The Praemium Ltd (ASX: PPS) share price is up 4.3% to 73.5 cents today after the funds administration platform provider reported record gross inflows of $768 million for the quarter ending December 31 2018.
Of the total, ‘Australian gross inflows’ made up $585 million and ‘international gross inflows’ made up $183 million, with calendar year 2018 also producing record total inflows of $2.8 billion.
At the end of the year funds under administration stood at $8.4 billion, up 14% on this time last year, which is a reasonable result when you account for the fact that declining asset or equity values lopped off a significant part of FUA over the period.
Outflows will also have played a part, although Praemium does not break down what part outflows played versus declining markets when calculating overall FUA changes over periods.
In FY 2018 Praemium reported a net profit of $1.4 million on revenue of $43.2 million, with earnings per share hitting 0.4 cents. Given the underlying growth rates it’ll hope to deliver more profit growth this year, with the company currently boasting a chunky market value around $293 million.
In 2019 the group plans to release a new managed accounts platform that will offer functionality over self managed accounts and individually managed accounts, while it also attempts to grow into the UK’s vast Self Invested Personal Pension (SIPP) market that also enjoys tax breaks for investors similar to Australia’s self managed superannuation (SMSF) system.
Like its competitors Hub24 Ltd (ASX: HUB) and Netwealth Limited (ASX: NWT), Praemium is benefiting from a structural shift in fund flows away from the big banks towards smaller operators due to advancements in digital technology and as the consequences of the Royal Commission put to an end to the “vertical integration” model used by the big banks like Commonwealth Bank of Australia (ASX: CBA).
As such all three of these businesses are probably worthy of further investigation on investors’ watch lists.
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Returns as of 6th October 2020
Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia owns shares of Netwealth. 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 Scott Phillips.
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