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Could Netwealth’s (NWL) strong $$ flows light up the Platform providers?

Independent investment platform provider Netwealth is a mixture of a tech business, a superannuation fund trustee and an administration business whose digital platform aims to deliver easy and affordable investment facilitation to its users. The stock rallied +4.7% yesterday after delivering strong quarterly flows of $2.72bn versus $2.64bn QoQ which clearly impressed the market:

  • NWL delivered annual net inflows of $13bn up 32% on the prior year.
  • Funds under Administration (FUA) at the EOFY came in at $55.7bn, up 18.1%.
  • NWL is the fastest growing platform provider in Australia, its market share increased to 5.8% from 4.6% over the financial year i.e. for the 12-months to March 2022.

This $3.2bn financial business enjoys strong EBITDA, profitability and excellent cash generation courtesy of high levels of recurring and predictable revenue hence its debt free and holds significant cash reserves. However, while all of these metrics look great the big question as is so often the case comes down to valuation, NWL is trading on a Est. P/E of 57x for 2022 placing it well and truly in the growth category although it’s reliable 1.5% fully franked yield illustrates its already positive cashflow.

  • MM likes NWL initially looking for a test of the $15 area, coincidentally ~15% higher.
MM likes NWL around $13
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Netwealth Group Ltd (NWL)

NWL has 2 major competitors at this stage of its evolution while there are more waiting in the wings, MM previously solely used Praemium but recently we have added OpenWealth to power the new Market Matters Invest platform: Market Matters Invest – Click Here. The simple motivation for MM to offer the OpenWealth powered alternative was the ease of the user journey for investors i.e. depending on the structure of the account it can be a simple 5-minute online process to be up and running with a better online portal and investor Ap, plus the fee is a set 0.85% inclusive of GST with no brokerage charged on any transaction.

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