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Why Praemium Rallied 17% Today?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Praemium (ASX: PPS) shares staged a sizeable rally today after their VMA Administration Service business recorded a significant beat to expectations. The VMA services segment allows the management of non-custodial accounts and provides services extending to client onboarding, receipt management, portfolio data entry, reconciliation and CGT reporting. The CGT reporting can capture corporate action events prior to 1985, so the product solves several administrative headaches that plague financial advisers.

Praemium - report
Praemium (ASX: PPS) has rallied hard off the back of exceptional results for one of the company’s new business units (Credit: Praemium)

This popularity of this new offering of Praemium has enabled funds under administration to pass the $20bn mark. The best thing about the result is that growth in FUA is accelerating for the firm. VMA Administration services grew by 49% over the last quarter alone, well above the rest of the business which is growing at ~30% p.a. An acceleration in growth drives multiple expansion, as well as a share price re-rate based on higher earnings, which is why investors are so excited about the positive update from this new business unit.

Praemium is a B2B provider of services in the wealth management space, helping advisers service the investment portfolios of clients. The company has a strong business in the SMSF space, helping advisors to manage all their SMSFs under one wrap platform. The low fees and streamlined tax and financial reporting are both great attractions for clients.

One weakness of their business model is that individuals cannot use Praemium’s products. The company is solely focussed on the B2B market, a decision likely driven by the additional licencing requirements and different distribution channels that are required to sell the product directly to consumers. The strategy does, however, help put financial planners at ease, since consumers can only get the product through an advisor, increasing client retention.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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