The turnaround
Praemium (ASX:PPS) offer technology solutions to wealth advisors, investment managers to cover reporting tax and corporate actions and governance with product solutions in Superannuation, managed and individual accounts.
The Daily view of Praemium (ASX:PPS) shows price retracing back to find support at the 200 day moving average, current price movements are above the 20 day moving average and have the potential to test the “Gap” area in this developing trend.
Shares in Praemium (ASX:PPS) have performed well on the release of the HY-23 results. For the 1H-23 the company recorded A$11.4m in EBITDA from a very strong 17% increase in revenue over HY-22.
We view this as a good result from management in the current investing climate.
The divestment of the international operations to Morningstar realized a profit of A$45.7m, the funds being used to pay a special dividend of $0.50 cents per share and the ongoing share buy back, and most importantly A$10.6m was used to pay down the Powerwrap acquisition. Powerwrap continues to book losses with 1H-23 showing a tax loss of A$9.0m.
Addressing the requirement to lift the Powerwrap business, Praemium have announced a strategic partnership with Escala partners. Escala is Praemium’s largest client with A$7b under administration on the Powerwrap platform.
Entering into this new services agreement and bringing forward the existing services agreement that was due to expire in December 2023 ensures Praemium can allocate required resources and continue to invest in its largest client with certainty and benefit from ongoing growth of Escala, in the process Escala has resigned to Praemium with a 6 year contract. Part of the deal saw Praemium issue 5.5 million options at $0.70 cents and a further 1 million options to Henslow Pty Ltd who acted on the transaction. It is now in Escala’s best interest to grow the Powerwrap product and Praemium now have certainty of continuity to further develop the platform.
As a business Praemium (ASX:PPS) have now fully repositioned themselves to focus on the Australian operations, the company has continued the focus on building a strong platform suitable for all types of clients. The current total market for high net worth funds under management in Australia is A$2.82t with the larger part of the retail market platform market showing A$921b of funds under management.
Currently Funds under management are up 6% to A$42b with the self managed accounts holding A$9.0b.
The non custodial (VMAAS) funds increased 4% to A$21.8b. This offers Praemium a lot of scope for further business development in a growing superannuation and money management industry.
Praemium (ASX:PPS) have not offered a further dividend policy since the special dividend payout, investors will be looking for further capital gain in the share price.
The Monthly view shows the wide developing channel with current price movements recently testing and now trading above the 12 month moving average within the broad Primary up trend.
Summary
Money management and investment continues to grow in complexity, not from the up front business of allocation, but from the ongoing reporting both to the client and Government agencies along with initial individual advisory statements of advice. Praemium (ASX:PPS) seem well placed and ready for the challenges in the financial industry going forward. Fat Prophets will watch this outcome closely with the potential to review our recommendation in the near future.
We maintain our Buy recommendation for members without exposure and a medium term outlook.
