Does Upcoming IPO Powerwrap Limited Offers An Attractive Investment Opportunity?

Powerwrap Limited (Proposed ASX Code: PWL) is slated to debut on 23 May 2019 at $0.35 under the financial sector industry. Here’s what could drive your investment decision in this upcoming float.

About the Company:

Powerwrap Limited is an innovative technology service provider operating in the Australian financial investments market. It has developed a specialised technology-based platform used by groups of financial advisers, wealth managers, brokers and accountants (Wealth Advice Groups) to manage and administer the investment portfolios of their clients. The platform is particularly designed to offer a comprehensive financial product range and tailored customer service mostly sought by High Net Worth (HNW) investors.

Operating since 2008, Powerwrap has built a high quality and well-established client base, which currently includes over 120 AFSL holders, 255 financial advisers and more than 5,000 investor accounts.

Powerwrap currently services Funds Under Administration (FUA) of $7.6 billion as at the end of March 2019. Looking forward, Powerwrap forecasts its Funds Under Administration (FUA) to grow to $9.8 billion in FY 2020 at a 22% compound annual growth rate (CAGR) and Platform and Other Revenue is forecast to grow to $19.4 million in FY 2020 at a 26% CAGR (FY 2016 to FY 2020).

Initial Public Offering (IPO):

A prospectus dated 15 April 2019, launched fully underwritten initial public offering of 49.8 million shares in Powerwrap Limited at an offer price of $0.35 per share to raise $17.4 million ($15 million before costs). The offering includes 6.9 million existing shares offered by Powerwrap SaleCo Pty Ltd for sale at $0.35 per share, reflecting a total consideration of ~$2.4 million.

The company intends to utilise the funds raised for the continued development of its technology platform. It also seeks to strengthen its balance sheet, pay the costs of the offer and pursue its business strategy by using the funds raised in public listing.

The Joint Lead Managers and Underwriters to the Offer are Bell Potter Securities Limited and Baillieu Limited. Bell Potter Securities Limited also serves as a financial adviser to the company.

IPO has been closed on 3 May 2019. Powerwrap has scheduled to issue and transfer shares in settlement of retail and institutional offer by 17 May 2019. These shares are reportedly expected to commence trading on the ASX on a normal settlement basis on 23 May 2019.

Important dates (Source: Company IPO Prospectus)

Revenue Model and Products offered by Powerwrap

Headquartered in Melbourne, Powerwrap provides two primary accounts to Wealth Advice Groups and their underlying investor clients that include ‘The Powerwrap Investment Account’ and ‘The Powerwrap Superannuation and Pension Account’. Its Powerwrap Investment Account’ forms 97% of its FUA, representing ~$7.35 billion, whereas the Powerwrap Superannuation and Pension Account contributes marginal 3% to Powerwrap’s FUA, amounting approximately $230 million.

The revenue model of the company is based on three separate fee-charging structures including administration fees, transaction fees, and ancillary fees. Approximately 70% of Powerwrap’s revenue is recurring and comprises account administration, product and other non-transactional fees.

Growth Prospects

Powerwrap, headed by Non- Executive Chairman Mr. Anthony Wamsteker and Chief Executive Officer Mr. William Davidson, operates in the Investment Platform market which in Australia alone had total funds under administration of $854 billion as at 30 June 2018. And the market is projected to grow at 9% per annum over the next 5 years, between 30 June 2018 and 30 June 2023, reflecting high-growth opportunities for the company and its shareholders.

The key factors driving the growth of the Investment Platform market include the growing number of HNW investors in Australia and the increasing awareness among investors of the value of financial advice among other regulatory and professional requirements defining greater transparency. The main Australian competitors of the company include Netwealth Group (ASX: NWL) and Hub24 Limited (ASX :HUB)