The Hub24 Ltd (ASX: HUB) share price is under the spotlight today after announcing significant profit growth in the FY21 result.
Hub24 is a financial technology business that provides platforms for advisers and their clients with a range of investment options, as well enhanced transaction and reporting functionality. One of the competitors in the space is Netwealth Group Ltd (ASX: NWL).
Hub24’s FY21 result
Total group revenue rose by 34% to $110.9 million, whilst platform revenue went up 36% to $101.1 million.
During the year, it saw total funds under administration (FUA) increase by 237% to $58.6 billion. Platform FUA rose 141% to $41.4 billion. It experienced record platform net inflows of $8.9 billion – that was 82% higher than FY20. The company is seeing a lot of growth.
This growth saw the fintech’s platform market share rise to 3.9%, up from 2.5% last year. Management pointed out that its footprint has grown considerably as the company completed a number of strategic transactions (Xplore Wealth and Ord Minnett) which have delivered increased scale, provided new client relationships and enhanced product capability to access new client segments.
The number of advisers using the platforms increased 997, up by 48.3% over the prior year.
Group underlying EBITDA (EBITDA explained) rose 47% to $36.2 million, whilst platform underlying EBITDA grew 32% to $37.9 million.
Statutory net profit increased by 20% to $9.8 million, which included $7.5 million of transaction and implementation costs. Underlying net profit surged 53% higher to $15 million.
Big growth of the dividend
The board decided to declare a final dividend of 5.5 cents per share. That means that the full year dividend is 10 cents per share, an increase of 43%.
Outlook for the Hub24 share price and the profit
Hub24 said that the market conditions continue to be favourable for Hub24 given the ongoing transformation of the Australian wealth management landscape.
Management believe the company is well placed to pursue further growth opportunities as the leading provider in the fintech space.
It’s expecting ongoing strong net inflows to the platforms and are now targeting a platform FUA range of between $63 billion to $70 billion by 30 June 2023 (excluding PARS FUA). Remember, the platform FUA in FY21 was $41.4 billion and Hub24 said FUA was $44.2 billion at 20 August 2020.
I think the Hub24 share price is very highly priced. Using the underlying profit, it’s valued at around 120 times FY21’s underlying profit. It’s a really good business, but I’m not sure about the current valuation. The bigger it gets, the less room there is for growth, so I’m not sure an even higher earnings multiple makes sense for a good buy today.
