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Why the Hub24 Ltd share price is soaring today

The Hub24 Ltd (ASX: HUB) share price is up 4.5% to $13.90 today after the investment and superannuation funds administration platform provider held its AGM and provided a general trading update.

Hub24 offers private investors and advisers a platform that is independent from the banks like Commonwealth Bank of Australia (ASX: CBA) or Westpac Banking Corp (ASX: WBC) in providing broad investment options and tax optimisation tools.

The ‘independence’ of the platform has helped it grow in popularity especially after the allegations that banks and advisers have been selling specific products in order to achieve greater commissions or sales rather than having the best interests of their clients in mind.

In fact new regulation that has sort to encourage the independence of financial advice has been a significant tailwind for independent platform provider such as Hub24 and Praemium Ltd (ASX: PPS). Their share prices are up nearly 50% and 20% respectively over just the past 12 months.

At its AGM today Hub24 reaffirmed its long-term target to have funds under administration (FUA) of $19 billion to $21 billion by June 2021.

As at September 30 2018 it had $9.1 billion in FUA, which means the June 2021 target will require some strong compound growth, although it claims to have an 85% compound annual growth rate in FUA over the past 5 years.

For FY 2018 it increased FUA by 51% to $8.3 billion and appears to be off to a very strong start to FY 2019 in adding $800 million in FUA over just 3 months.

In FY 2018 it posted an underlying net profit after tax of $5.4 million on revenue of $84 million and paid investors a maiden dividend of 3.5 cents per share.

Hub24 looks an exciting growth business, but investors must remember the market is already allocating it a value around $826 million versus its FY 2018 underlying profit of just $5.4 million. Therefore if Hub24’s growth were to not meet expectations for any number of reasons then the shares could fall quickly.

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