Netwealth Coverage Transferred to New Analyst; FVE Lifted to AUD 7.30 As Investments Support Gains

We maintain our no moat rating for Netwealth, but raise our fair value estimate 7% to AUD 7.30 per share after a transition in the analyst covering the stock. Our upgrade reflects the expectation of improved earnings from increases in the cash margin rate and ongoing growth in funds under management and administration. Further, adding to FUMA growth will be the new Whole of Wealth, multiasset portfolio functionality and enhancements targeting managed discretionary accounts and high-net-worth individuals. Fiscal 2023 funds under administration and net inflow guidance between AUD 11 billion and AUD 13 billion points to ongoing market share gains. Netwealth continues to take share from competing platform providers with weaker customer service, poor integration, and underinvestment in features and functionality, such as automated reporting and analytics. We maintain our Standard Morningstar Capital Allocation Rating and High Morningstar Uncertainty Rating. The business is leveraged to volatile capital markets, changes in economic growth, and risk of regulatory changes.