HUB is up over 9% so far in 2024, aided by a solid 1H result earlier in the year that showed the company was enjoying higher margins. At the time we were conscious that management flagged an increase in costs with a higher headcount to be factored into FY24, making us feel the “easy money” for investors was in the rearview mirror. This is a classic case of a quality company being hard to buy as it looks fully valued, although we reiterate that MM would rather buy a relatively expensive quality company than a cheap, poor business.
This month saw HUB report 3Q24 funds flows which continue to improve and were ahead of forecasts. However, we saw several earnings headwinds in 2H24, including a pickup in staff expense growth, a skew to institutional FUA, and a decline in cash allocation, currently running below the 1H24 average, which we can see dropping down to a reduction of revenue margin by about 5%.
- We can see HUB making fresh all-time highs if the market regains its mojo, but we don’t like the risk/reward around current levels – we think it gets harder for HUB from here.
MM is neutral HUB around $40
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