst the boardroom chaos this year that saw CEO Michael Ohanessian dismissed and then reappointed left me a little concerned, I do believe this is now all in the past and the company can focus purely on business again.

Which all being well will mean another year of growth following the launch of a series of new products.

Whilst at 20x full-year earnings I think Praemium’s shares about fair value, if it can continue growing its funds under administration at a similar rate over the next few years then there could be significant upside for its share price.

Right now I would class it as a hold and choose fellow fintech shares Class Ltd (ASX: CL1) and AFTERPAY T FPO (ASX: APT) ahead of it.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Class Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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