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Netwealth (ASX:NWL) share price jumps on strong June update

The Netwealth Group Ltd (ASX: NWL) share price has risen more than 6% after its June update which showed good growth.

This business provides a digital platform that enables advisors and clients to invest and manage a “wide array of domestic and international products through the platform.”

The ASX fintech share told investors about its funds under administration (FUA) for the three months and 12 months to 30 June 2023. That’s how much money is being administrated by the platform.

Netwealth FY23 update

The FUA increased by $4.4 billion for the June quarter to $70.3 billion, with net inflows of $3.2 billion and positive market movement of $1.2 billion. This level of growth is good support for the Netwealth share price.

Over the year to 30 June 2023, FUA increased by 26.3%. It said that there were record ‘custodial’ FUA gross inflows of $6.2 billion for the June quarter.

The non-custodial administration service is now live for clients. There was a successful product launch in April 2023 with $126 million of non-custodial FUA onboarded by 30 June 2023.

Funds under management (FUM) increased by $0.6 billion over the quarter, with FUM ending at $16 billion on 30 June 2023. FUM net inflows for the June quarter was $0.4 billion.

Netwealth was pleased to say that it was recently ranked the highest for overall satisfaction among primary users for the 11th consecutive year.

Business update and outlook

It has been seeing growth in the right areas that will help its growth in the coming years.

Netwealth said that in the June quarter, it “experienced significant growth and establishing new partnerships with advisers and licensees”. The company said it’s confident with its ‘transition pipeline’ and the “potential for new business opportunities.”

It thinks it can consistently attract substantial net inflows from “all” of its key market segments in the “foreseeable future”.

However, the company did say that the economic uncertainty has delayed committed transitions and new business activities for existing clients.

Final thoughts on the Netwealth share price

The company is optimistic about reasons to like it. It notes that it’s highly profitable, with a strong EBITDA (EBITDA explained) margin. Netwealth makes a lot of cashflow because of how correlated operating cashflow is with EBITDA.

The ASX fintech share has “very high levels of recurring revenue, which results in predictable revenue”. Finally, it has low capital expenditure, it’s debt free and has “significant cash reserves”.

It’s a good business, but it’s certainly priced to reflect that growth. I’m not sure if the price will go much lower than right now, so it’s hard to say if now is a great time to buy.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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