Do You Know Why HUB24 Stock Price Is Bleeding On ASX?

Investment Platform provider, HUB24 Limited (ASX:HUB) declared 46% improvement in the Underlying Net Profit After Tax (NPAT) to $3.1 million for the half year ended 31st December 2018. The key highlight of the 1HFY19 result includes Underlying EBITDA of $6.5 million, up 32% on previous corresponding period, and a growth of 46% in the company’s Funds Under Administration (FUA) to $10.0 billion.

But then what led the stock price to fell as much as 14% in the early trade today?

It seems that the Group’s financial metrics can’t meet the investors' expectation as there has been a significant decline in the company’s 1HFY19 profit compared to the previous half year, i.e., 2HFY18. Statutory Net Profit After Tax (NPAT) stood at $3.2 million in 1HFY19, down from $5.1 million in the prior half year, and EBITDA margin declined from 13.4% in 2HFY18 to 11.5% in 1HFY19.Â

HUB24 told that its revenue was impacted by adverse market movements and higher levels of assisted FUA transition, which involve the in-specie transfer of assets, and as a consequence reduce trading margin revenue for new accounts. The 1HFY19 Basic Underlying Earnings Per Share (EPS) of the Group stood at 5 cents, down from 5.5 cps in 2HFY18 but significant up from 3.6 cps as in the previous corresponding period.

HUB24 Managing Director Andrew Alcock stated: “HUB24 has maintained its position as the fastest growing platform provider in the market on the back of constant innovation and ongoing investment to capture market share.”

On the platform segment front, the Group reported revenue of $25.4 million, up 35% on the previous corresponding period, Underlying EBITDA of $8.0 million, up 60% on 1HFY18. Its Platform revenue reportedly comprises of a mix of FUA based fees, including tiered administration fees and margin on client funds held as cash as well as transaction fees such as platform trading for equities, managed funds and insurance.

Despite challenging and disrupted markets, HUB24 achieved record half-yearly net inflows of $2.1 billion in 1HFY19. On the back of these robust net inflows, both from organic flows and large transitions, HUB24 achieved Platform Gross Profit of $18.7 million, up 44% or $5.7 million compared to 1HFY18.

During the period, the company has incurred operating expenses of $15.0 million, compared to $11.1 million in 1HFY18, with respect to growth investment expenses, predominantly headcount resources dedicated to distribution and marketing, future platform development and business strategy to drive future growth.

The Board declared an unfranked interim dividend of 2 cents per share for six months ended 31 December 2018. The company’s shareholders are entitled to receive the dividend on 11 April 2019, if present on the company’s registry as on the record date of 14 March 2019.

Going forward, the Group commits to continue investing in the business in order to support its growth ambitions of a targeted $19–23 billion FUA by June 2021. Following the release of final recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, HUB24 confirmed that it is well-positioned to leverage technology and provide innovative solutions to its clients. It further believes that the removal of grandfathered commissions is expected to release FUA from legacy products and approved product lists may be opened up to Specialist Platform Providers.

HUB stock price plunged by 14.059% to trade at $12.195 on 26 February 2019 (1:43 PM AEST).

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