Should you buy Praemium Ltd shares today?

Praemium Ltd (ASX:PPS) is well positioned for earnings growth.

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Praemium Ltd (ASX: PPS) recently announced record inflows to the platform for the September quarter with key milestones being; record quarterly inflows of $749 million, record Australian inflows of $578 million and funds under administration (FUA) of $6.6 billion.

Praemium Ltd is involved in the provision of investment administration, separately managed accounts (SMAs) and financial planning technology platforms.

Managed account technology within platforms is a growing area of financial advice and is becoming more popular with financial advisers.

The company is committed to innovation, which is important in this sector as most advisers will change platforms for better features.

CEO Michael Ohanessian noted recently; “We remain focused on accelerating our growth momentum; therefore, we have made the decision to invest in building the foundations of our business in preparation for this additional growth, particularly in technology, product, sales and marketing, and expanding our management depth”.

Low margin costs mean the increase in FUA has a marked impact on the bottom line, which can be seen in the increase of EBIT over the last 5 years.

The FY 2017 results were strong with key highlights including a 54% increase in underlying EBITDA to a record $6.3 million, compared to $4.1 million in the previous year, a 17% increase in revenue and other income to $35.4 million and 28% growth in funds under administration to a record $6.1 billion.

The company has no debt and cash at 30 June 2017 of $9 million.

The company’s UK business (which is making strong progress) is also a point of difference versus others in the space such as Onevue Holdings Ltd (ASX: OVH) and Hub24 Ltd (ASX: HUB). International inflows of £97 million for the quarter were the third highest on record.

The company’s in-house investment management proposition of multi-asset funds and model portfolios grew to £440 million in the quarter, up 53% over the past 12 months.

The Smartfund range of multi-asset funds has reached £254m in FUA, a rise of 217% in a year.

Praemium’s yearly results were solid and with increasing FUA and significant operating leverage, the company is on track for good earnings growth in the medium term. Management is focused on innovating and plans to add international equities for the Australian SMAs.

Praemium offers investors good exposure to the growing platform industry in Australia.

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Motley Fool contributor Christopher Coe does not own any shares mentioned above. The Motley Fool Australia has no position in any of the stocks mentioned. 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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