Is Netwealth Group Ltd (ASX: NWL) set to beat the big banks at large?

  • Aug 10, 2018 AEST
  • Team Kalkine
Is Netwealth Group Ltd (ASX: NWL) set to beat the big banks at large?

Netwealth Group Ltd (ASX: NWL) was formed in 1999 with the objective of providing astute investors and wealth professional with a better way to invest, protect, and manage their current and future wealth. It offers a range of Superannuation and Wrap based portfolio and investment management solutions to individual investors and financial intermediaries. The group is showing solid growth inside the Australian market supported by robust net-inflows. We expect that the group will be likely a beneficiary from the ongoing performance while its current level is still close to fully priced position. The company is working towards the acquisition of new advisors and client portal interface, expanding its Retail and Private Label Managed Account services including the addition of new models, strategies, and functionality.

New development – Strengthening its Business Model: During the quarter, the group released a range of new platform features and products focused on improving the delivery of advice and increasing client engagements. For that matter, the group added 4 new Netwealth diversified index models available on both the Core and Plus investment menus providing simple and low-cost investment multi-asset solutions for the clients. Along with this, it’s managed models were also added in its SMART solution to provide additional multi-asset capabilities. We expect that these key initiatives will underpin the Group’s business model and ensure the long-term engagement with the new and existing clients.

On the other hand, the group has exceeded $14.23 Bn in Funds Under Management (FUMA) following strong inflows and continued growth across the IFA, private client and wealth management sectors. The Group increased its profit guidance and expects 6.0 per cent growth above its FY18 Pro-forma NPAT prospectus forecast. Funds Under Administration (FUA) at 30 June were reported at $17.96 billion with an increase of $1.95 billion for the fourth quarter and $5.2 billion for 12 months ended 30 June 2018 (41 per cent increase). It was primarily driven by strong inflows of $1.4 Bn for the quarter and $4.2 Bn for the full year and positive market movement during the same period.

Besides the strong growth of FUMA, the group has launched many new initiatives including a wide range of new adviser efficiency enhancements program, nine new private label managed accounts services and the successful transition of the Russell IQ Wealth and Super platform across to the company. Besides this, the group has recently expanded its retail managed account menu with the appointment of two new managers i.e., Elston Asset Management and Quilla Consulting. This strategy will underpin the private label relationships.

Although, we believe that Netwealth could beat the big banks with the help of focuses on its business strategy. In the last 12 months, this stock has reached a high of $ 9.990 and a low of $ 4.870; its current price of $7.47 places it 24.8% under its 52-week high and 54.2% over its 52-week low. Currently, it is trading at a very high P/E of 121.3x with the market capitalization of circa $1.78 Bn as of August 10, 2018, post market open. Given the performance till date, the group seems to have taken it against the big banks and it will be key to watch further developments in the above regard.

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