Hub24 share price tumbles despite a big profit and dividend increase

The Hub24 Ltd (ASX: HUB) share price fell this morning even after it reported an increase in profits and dividend despite COVID-19.

Shares in the financial platform company slumped 3.1% to $15.09 when the S&P/ASX 200 Index (Index:^AXJO) jumped 1.1% at the time of writing.

The bout of profit taking comes as the stock hit a record high yesterday of $15.57. Hub24 may be a victim of “buy the rumour and sell the fact”.

Big operating leverage

Hub24 unveiled a 60% surge in underlying FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) to $24.7 million as platform net inflows jumped 27% to a record $4.95 billion.

The group’s significant operating leverage was on display as the 37% uplift in platform revenue to $74.3 million was outpaced by the bigger increase in EBITDA.

It’s underlying net profit also increased by 49% over FY19 to $10.1 million, although its statutory net profit advanced a more modest 13.9% to $8.2 million as it contained one-off restructuring costs.

Dividend upgrade

That rise in its top and bottom lines aren’t the only thing that will please shareholders. Management resolved to pay a bigger the final dividend of 3.5 cents a share, which is 35% more than the same time last year.

This takes Hub24’s full year dividend to 7 cents a share compared to the 4.6 cents it declared for whole of FY19.

The dividend will hardly qualify Hub24 as an income stock with a yield under 1%, but the bigger payout signifies management’s confidence about future growth. That’s worth something in this highly unpredictable environment.

Momentum going into FY21

On that front, the outlook for the group looks positive with Funds Under Administration (FUA) continuing to rise in the first few months of FY21.

FUA jumped 34% to $17.4 billion between 30 June last year to this year. Management reported that FUA is up by another $1.1 billion since then.

$30 billion FUA by FY22?

“HUB24’s leadership in the growing managed portfolio space has continued, maintaining 1st place for managed accounts functionality for the 4th year running, and this year adding another 108 new managed portfolios to the platform,” said the company in its ASX statement.

“Moving forward HUB24 expects ongoing strong net inflows to the platform, and the company is now targeting a FUA range of $28-$32 billion by 30 June 2022,” said the company in its ASX statement.”

Market share gains for Hub24’s platform accelerated in FY20 to 1.9%. This is up from the 1.3% increase recorded in June FY19.

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Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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