I think the financial technology industry is one of the most exciting areas of the local share market at the moment and home to a number of fantastic options for investors.
Analysts at Goldman Sachs appear to agree with this and yesterday put out a note relating to four emerging companies in the wealth management platform space.
The four shares below accounted for just 3.4% of the total platform market in Australia in FY 2017 but 32.6% of net inflows thanks to structural changes in the industry.
Considering the platforms cater to the $2.3 trillion Australian superannuation industry, the broker believes there could be a huge opportunity for the companies over the next decade. Here are Goldman's thoughts on these four emerging companies:
Hub24 Ltd (ASX: HUB)
The broker has a buy rating and $13.75 price target on the shares of Hub24. Goldman likes the company due to its leadership position in managed accounts. Although it is early in its lifecycle and carries execution risks, the broker is willing to overlook this due to the potentially higher earnings growth as it increases in scale.
Netwealth Group Ltd (ASX: NWL)
Netwealth is Goldman's top pick in the wealth management platform industry and has a conviction buy rating and $8.20 price target on its shares. As well as its market-leading product functionality, high levels of service, and flexibility, the broker is attracted to the company due to its growing scale, execution track record, and strong alignment of management with shareholders. This could make it worth a closer look.
Onevue Holdings Ltd (ASX: OVH)
The broker has a neutral rating and 84 cents price target on Onevue's shares. Although the broker is positive on the outlook for the company and expects solid growth from it this year, it believes this is already reflected in its share price. At present Onevue's shares are changing hands at 32x estimated FY 2019 earnings. I think this is a fair call by Goldman.
Praemium Ltd (ASX: PPS)
It is a similar story for this managed accounts platform provider. Goldman has forecast a 26% CAGR in funds under administration across Australia and the UK through to FY 2020 for Praemium. But at 37.5x estimated FY 2019 earnings, it believes this growth is already built into its share price. As a result, Goldman Sachs has a neutral rating and price target of 90 cents on Praemium's shares. Which seems about fair to me.
