Bell Potter $1.18 Price Target

PRAEMIUM (PPS)
(BELL POTTER Strong Buy 12-month Target $1.18 (revised from $1.07)
5 June 2018

Momentum building, strategy working
PPS has announced a material client win for its SMA platform, with Morgan Stanley and its approximately 110 advisers set to go live in July 2018. We are how many advisers will start utilising the SMAs, but believe there is upside potential ahead of our current EPS upgrades.

Morgan Stanley already utilise PPS’s V-Wrap reporting functionality, but are now extending the relationship to include PPS’s SMA offering.

This is a major coup for PPS and shows that their strategy is working and the investment they are making in their technology is being recognised. It is particularly noticeable as there were media reports around about a year ago that suggested Macquarie Wrap was in the running to win part of Morgan Stanley’s in-house platform, and / or SMA solution.

This is consistent with our thesis that more players will move away from the traditional owners of the platform space (big four banks, AMP, IFL and Macquarie) and towards the independent players, including PPS. We see this thematic accelerating following the various regulatory reviews and as there is greater acceptance of non-aligned solutions in the market.


Earnings revisions
Following the company announcement we have upgraded our FY18, FY19, and FY20 underlying Cash earnings by 0.9%, 2.6% and 3.5% respectively. The change is driven by revised net-flow estimates resulting from Today’s client win and from higher share market assumptions for the June quarter given the current levels were above our estimates.
Following the earnings revisions and after including higher longer-term growth rates our revised Price Target is $1.18 per share (previously $1.07 per share) and we reiterate our Buy recommendation.