Why the Hub24 (ASX:HUB) share price could go higher

The Hub24 Ltd (ASX: HUB) share price has almost doubled this year. But this broker thinks it could go higher. Here's the lowdown…

| More on:
man jumping from 2020 cliff to 2021 cliff representing asx outlook 2021

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Hub24 Ltd (ASX: HUB) is one of few ASX shares to not only break above its pre-COVID highs, but almost double in year-to-date returns. The investment and superannuation portfolio administrator has experienced significant growth in its platform revenue and funds under administration (FUA) over the past five years.

But, despite the Hub24 share price currently sitting at over $20, according to one broker, the company still has a significant market share opportunity at hand. Here's the Hub24 growth story so far and why this broker thinks the company still has a solid runway ahead of it. 

Hub24 highlights 

Hub24's investment and superannuation platform offers a comprehensive range of investment options, with enhanced transaction and reporting solutions, for all types of investors, individuals, companies, trusts, associations or self-managed super funds. 

The platform has continued to scale with a 5-year compound annual growth rate (CAGR) for FUA of 59% and a 5-year CAGR for platform revenue of 55%. More recently, in FY20, the company achieved a 37% increase in platform revenue to $74.3 million and a 34% increase in FUA to $17.2 billion whilst underlying net profit after tax (NPAT) soared 49% to $10.1 million. 

The company made a series of compelling acquisitions in FY20 to strengthen its position as a leading platform provider. Three companies including Xplore Wealth Ltd (ASX: XPL), PARS and an investment of up to 40% of Easton Investments Ltd (ASX: EAS) were added under the Hub24 brand for a total consideration of $93 million. These acquisitions are expected to result in approximately 13% earnings per share (EPS) accretion in FY22 and expected synergies of $10 million per annum by FY24. 

Despite the company's record growth, acquisitions and achievements to date, according to Citi, the market share opportunity for Hub24 is still significant. In FY20, the company's market share increased from 1.5% to 2.1%. 

IOOF agreement 

Last Friday, Hub24 announced it had entered into a binding heads of agreement with IOOF Holdings Limited (ASX: IFL) to collaborate on developing a range of solutions. These include an investment and superannuation wrap platform, utilising HUB24's custody, administration and technology capabilities, as well as a suite of managed portfolios. 

Under this proposed arrangement, Hub24 will provide custody and administration services for IOOF's new private label investment and superannuation solution that will extend the range of products and services offered to the IOOF adviser network and its clients. This is expected to be launched by the second quarter of calendar year 2021.

Citi bullish on Hub24 share price 

On Monday, Citi retained its Hub24 share price target of $24.00 as well as its buy rating. The broker believes the company is well placed to take advantage of the ongoing structural shifts in the wealth management sector. It also sees the agreement with IOOF as a positive which will allow the business to build additional volume and scale. 

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

Expert's verdict on 3 ASX 200 shares (2 have doubled in value and the other has lost 29%)

Two of these stocks were the best performers of their sectors in FY25. Should you buy, hold, or sell?

Read more »

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Wednesday

Here's what to expect on the Australian share market today.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Beetaloo, Botanix, Cobram Estate, and Origin Energy shares are falling today

These shares are having a poor session on Tuesday. But why?

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »