HUB FY25--signs of operating leverage accelerating or just a bull market?-top 10 holding

 HUB24 FH25—signs of op lev acceleration

HUB upped target FUM for FY26 from $115-123B to $123-135B, not a surprise after the fund update a few weeks ago. I'm at an average FUM of $127B for FY26.

As can be seen below EBITDA margins are up a lot. 35.1% to 39.8%. The bullish case here would be that HUB is spending all it can on product development and growing sales team etc and is now seeing operational leverage as costs fractionalise with stronger revenues. The bear case is that the strong revenues are due to the bull market pulling forward flows and there was a pause in headcount over the last period that flattered these numbers. Both are true to some extent, but I feel operational leverage is now taking hold as the sheer scale increases. That means that gains will continue but maybe not as large as we have seen in this last result.

Class (SMSF admin) also saw operational leverage as it came to life after a stagnant period. However in the scheme of things, Class is much smaller.

HUB flagged increases in operational spending in the 2H and Fy26 but not enough to undo margin gains maybe flatten them.

I am not trying to extrapolate a bull market flows, with Hub highlighting the industry platform FUm grew 17% over the period, 7% pcp (LT average).

VALUATION is a challenge

To look at valuation another way. I assume 15% compound revenue growth for 5 years. The last 5 years have seen NPAT margins expand about 10%, assuming they do that again, a big ask given the low profitability five years ago as a comparison. That grows NPAT at 24%pa for the next 5 years. To generate a 10% return cagr over the next 5 years on shares at $84, means an exit PE of 55X is required. Choose your own adventure here, I suffer from investment acrophobia (you could argue its cheap compared to PME et al.). Im a hold -like many of my similar holdings a this stage.

 



Market share gains, best in class. I assume they continue to take share for the foreseeable future.

 


No real benefit from mix or platform revenue margins.



 

 

 

 

 

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