On the Super Train…
Although not performing as strongly over the past year as Praemium, shares of superannuation platform administrator OneVue (ASX:OVH) shares have been no slouch, gaining more than 30% over the past year as of yesterday’s closing price. As with the other financial service platforms we have recommended in the Australasian Equities report, OneVue is benefiting from favourable sector tailwinds and has delivered improvements in various key metrics in recent periods.
We last covered OneVue (ASX:OVH) as a buy at 70 cents at the end of October 2017. The shares have since continued to rise and we retain our positive stance towards the investment case.
Since then the company has inked what we view as a mutually beneficial deal with EQT Holdings and in December, announced that it had successfully completed its first fund manager transition under the five-year partnership with NAB Asset Servicing.
Founding Chairperson Gail Pemberton has also passed the baton to Ron Dewhurst, who joined the OneVue Board in October 2016. Ms Pemberton was Chairperson the company for 10 years as the company evolved from a start-up to an ASX 500 company.
Of the company’s management succession plan, Ms Pemberton said, “Last year we began a Board refresh program and welcomed three new directors to the Board including Ron Dewhurst, the former Chairman of Diversa. The new Board members have brought greater depth in Investment Management, Business Process Outsourcing and Technology which has been particularly helpful to Management.”
Ms Pemberton continued, “Having been with OneVue (ASX:OVH) from the beginning, and through its ASX listing, consistent with the ASX’s principles of good governance, with great confidence I now hand the baton to Ron Dewhurst. Ron and the other Board members will help lead the Company through the next stage of OneVue’s growth journey. I will continue to be a shareholder and enthusiastic supporter of the Company.”
Mr Dewhurst has over 40 years of senior leadership experience in the Investment Banking and Asset Management industries, so the company appears to be in good hands for the next phase in its lifecycle.
The forecast 35 times FY18 average earnings estimate might appear a bit lofty initially, but this is expected to quickly fall to around 22 times for FY19, and substantial operating leverage will drive robust, ‘sticky’, profit growth over time in our view. The platform’s OneVue and its peers offer have disrupted the market and are fast-growing with a long runway of growth due to still relatively modest market share. Accordingly, we recommend the shares as a High-Risk Conviction Buy to Members without exposure.
Mutually Beneficial
Towards the end of the third quarter of 2017, OneVue (ASX:OVH) announced it was selling its responsible entity (RE) operations to EQT Holdings, the holding company for Equity Trustees for $3.5 million. As part of the deal, Equity Trustees will outsource its managed funds administration to OneVue, boosting scale for both businesses. The transaction adds 26 funds and approximately $2.6 billion in FUA (funds under administration) for OneVue.
An initial deposit of $250,000 was paid, with the balance payable on completion. The transaction is subject to the usual conditions and expected to complete in 1Q18.
More recently, in early December 2017, OneVue (ASX:OVH) announced that it had successfully completed its first fund manager transition under the five-year partnership with NAB Asset Servicing.
Some 25 UBS Asset Management Funds were transitioned onto the OneVue Fund Services managed fund administration platform.
John Comito, NAB Asset Servicing EGM said, “OneVue will provide our clients with access to market leading solutions and is a strategic partner in our suite of Asset Servicing products.”
Connie Mckeage, Managing Director, OneVue, stated: “There is absolutely no doubt that having NAB as a custody partner has made OneVue a much stronger organisation. We were fortunate that NAB chose UBS to be their first client transition as the experience, breadth and depth of the UBS team made what can be a very challenging time, a very rewarding experience.”
OneVue (ASX:OVH) entered into a five-year agreement in November 2016 with NAB Asset Servicing to provide its automated managed fund administration solution and online portal to NAB Asset Servicing clients with separate, branded portals available for fund managers, their advisors and investors.
OneVue’s December 2017 ASX release regarding the above concluded by stating FUA was at $513 billion, across 43 fund managers and exceeding 690 funds.
That was compared to the FUA of $502.8 billion at the end of the September 2017 quarter, which itself marked a $13.7 billion increase on the June 2017 quarter end and a whopping $75.4 billion increase year-on-year.
Source: OneVue (ASX:OVH)
To recap, as part of the first quarter update, OneVue reported that superannuation member administration FUA reached $2.06 billion, 160% ahead of a year earlier. That meant OneVue was administering 22 funds comprising 90,345 members.
Quarterly platform services gross inflows exceeded $500 million for the first time, and were up 47% on the previous quarter, and 68% higher than the same period last year, at $515 million. Net inflows for the quarter doubled on the previous three months to $307 million.
Source: OneVue (ASX:OVH)
Funds under Trusteeship (FUT) also grew 3% during the quarter, and are closing in on $10 billion.
FUT then totalled $9.7 billion at the end of the quarter with 37 funds.
Turning to the charts, overhead resistance is situated at the January intra-month high of $0.77 as shown by the horizontal red line. However, it should be noted that the rapid increase in share price has resulted in the RSI to venture within range of overbought territory (exhaustion of short-term upward momentum). Hence, should the bears emerge over the near term, then a temporary pullback in price may follow. Positively, should this occur, we would view this temporary pause as corrective. Medium-term momentum remains in favour of the bulls, as backed by the bullish moving average crossover present since September 2017. This is when the 50-day moving average (red line) crosses above the 200-day moving average (green line).
Regarding the monthly chart, we note that since reaching a high of $0.90 in December 2015, OneVue Holdings’ share price has come under downward pressure until the first-quarter of 2017. Positively, the company’s share price has respected support at the 61.8% Fibonacci retracement (blue set of retracements) of $0.49 in March 2017 to form a ‘bullish doji’, which is a positive event. The longer-term bulls have since stepped up their game, and have lifted prices above the aforementioned ‘bullish doji’s’ highest price of $0.55 in April, confirming a resumption of the broader uptrend. Moving forward, this bodes well for an eventual advance towards the next band of resistance situated between $0.74 and $0.81. This is made up of the 61.8% and 78.6% Fibonacci retracement levels as represented by the red set of retracements.
Summary
Investors continue to be warm towards OneVue (ASX:OVH) (and its peers) due to favourable industry trends and solid improvements in various key metrics. OneVue printed a maiden net profit in the year ended 30 June 2017 and its first quarter update was strong.
Given that most of the company’s cost base is fixed, ongoing growth in FUA will have a pronounced impact on profitability in our view, so the continued strength in attracting funds to the platform is highly positive for the investment case.
The forecast 35 times FY18 average earnings estimate might appear a bit lofty initially, but this is expected to quickly fall to around 22 times for FY19, and substantial operating leverage will drive robust, ‘sticky’, profit growth over time in our view.
OneVue (ASX:OVH) customer base FY17
Source: OneVue (ASX:OVH) 2017 AGM presentation
The platform’s OneVue and its peers offer have disrupted the market and are fast-growing with a long runway of growth due to still relatively modest market share and a growing market.
There is a powerful thematic within the Australian financial services industry, with the superannuation system poised to continue to grow strongly. This is supported by the expectation that the mandatory employer contribution rate (currently at 9.25%) will increase to 12% by 2025. The long-term technical picture for OneVue also remains supportive.
Accordingly, we recommend OneVue shares as a High-Risk Conviction Buy to Members without exposure.
Disclosure: OneVue Holdings (ASX:OVH) is held within the Fat Prophets Concentrated Share and Small/Mid-Cap models. The OneVue (ASX:OVH) platform is used by Fat Prophets Wealth Management.
