HUB24 set to grow FUA by 46% over the next 2 years

Wealth management platform HUB24 (ASX: HUB) has been on a stellar run over the last 12 months, with its share price soaring 86%. 

While the company slightly underperformed analyst expectations in FY24, with EBITDA coming in at $118 million compared to estimates of $118.1 million, and revenues coming in at $327.4 million versus estimates of $328.3 million, the market didn't mind. HUB24's share price rose around 1% on Tuesday on the back of the result, and it's up a further 3% again today. 

According to data from FactSet, analysts now believe the company will see EBITDA growth of 64.8% in 2025 and 20.1% in 2026. Earnings margins are estimated to increase from 38.9% next year to 40.7% the year after. While free cash flow is expected to grow by 11% in 2025 and a further 20% in 2026. 

For me, at least, the most exciting part of the report was HUB24's growth in funds under administration (FUA) - as the company continues to prove it can take share from the incumbents. 

During the financial year, HUB24's FUA lifted 35% to $84.4 billion. Over the next two years, the company believes FUA will lift by more than $11 billion a year to hit $115-123 billion - which at the upper range, would be a 46% increase in funds on the platform. 

And yet, as HUB24 Chief Executive Officer Andrew Alcock explained in an interview with Livewire Markets, this isn't an overly ambitious target. In fact, the company is likely to overshoot this. 

"Our goal is always to try and hit the top end of that or overshoot it. We don't want to be giving guidance that we have to go back and correct. So, it's a sensible range and we know what the breakdown is," Alcock says. 

For those who added the figures up for FUA and are wondering about that breakdown - yes, $11 billion a year does not add up to $115-123 billion, but $106 billion. So what is baked into that additional FUA? 

"There's two things in there. One is market movement. So we have an assumption that we'll get 5% market growth. So you can add another $5 billion per annum or probably $8-9 billion over those two years," Alcock says. 

"The other one is we know that we've got a large transition still to come from Equity Trustees. So in FY24, we moved about $2.6 billion. There's another $2.5 billion to come." 

In this C-Suite Interview, Alcock provides an insider's take on HUB24's latest result, outlines how the company is balancing shareholder returns and income, and points to some of the exciting initiatives HUB24 has on the horizon. 

Note: This interview was recorded on Tuesday 20 August 2024. 

Timecodes

• 0:00 - Intro 
• 0:23 - Key figures investors need to be aware of
• 1:08 - Dividends and plans for capital allocation on the horizon 
• 1:57 - Superannuation guarantees and business resilience
• 3:13 - Impact of an interest rate cutting cycle on HUB24 
• 4:32 - Internal projections on the total addressable market 
• 6:09 - Adviser trends and green shoots starting to appear on numbers 
• 7:01 - Funds under administration growth plans
• 8:09 - Possible exciting initiatives for growth on the horizon 
• 9:46 - The HUB24 team and succession planning