Reporting Season Road Map: 26 February 2020

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
26 February 2020, 10:20 AM
Sectors Covered:
Equity Strategy and Quant

HUB24 Ltd - Scale coming through

HUB reported underlying 1H20 NPAT of A$5.4m, up 75% on pcp and in-line with expectations. HUB's FUA target for FY21-end remains unchanged at A$22-A$26bn (~36% CAGR from FY19A A$12.9bn). This is on track (A$17.4bn as at 21-Feb 2020). Accelerated flows in FY20 to-date are being driven by the strong increase in advisers using the platform (+26% in 1H20 to 1,841). The largest risk and concern remains around HUB's ability to manage cash earnings pressure if the RBA drops the Cash Rate below 0.5%. Whilst we remain cautious on the earnings and sentiment impact from any change to earnings on pooled client cash, taking a longer-term view we expect HUB to scale successfully and deliver solid earnings growth. ADD maintained. 

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Generation Dev Group - On the right track

GDG's 1H20 underlying NPAT (~A$1.45m) was slightly above our forecast (A$1.3m) and up 75% on pcp. Overall we saw this as a solid result reflecting the benefits of strong sales and FUM growth, albeit with leverage impacted by a step up in certain operating costs, e.g. regulatory/compliance costs and D&O insurance. We make relatively nominal changes to our FY20F/FY21 NPAT of +1/-1%. In our view, GDG management continue to execute well and we see the company in a strong position to deliver a compound earnings growth over time. Trading on 22x FY21F PE, we see GDG as undervalued versus its medium-term growth profile. ADD maintained.

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FlexiGroup Limited - Early signs

FXL reported 1H20 Cash NPAT of A$34.5m (recently guided), down ~18% on the underlying pcp. Divisional composition was very mixed, and slightly weaker than expected. FXL expect FY20 volumes to be up 10-15% on the pcp, implying 2H20 volume growth of 17-27% versus the pcp. A longer term (FY22-end) cost to income target of 40% remains in place (versus 54% in 1H20). Achieving the target would result in a ~50% Cash NPAT uplift based on FY20F net income. Whilst turnaround execution is required (and no firm evidence that a sustainable earnings turnaround is in place) - we view the risk/reward as favourable given early traction (volume growth) and the stock trading on ~10.4x FY20F PE.

Morgans clients can login to view our share price target and detailed research note.

More information

Morgans clients can access our latest reports on HUB24 (HUB), Generation Dev Group (GDG) and FlexiGroup (FXL) in the research section. Alternatively, please contact your nearest Morgans office for access.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.


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