The Netwealth Group Ltd (ASX: NWL) share price is up more than 10% after giving its December quarterly update.
Netwealth is a fintech wealth management business. It’s a technology company, a superannuation fund and an administration business. Through its platform, financial intermediaries and clients can invest and manage a wide array of domestic and international products.
What was in the Netwealth update?
The fintech company said that funds under administration (FUA) was $38.8 billion at 31 December 2020, a 14% increase ($4.8 billion in dollar terms) including market movements of $2.2 billion. Compared to the prior corresponding period, FUA was 36.1% higher – which was up $10.3 billion in dollar terms including positive market movements of $1.1 billion.
For the December quarter, FUA net inflows were $2.6 billion. This was an increase of $0.6 billion (33.7%) compared to the first quarter. FUA net inflows for the 2020 calendar year was $9.2 billion.
Funds under management (FUM) was $9.3 billion an increase of $1.3 billion (or 15.5% in percentage terms). For the quarter, Netwealth saw FUM net inflows of $0.7 billion and market movement of $0.5 billion.
The managed account balance was $7.6 billion at 31 December 2020, an increase of 74.1% compared to the prior corresponding period.
The new product pricing was implemented on 1 January 2021. Clients have been progressively moving to new pricing since the announcement and the clients that have not already moved to the new pricing have now been transitioned.
Outlook and summary thoughts
Netwealth said that it expects to benefit from ongoing industry consolidation and change. For FY21, the company said that the pipeline of new business and transitions remains strong.
FY21 FUA net inflows are expected to be in the range of $8.5 billion to $9 billion, an increase on previously advised expected annual FUA net inflows of $8 billion.
I think that Netwealth is doing really well to keep growing the business. The increase in the FUA growth expectations is pleasing and suggests that the business can continue to win higher market share.
For me, the question is valuation. Using the earnings projections on CommSec, Netwealth shares are valued at 54 times the estimated earnings for the 2023 financial year.
There are other ASX shares in the financial space that I’d rather buy such as Magellan Financial Group Ltd (ASX: MFG).
