Selfwealth Ltd (ASX: SWF) released its quarterly update to investors today. Is it time to buy shares?
Selfwealth is a share brokerage business that offers a flat brokerage fee of $9.50 per trade. It also has a community-driven insights tool that pools information from 80,000 Australian portfolios. It has an advisor platform and a world-first ETF that is driven by community data.
December 2020 quarter update
The company revealed that its number of active traders increased by 208% year on year to 67,394. The number of quarterly trades grew by 377% to 378,430.
Those growth numbers helped operating revenue rise by 298% to $4.46 million. Client cash went up 220% to $435 million. The amount of securities held on HIN rose by 153% to $4.3 billion. Operating costs on clearing were down from January 2021, which resulted in higher gross profit margins.
Selfwealth was pleased to launch its US trading on 14 December 2020. The cashflow of its existing operations enabled the business to invest in the development of US trading without impacting on the capital strength of the business. The US trading was in line with expectations, and 13% of existing clients had applied for US trading. The company expects to start making a profit from US trading during the March quarter.
The company finished the quarter with $7.3 million cash on its balance sheet.
Management comments
Selfwealth Managing Director Rob Edgley said: “2020 has been a transformational year for Selfwealth. This continuing growth in new active traders on our platform during the quarter – another 9,578 active traders – shows a 208% increase on the same quarter in 2019. The launch of US trading is now complete with an encouraging take up by existing clients and quickly growing trade volumes. This has introduced additional revenue streams relating to US dollar brokerage and foreign exchange transactions.
“We are excited by the growth prospects for the company in 2021, in particular as we will realise the full impact of adding US trading. US trading growth from existing clients, continued new customer acquisition and new product offerings will support revenue growth in the calendar year. The company will continue to invest in additional functionality and new products on the retail trading platform during 2021 to drive both growth and increased market share.”
Summary thoughts
Selfwealth is a fast-growing business, but its share price has actually fallen by around 30% since 4 September 2020. This could be an opportunistic time to consider Selfwealth. It could be a long term opportunity if it can continue to add more investors onto the service whilst also growing profit margins. It has grown strongly over the last year, it will be interesting to see if it can continue growth at a triple digit rate for a sustained period.
There are other ASX shares in the financial space that I also like, including Magellan Financial Group Ltd (ASX: MFG).
