The investment platform quietly winning market share

HUB24 is one of Australia's fastest-growing mid-cap companies supported by multi-year structural tailwinds and a technology offering that we believe is superior to incumbent platforms.

HUB's offering has attracted a record number of financial advisors, and is taking market share from competitors, still with a substantial runway for growth.

Helping drive this change is the switching patterns of superannuants seeking more sophisticated levels of advice as they approach retirement - a trend that will only accelerate as the population ages and retirement balances swell.

HUB has been a beneficiary of major changes in the wealth management industry over the past five to 10 years which has seen incumbent players such as Insignia, CFS, BT and AMP ceding share to the tech-enabled wealth management and investment service platforms like HUB.

Ultimately, it's the ongoing investment in technology that continues to attract advisors and in turn funds under administration (FUA), driving market share gains.

Importantly, from a HUB revenue perspective, advisor numbers lead flow by about 24 months, so we view revenue growth as highly visible.

Consequently, we believe HUB can continue delivering revenue growth of more than 20% per annum and is expected to outpace cost increases, supporting further margin expansion and operating leverage over time.

Moreover, a significant tailwind for HUB has started to emerge, the transfer of superannuation from industry funds to advisors, and in particular, to platforms like HUB.

This is illustrated by recent data that shows industry superannuation funds have now moved into net outflow. In our view, this is being driven by the desire for more advice ahead of retirement as decisions become more complicated and demanding.

Most compelling for investors is that the FUA growth profile for HUB, and the rising per-client FUA is translating to rising revenue, earnings, and earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin.

HUB's purpose-built platform is especially effective in converting economies of scale into improving margins and lower unit costs per adviser/client, adding an edge that can compound powerfully for investors over time.

On earnings, HUB is delivering year-on-year growth. EBITDA margins have been gradually rising. HUB has strong free cash flow and continues to actively reinvest strategically in technology and growth initiatives, which we expect to translate into sustained FUA and earnings per share (EPS) growth over the coming years.

In summary, we see HUB as a high quality, long duration compounding investment in the growth of household and superannuation wealth. Its technology advantage, growing adviser base, cost efficiency and margin profile provide a compelling investment case for long-term investors.

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