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 (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.
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