Self-managed account software provider Praemium Ltd (ASX: PPS) saw its shares rise 8% to 47 cents today in response to an update the company provided over its growth for the quarter ending December 2016.
The headline numbers seem reasonably impressive for the Australia and UK-based operator with total funds under administration up 7% for the quarter from $5.07 billion to $5.4 billion. However it should be noted that this is partly due to a strong final quarter of 2016 for global stock markets. Gross inflows made up just $422 million of the more than $3 billion rise, although this is still a respectable result.
It's also worth noting that the term funds under administration is possible to loosely use, although the company does state in its FY16 results presentation that its business model involves asset-based pricing based on total funds under administration invested across its self-managed accounts. This means it is a beneficiary of both rising markets and rising account numbers, rather than just the latter.
It also operates a software-as-service business model for its other portfolio administration platforms, which helps save on costs and generally allows for subscription-based pricing and recurring revenue streams that can make for juicy business models.
It is also looking to move deeper into the UK's popular self-invested-personal-pension (SIPP) space via an acquisition. This is a sector roughly equivalent to Australia's SMSF sector and it also enjoys the tailwinds of an ageing population in a far larger market.
Due to its potential Praemium trades on a fruity market value of around $173 million despite delivering a net profit of just $0.8 million in FY2016. To my mind it looks a little expensive for an investment for now and I think it's one for the watch list.
Another business in the fintech space providing investment platforms in the UK is GBST Holdings Limited (ASX: GBT), while Class Limited (ASX: CL1) as a cloud-based provider of SMSF software in Australia also provided a positive market update over its growth today. This suggests the space is a growing one, but it's competitive and there's the possibility large operators with a lot of financial firepower move into it in the future.
