Reporting Season

Post earnings fever for Praemium

Tue 15 Feb 22, 4:43pm (AEST)
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Key Points

  • A jump in expenses weighed on Praemium's first-half profitability
  • The stock has lost a fifth of its market value in the last 2 days
  • Trading volumes are more than 4 times usual averages

Praemium (ASX: PPS) has come up short this reporting season, down -20% since its half-year results on Monday. 

The result focused on the company's "strong top-line momentum", with funds under advice (FUA) up 43% to a record $49bn while revenue rose 25% to $39.2m.

The encouraging top-line result failed to trickle down the financial statement, with a net loss of -$2.6m compared to a $2.8m profit last year. 

The strong top-line growth was matched with an even greater percentage increase in expenses, up 31% to $19.4m.

Full-year outlook 

For the full-year FY22, Praemium expects earnings between $16.5m and $18.5m, up 18-32% compared to FY21. 

Though, the company did not specify what that figure meant in terms of profitability. 

CEO Anthony Wamsteker did note that the company is now “at a scale threshold at which a significant percentage of revenue will convert to underlying [earnings].”

Investors hit sell 

The sharp -20% correction has come off the back of massive volumes, with 6.4m and 6.7m shares traded on Monday and Tuesday respectively. 

Before this week, Praemium’s 20-day average volume was just 1m. 

Ord Minnett believes increased costs are the main reason why Praemium missed the broker’s first-half forecasts. 

A Buy rating was maintained on the basis of ongoing earnings momentum and scale.

Ord Minnett’s price target was lowered from $1.70 to $1.50 (50% upside). 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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