Hub24 Earnings: Growth to Constrain Extent of Margin Expansion

We marginally lift our fair value estimate for no-moat Hub24 to AUD 25.00 per share from AUD 24.50 due to a lower-than-expected medium-term tax rate and the time value of money. However, these positives are partly offset by slightly weaker performance in the core business. Shares are materially overvalued, with investors likely overlooking the trade-off between volume growth and margins in the increasingly competitive platform market in which Hub24 operates. Underlying net profit after tax grew 14% from the previous corresponding period to AUD 30 million, slightly below our expectations. The main detractor was higher operating expenses, supporting our thesis that future market share gains will likely entail ongoing investments, constraining margins.