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Hub24 (ASX:HUB) share price drops 3% despite record March quarter

The Hub24 Ltd (ASX: HUB) share price is down 2.8% after reporting its quarterly numbers for March 2024.

Hub24 provides an investment platform that offers managed portfolio solutions and “enhanced transaction and reporting functionality”. HUBconnect focuses on leveraging data and technology to provide solutions to common challenges for stockbrokers, licensees and advisers.

The business also owns Class, a cloud-accounting software provider for SMSFs and trusts, along with other compliance solutions.

Record third quarter for Hub24

It reported platform net inflows of $3.5 billion, an increase of 90% year on year, which included $0.8 billion from the Equity Trustees migration program. That quarter was a record for both excluding and including the migration.

Excluding the large migration, the FY24 third quarter net inflows were $2.7 billion (up 47%), resulting in a record March quarter.

During the quarter, 42 new distribution agreements were signed and the total number of advisers using the platform increased to 4,382 (up 17 year on year).

Total funds under administration (FUA) reached $100 billion as at 31 March 2024, an increase of 30% year on year.

The business noted the launch of HUB24 Discover was launched in November 2023, which has been well received with FUA of $75 million as at 31 March 2024.

It also said the Hub24 platform for high-net-worth (HNW) clients was enhanced with the addition of non-custodial administration and reporting capability for directly-held client assets.

What does these strong numbers mean?

Hub24 said the strong March quarter is a “good indication of market sentiment and pipeline in the lead up” to the end of the financial year.

The company explained strong equity markets have supported positive market movements and strong trading activity during the quarter which will benefit revenue.

However, Hub24 noted the additional platform revenue margin on market movements can be lower than the total platform revenue margin due to the tiered pricing of administration fees and the impact markets can have on the percentage of FUA held as cash.

Outlook for the Hub24 share price

The company explained its positive outlook with the following:

With record March quarter net inflows, market-leading products and solutions and a strong pipeline of opportunities from both new and existing adviser relationships we remain confident in meeting our FY25 platform FUA target of $92 billion to $100 billion and are well-positioned for future growth.

Hub24 is a solid business and continues to deliver impressive growth. However, it has a high earnings valuation and I don’t know how long its growth can continue at such a high rate, so I’m cautious, even after its decline today.

For me, there are better value ASX growth shares out there to look at.

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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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