Ann: December 2022 Quarterly Update, page-7

Take OVERWEIGHT Price Target (A$): 1.25 Price (A$): 0.80

PPS posted a weak 2Q23 update, with net inflows of $225m (down 49% on 1Q23, down 68% on pcp) into the Praemium SMA and $132m (down 39% on 1Q23, down 47% on pcp) into Powerwrap. Mgmt quoted ongoing macro volatility as a driver of softer flows. Cash proportions in the SMA fell to 6.9% (from 8% at Jun) and Powerwrap 6.4% (from 7%). The SMA spread on cash increased to 130bps (from 65bps)from Oct-22.Positive markets helped offset softer flows, leading to 2022-end FUA of $20.9b vs B*e $21.1b, only a 1% miss. Retain OW. 2Q23 underlying group (SMA + Powerwrap) flow update Underlying flow 1Q 2Q 3Q 4Q 2Q % pcp FY18 373 357 345 260 146% FY19 147 366 286 192 3% FY20 375 261 152 273 (29%) FY21 561 813 448 820 211% FY22 1,283 955 460 316 17% FY23 659 357 (63%) Source: Company data, Barrenjoey Research Key takeaways ·Praemium SMA flows at $225m were down 49% on 1Q23 and 68% lower than pcp, while Powerwrap flows at $132m were 39% down on 1Q23 and 47% off pcp. ·Management quote market volatility driving subdued activity levels. ·Group net inflows at $357m were 46% off 1Q23 and 63% down on pcp. We had forecast $750m of net inflows for 2Q23. ·Group FUA at $20.9b was only 1% behind B*e at $21.1b. ·Cash proportions fell as the market rose, with Praemium SMA at 6.9% (from 8%) and Powerwrap at 6.4% (from 7.2%). ·Absolute cash levels also fell, with Praemium SMA at $618m (vs $670m atSep22) and Powerwrap at $766m ($812m atSep22). ·The Praemium SMA fall may relate to the change in cash spread which increased to 130bps, from 65bps, inOct-22. Investment view – retain OVERWEIGHT Since reporting a disappointing1H22, Praemium has administered some self-help: 1) undertook management changes; 2) making commercial pricing decisions to increase yield; and 3) taking a more critical view on costs/investments to drive margin. We see elevated flow volatility vs Specialist Platform peers warranting a discount in PE-rating, but see the business on more solid financial footing heading into the 1H23e result than previous reporting periods given cost control, the cash spread increase and improving proportion of Praemium SMA FUA vs Powerwrap FUA (spot Dec-22 Powerwrap was 57% of group FUA, down from 60% pcp).

Financial & valuation metrics Y/E Jun (A$) FY21A FY22A FY23E FY24E FY25E NPAT ($m) 0 0 9 13 18 EPS (cps) 0.0 0.1 1.7 2.6 3.7 Consensus (cps) - - 1.8 2.5 3.1 B* vs consensus (%) - - (4.6%) 6.7% 17.6% DPS (cps) - - 0.8 1.6 2.6 PE (x) nm nm 47.2 30.1 21.7 EV/EBITDA (x) 45.1 11.0 17.7 12.4 9.6 Dividend yield (%) - - 1.1% 2.0% 3.2% Source: Barrenjoey Research estimates, FactSet.