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Last edited 3 years ago
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#FY21 HY Results
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Added 3 years ago

See Rapstar's comments on the incredible trading update from SelfWealth today. Some notes from the HY report:

  • Revenue up 278.5% (2.2m to 8.4m)
  • Gross profit up 310%
  • GP Margin up 2.87% from 34.84% to 37.7%
  • Operating Loss down 70% from -1.45m to -0.44m
  • Operating (Approx EBITDA) margin from -65.1% to -5.2%

Point being, not only is SelfWealth growing at a blistering and accelerating rate but they are scaling well with improving margins and profitability imminent most likely this quarter

##GME saga
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Added 3 years ago

Selfwealth is benefiting hugely from the GameStop saga.

Investors are leaving Robinhood and Stack enmass due to the restrictions and downtime related to recent volatility. Selfwealth introduced US trading about 6 weeks ago and GME is the most widely held US stock by Selfwealth clients. Apologies Andrew but there is a lot of great quality fundamental analysis over on the SelfWealth threads on hotcopper demonstrating the beneficial impacts SelfWealth are currently experiencing. Customer reviews of Robinhood and Stack have nosedived and it seems traders are far more interested in switching to SelfWealth than NABtrade or Commsec. Big fan of Matt Joass and this to me seems like a fundamental inflection point.

Selfwealth already typically have almost all their annual growth in Q3 and Q4 and Q3 was looking very positive ahead of this GameStop short squeeze. Now it seems Q3 is going to be exceptional for trade volumes, growth in currency conversion and US trading and particularly customer growth. 

#ASX Announcements
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Added 3 years ago

viharerda provided the Q2 update as summarised by management, but I wanted to add a bit of flavor. Reading through the update a number of other facts stood out to me so here is the non-summary summary:

Overall I was a bit disappointed in the low revenue growth QoQ (1.2%) but I wasn't overly surprised. Last year Q2 was up 4.2% on Q1 then they acheived 42 and 37% growth in the following quarters. It's also worth considering there was a 5% drop in overall ASX trades QoQ (and 7% drop on pcp), Q2 has seasonally the lowest trades. Active traders were up 17%.

International Trading: although it was introduced December 14, the 2 income streams from international trading (foreign exchange (FX) margin and a brokerage fee) are both "received monthly in arrears" so Q2 included no revenue from international trading. Q3 will include the relevant Dec, Jan & Feb income. They are also adding additional order types, stock research reports and other US trading functionality during the March quarter, which is expected to be profitable for US trading. The MD commented "The launch of US trading is now complete with an encouraging take up by existing clients and quickly growing trade volumes."

Profitability: they had a $29k operating loss after a $344k profit last quarter. A new, cheaper contract for settlement, execution and clearing services came into effect on January 4th 2021 with OpenMarkets. So that is 2 new revenue streams and lower operating expenses expected next quarter. Q3 and 4 are also historically much stronger quarters, especially the 4th as they offer sales on annual subscriptions including free trades. So I'm expecting 2 relatively very profitable quarters to finish the year.

New app: iOS app will be released early February 2021 with the Android app to follow shortly after. This was originally scheduled for December so is behind schedule, looking forward to seeing how significant of an improvement this is on the current UI and the impact it has on customer acquisition. Pleasingly they are expensing the R&D costs associated with developing the new app.

Marketing: they increased spend during the quarter and plan to continue this increased spend (from $162k Q1 to $261k Q2, 60% increase). This is only 6% of revenue Vs 64% for product manufacturing and operating costs. I think increasing marketing from here is a good move and hope to see more. They have waited until they have international trading and the improved UI of the new apps could result in higher ROI from marketing as well. I've been seeing a lot of adds for their competitors lately, and think the entry of a couple cheaper competitors is likely why the share price has been struggling. Selfwealth have a differentiated offering though with order functionality similar to Commsec and international trading, and I believe clients moving from more expensive platforms is their biggest market opportunity. Considering their blistering growth in active traders so far has been acheived with very minimal sales and marketing spend there could be more higher growth available to them in the future.

#Quarterly ASX Announcement
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Added 4 years ago

Valuation updated to reflect Q1 FY21 result. Notes:

Despite a modest QoQ revenue growth of 4.5% I think it is important to look at this figure Vs their underlying driver of revenue which is currently ASX trade frequency. As per page 3 of their update, ASX daily trades were down from ~1.8m to ~1.5m so it was always going to be a difficult quarter to grow revenues, however SelfWealth daily trades increased, helped by a 24% increase in active traders

Note that lowest Q3 & Q4 QoQ growth has been 41.8% and 37% respectively, not sure what has caused significantly higher growth historically in these quarters (apart from covid in most recent year, with 74% and 101% growth respectively) however I expect international trading and new apps to provide a similar boost. 

Still expecting YoY revenue growth ~200%, growing gross margin and profitability, growing share of big market opportunity.

Some may think their user and trade volume growth has been elevated by a one off covid related boost, I disagree:
-they have grown revenue QoQ 13 quarters in a row. 
-they are building momentum with early adopters, 
-they have US trading and new iOS and android apps pending both within 3 months 
-In Q1FY21 they grew trade volume and quantity despite these declining overall for the ASX i.e. they grew their market share ~30%

They are clearly listening to their users, who are growingly becoming investors in SelfWealth (can't get much stickier than that). As they gain market cap more investors will notice them, research them and make the decision to switch to a cheaper broker, I think their share market success could make great free product marketing. 

Biggest risk is competition, I think the new app and US trading will assist in getting majority of new traders as well as being ASX listed, however they have no moat and are already being undercut with $8 trading offered by ThinkMarkets, so only time will tell. Will need to keep an eye on quarterly new traders, liking the 11,370 new traders added in Q1