OneVue Integration And Spectrum Launch Will Boost Client Engagement

Key Takeaways

• Integrating custodial solutions and enhancing the mobile app aims to capture high-net-worth clients, boosting revenues through improved client engagement.
  
• Operational efficiencies from the OneVue integration and AI-driven service excellence initiatives are expected to enhance margins and reduce churn.
  
• Integration challenges and market volatility may impact margins and revenue, while platform transitions and market saturation affect client retention and growth prospects.

Catalysts

Provides advisors and wealth management solutions by seamless digital platform experience in Australia and internationally.

• Praemium is focusing on integrating its custodial and non-custodial solutions, providing a seamless offering that can capture a greater market share among high-net-worth clients. This integration is expected to boost revenues by catering to complex portfolio needs.
  
• The completion of the OneVue integration promises operational efficiencies and synergies, potentially enhancing the company's net margins through cost reductions and streamlined operations.
  
• Praemium’s investment in upgrading its mobile app and enhancing client and adviser engagement is expected to drive revenue growth by improving customer satisfaction and retention, making it easier for advisers to engage clients.
  
• The launch and ongoing promotion of the Spectrum platform, which targets the high-net-worth adviser segment, could significantly increase earnings by capturing a portion of the ongoing market share shift from legacy platforms to modern challengers.
  
• The service excellence initiatives, including AI-driven quality assurance and improved onboarding processes, are likely to reduce churn and improve net margins by enhancing customer support efficiency and experience.

Praemium Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Praemium's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.1% today to 17.2% in 3 years time.
• Analysts expect earnings to reach A$21.3 million (and earnings per share of A$0.04) by about May 2028, up from A$10.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as A$18.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.7x on those 2028 earnings, down from 33.7x today. This future PE is lower than the current PE for the AU Software industry at 63.8x.
• Analysts expect the number of shares outstanding to grow by 0.52% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.65%, as per the Simply Wall St company report.

Praemium Future Earnings Per Share Growth

Risks

• The integration complexities and costs associated with OneVue, if not managed well, could lead to budget overruns and integration delays, impacting net margins negatively.
  
• Market volatility, while potentially increasing trading volumes, could reduce the Funds Under Administration (FUA) and revenue linked to FUA, thereby affecting overall revenue stability.
  
• The transition from legacy platforms like Powerwrap and OneVue to Spectrum might incur initial client resistance or attrition, affecting client retention and future revenue streams.
  
• The potential for saturation in managed accounts and reliance on winning a greater market share could limit organic growth if the competitive landscape shifts unfavorably, affecting revenue forecasts.
  
• The company's strategy to achieve $3 million of synergies from OneVue might face challenges if revenue continues to drop, necessitating further cost reductions or risking earnings if synergies are not realized.

Valuation

• The analysts have a consensus price target of A$0.904 for Praemium based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$1.03, and the most bearish reporting a price target of just A$0.69.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$123.7 million, earnings will come to A$21.3 million, and it would be trading on a PE ratio of 25.7x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of A$0.74, the analyst price target of A$0.9 is 17.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.