Pinned straw:
So I invested based on Praemium growing the new Spectrum product and showing operational leverage. While lower quality than competitors Hub and Netwealth I thought the lower valuation compensated for this. Also, downside protection from takeover potential.
The latest H1FY26 results showed some disappointing margin trends. Margin for all platform products reduced with the explanation given based on tiered pricing. They give large accounts with high balances cheaper rates.
Previously announced inflows for Spectrum and Powerwrap were solid.
The non custodial product (Scope) also saw a reduction in portfolios. Praemium was one of the first to provide such a product and shows competitors catching up.
The question here is how much is loss in market share due to competitive pressures? Is Praemium reduced to competing on price? Perhaps it deserves to trade on a much lower multiple than its higher quality peers.
The full OneVue cost out was also not completed in 2025 as planned but only completed in February (this month) which was another negative.
On the positive side the Technotia acquisition ($7m in shares + earn out) seemed to be a good one. They state $9m in salaries cost out due to technology division restructure. The CEO framed this as hiring exceptional developers rather than jumping on the AI cost saving narrative which I liked. Does make you wonder the state the tech stack before they engaged Technotia 18 months ago though.
So I originally thought the Spectrum product would help grow margins, but the Powerwrap platform has been achieving inflows and platform margin is down for all products.
Operating leverage should be helped by cost out through the Onevue in H2FY26 and the Technotia acquisition/restructure should help reduce costs in FY27.
In terms of management I think they are reasonably honest in how they present information (providing internal fund transfers and platform margin).
Overall, I hold and I'm comfortable with the valuation but I need to watch thesis creep. I will continue to monitor Spectrum growth and the operating leverage.
Quick Q3 update. The Q3 highlight was good spectrum growth with 502m net inflows. Like HUB24 platform FUA was down on the prior quarter due to the market.
Still the profitability/margin questions remain. Seems like more competitive pressure in non-custodial space too. They indicate that the 9m Technotia savings will be offset by related one-offs and that they will come in FY27...skeptical. It will be interesting if the claimed OneVue synergies come in FY26. Not a fan on continual "one-offs" and references to underlying stats but will remain patient until FY26 results at least.
@twee. I'm in PPS for the same reasons as you but I found the result a bit underwhelming and expected stronger margins as well as top line growth. Maybe I was too optimistic after having seen the report cards for HUB/NWL but as you said they are higher quality stocks.
CEO did say he expects Spectrum margins to improve and this plus the cost out story needs to be given 6-12 months to see the effect on operating leverage so it is a hold for me until the next result.