If you are searching for big returns, then it could be worth hearing what Bell Potter is saying about the S&P/ASX 200 Index (ASX: XJO) share in this article.
That's because the broker believes it could deliver a total return of around 50% over the next 12 months.
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Which ASX 200 share?
The share that Bell Potter is recommending to clients is Netwealth Group Ltd (ASX: NWL).
It is an investment platform provider used by over 4,000 financial advisers and with over $135 billion in funds under administration (FUA).
Bell Potter has updated its forecasts to reflect weaker equity markets. It said:
We update our model to reflect equity market movements and comment on net flow expectations. Consensus forecasts appear too high, implying the upper end of the $18-20bn guided range is achieved over the last 6 weeks of 1Q. This compares to $14bn run rate over the first 7 weeks. Equity markets have also weakened since the trading update, with September the second worst performing month this year behind March.The local share market declined by -4%. We make no EPS changes, having already factored in the negative mark-to-market impact of the drawdown.
The broker also highlights that it thinks consensus estimates for net inflows is too high and is forecasting inflows of $3.2 billion for the first quarter. It adds:
Guidance stands between $18-20bn. This is subject to sentiment and the economic and regulatory environment. Our 1Q net inflow forecast is $3.2bn vs. $3.5bn consensus. NWL reported $1.4bn of net inflows between 30 June and 21 August with a one-off institutional outflow worth $0.6bn. That equates to a $1.2bn monthly run rate. Our estimate assumes a $1.4bn exit rate vs. $1.7bn consensus. Flows have been running around that range already before MS Wealth contribution.
However, despite this, the broker remains very positive on the ASX 200 share and sees recent share price weakness as a buying opportunity.
Big potential returns
According to the note, the broker has retained its buy rating on the ASX 200 share with a trimmed price target of $25.00 (from $30.00).
Based on the current Netwealth share price of $16.69, this implies potential upside of 50% for investors between now and this time next year.
In addition, the broker is forecasting a fully franked 3.1% dividend yield in FY 2027 (and 3.6% in FY 2028 and 4.1% in FY 2029), which boosts the total 12-month return to over 50%.
Commenting on its buy recommendation, Bell Potter said:
Maintain Buy. Given interest rates, we have moved our valuation multiple to 2022-23 levels with a class action provision. Our flow expectations are below FY27 guidance. NWL has operated in similar environments, with large withdrawals and clients moving off platform. FY23 flows landed -10% below the guidance and growth was restored in 12mths. Our $17.9bn matches this experience. So far, we are 6mths into the cycle.
