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Why the Praemium share price closed ~3% higher yesterday

The Praemium Ltd (ASX: PPS) share price closed 2.8% higher at $0.37 per share yesterday after the company announced that funds under administration (FUA) have hit $6 billion.

What did Praemium announce yesterday?

Praemium advised that since the launch of its non-custodial VMA Administration service (VMAAS) 18 months ago, its FUA have grown to over $6 billion.

The service was launched to supplement Praemium’s existing non-custodial Virtual Managed Account (VMA) solution, currently managing over $100 billion in assets.

As previously advised by management, Morgan Stanley and Shaw & Partners recently signed up to the VMAAS and both of these clients are now live on the platform.

A total of 10 Praemium clients now use the service, comprising over 4,000 portfolios and over $6 billion in FUA – a 15-fold increase since December 2018.

What’s been happening to the Praemium share price?

The Praemium share price has fallen 43.9% since the start of the year and 56.5% in the past 12 months in what has been a challenging period for equity investors.

Praemium has struggled to perform for investors so far this year as fellow Software as a Service (SaaS) wealth management platforms Netwealth Group Ltd (ASX: NWL) and HUB24 Ltd (ASX: HUB) have seen their share price increases in 2019.

Praemium is currently trading at 104.8x earnings which makes it slightly more expensive than both Netwealth (96.6x) and HUB24 (101.6x) on a relative value basis.

Given its current growth phase, the company does not currently pay a dividend to its shareholders, in contrast to the low-yield dividends of its competitors including Netwealth’s 1.33% and HUB24’s 0.17% dividend yields.

However, despite a disappointing first half of the year for investors, the Praemium share price still remains 164% higher than its $0.14 IPO price back in July 2014 on a positive note for shareholders.

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Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd and Praemium Limited. The Motley Fool Australia owns shares of Netwealth. The Motley Fool Australia has recommended Hub24 Ltd and Praemium 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 Scott Phillips.

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