All eyes on the Platform Managers (NWL, MGP, HUB, AMP, BBN)
35 points were taken off the index early before buyers stepped up to support a weak open, grinding back towards parity. We fell just short of Friday’s close in the end, as weakness particularly in utilities and financials more than offset the strength shown by the rebounding energy sector. Overall, a range today of +/-34 points, a high of 5957, a low of 5922 and a close of 5945, off 11pts or -0.19%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Most of the market was watching the new listing of Netwealth (NWL) which commenced trading at midday today. It was a highly sought after listing in a space that has had a lot of traction recently. Another platform provider, Managed Accounts (MGP), raised $34m just a few weeks ago to acquire competitor Linear, while Hub24 (HUB) more than doubled since it’s Feb lows. Hub tried it’s best to rain on the Netwealth parade today, announcing “market leading integration” and platform enhancements at the AGM today. It did little to take away from NWL, which closed over 40% higher than its listing price, up $1.62 to $5.32 after the deal was priced at $3.70. The word is investors were significantly scaled back in the offer as demand was high, and have now used the opening day as an opportunity to top up their holdings.
Netwealth (NWL) Intra-day Chart
Scalability for platform managers is undeniably important as fixed costs and capital expenditure outweigh the variable costs. As competition grows, retaining and growing FUA (Funds Under Administration) & FUM (Funds Under Management) will drive margins and profitability for platforms. Historical FUA/FUM growth has been significant accross the platform space, leading to the two players above trading on lofty PE ratios – Hub24 on 54x, while Netwealth is on a huge 67x 2018 PE. As we stated in this morning’s report, “you definitely need to look at the company’s growth potential in the years ahead as opposed to today’s P/E otherwise you are likely to miss some of the best performing stocks out there. This risk obviously comes when a company becomes ex-growth.” The question remains, when do platform managers go ex-growth.
Hub24 (HUB) Daily Chart
Other notables in the Financials spaces was the rumours that AMP is planning to sell its bank assets. Rumours around corporate activity at AMP are nothing new with investors pushing to have non-core businesses split from AMP’s core wealth management arm for over 12 months. Although the rumoured $5bil seems excessive for this business, which is probably why it was disregarded by the market with AMP falling 0.8% today, it is likely that there would be some demand if it was to be sold with many Asian banks looking for an inroad to the Australian market.
AMP Daily Chart
Baby Bunting (BBN) was hit hard today after downgrading guidance stemming from “aggressive discounting continuing” and “supply issues with a leading car seat supplier.” Now guiding to no growth in FY18, BBN initially fell 15% before recovering some of the losses, closing 5.7% down at $1.41. The 11% downgrade only extended downtrend that began late last year when BBN peaked around $3.20.
Baby Bunting (BBN) Daily Chart
Have a great night
The Market Matters Team
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