Growth Focus: HUB24 Ltd (HUB)

by Patrick Taylor

Date of Data Capture: 7/3/2019
Name: HUB24 LTD (HUB)
Classification: Investment Services
Current Price: $12.69
Market Capitalisation: $785M
Forecast EBITDA Growth: 45.61%
Yield Estimate: 0.53%
Consensus Price Target: $12.89
# Covering Analysts: 7
Discount at Current Price: 1.58%
Price Target Trend: Increasing-Flat
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Flat/ Long-Medium

Short-term: Positive-Neutral
Medium-term: Positive
Long-term: Positive

Recommendation: Buy
Focus: Capital Growth
Set up Notes:
·    HUB is riding a major long-term uptrend, one that is prone to regular sideways consolidations – here price seems ready to move again with fresh positive signalling adding technical strength to a strong fundamental outlook.
·    Performance has been excellent with consistently robust earnings growth since 2015, which is set to continue with forecasting for strong expansion to sales and profits to 2021.
·    Price has been working against $14 and $15 resistance since May 2018 and while we remain under those levels we see good signalling showing here across our key timeframes.  
- Support ($): 12.00, 11.00 & 10.00.
- Resistance ($): 13.00, 14.00, 15.00 (then clear).

Growth Focus: 

The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.

A history of good performance is often a central motivation for buying shares in a company, but so too are expectations for continued growth - and we think we have both here with HUB24 Ltd as the superannuation administration specialist shows signs of renewed strength that could pivot prices higher once more.

HUB24 provides a leading platform for portfolio administration across superannuation, pension, investment and insurance services within Australia; this is an emerging niche in the financial services sector that has seen strong general growth over recent years. Even within this expanding part of the market, HUB still manages to stand out from the crowd with an excellent track record of fundamental growth and price gains to match, with recent results showing total funds under administration increasing by over 20% in just the last six months.

A longer track record shows HUB building strong fundamental performance since 2015, with excellent underlying growth that is still accelerating. In the last 12 months HUB grew sales by 36% and earnings by over 120% - all whilst managing to increase margins by 6%. This growth trend is not expected to stop (or even really slow down) with very robust forecasts stretching ahead to 2021, and analysts calling for continued aggressive expansion across sales, earnings and profits.

Even though the stock currently offers only a small discount to price targets, these valuations normally get dragged higher with price gains. The company has begun dividend payments but really it is growth we are after and in the short-term it should see a nice price bump prior to its addition to the ASX200 at the end of this month. This increased exposure is beneficial but it is also backed contract wins, industry accolades and strong funds under management growth. This upwards momentum is expected to continue and HUB is seen benefitting from the aftermath and adjustments of the recent Banking Royal Commission on the financial sector.

Pricing shows HUB is prone to making sweeping and long-term trends that run in phases, alternating between rallying higher and consolidating sideways. Here we find them beginning to emerge from nine months of containment underneath major resistance at $14, with each test cycling down and coiling into rising support. With long-term signals turning positive and combining well with medium and short-term signalling, we think now is the time to make a core investment in HUB.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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