Time to sell for a Praemium

When you find a business capable of growing earnings per share well into the future and you’ve acquired that stake at a substantial discount to fair value, it almost always pays to hold on to it - outside of those rare times when it trades at an excessive valuation.

Praemium (ASX:PPS), the independent investment platform and administration software provider, is a strong candidate to be one of those businesses. Over the last decade, the Australian business has generated double digit organic revenue growth while EBITDA has increased ten-fold from $4m to ~$40m in FY27 based on consensus.

It has benefitted from the same tailwinds of its larger peers Netwealth and HUB24– long-term rising asset prices, growing wealth of Australians, compulsory super and the shift from legacy platforms to the independents – all while building an enviable leadership position in the High Net Worth segment that significantly exceeds both its larger peers. For a deep dive on the company fundamentals, we’d point readers to this wire.

But the performance of the share price has been far from impressive. Due to numerous factors, not the least of which was an excessively high (i.e. overvalued) starting point for the stock since 2020/21, PPS is trading at half where it was five years ago.

We are one of the company’s largest shareholders. When we first acquired our stake in 2023 off the back of an earnings downgrade that saw the stock halve, we took the view that despite persistent rumours of a potential takeover (including the very public attempted takeover by Netwealth in 2021) that the best option for long term value creation was for Praemium to remain a listed entity.

Our view has changed. A new board, new CEO and substantial register turnover means the right thing for the board to do is implement an immediate strategic review to test the value of our company on the market, relative to the alternative of embarking on another multi-year journey under a new CEO.

In this wire we explain why we believe the right thing for the new PPS Chairman and board to do is to announce a strategic review and explore a potential sale, and what price it could command in a transaction.

Background – Earnings Growth, Activist and Board Upheaval

First, some background on what’s occurred in recent months.

FY25 and FY26 saw Praemium launch their new Spectrum offering, competing more directly with the likes of Netwealth (NWL) and HUB24 (HUB). They announced several new flagship wins across each of their core product offerings and told the market that successful onboarding of these clients would be sufficient to drive double digit revenue growth over the next few years.

As the AI phenomenon rolled into town, Praemium were one of the first to announce how they were overhauling their business to deliver substantially higher margins and new product offerings. Earlier this year they disclosed a target of $9m of cash savings per annum, which have now been achieved and repeatedly reaffirmed as being fully realised in FY27, including by the new board who have hinted at further savings to come.

Continued top line growth is expected while margins will lift considerably. As a result, the business is well placed and brokers have earnings increasing >30% in FY27.

Separate to the fundamental performance of the business, Praemium has long had a completely open register. One of the questions we had at HD Capital Partners was why no activist or strategic acquirer had yet to take advantage of this.

That changed in March 2026 when an activist firm called Viburnum announced a 5% stake (making them the largest holder), no doubt attracted by the deep discount to fair value and steady progress in new client wins.

While it all happened behind closed doors it is not hard to connect the dots – shortly after Viburnum’s arrival two directors were removed, two new directors appointed and a new chairman was installed.

The new Chair Matthew Quinn has an impressive resume, the most relevant of which is his role as Chairman of Class Software when it was sold to HUB24 in 2021 for $386m, and as Chairman of Bravura Solutions (ASX:BVS) between 2023-2025 when the stock rose ~600%. He has acquired 800,000 shares in PPS already.

Faced with board changes and uncertainty, the stock fell ~30% within a month. The last lingering question was what would happen to the CEO, Anthony Wamsteker, now that a new board was in place.

That question was answered last Friday when Wamsteker resigned effective immediately. The stock jumped 10% and, notwithstanding that it had been aggressively sold down prior to this, implies the market was not a backer of Wamsteker’s strategy.

Interestingly, the facts don’t completely align with this from the perspective of business performance. Since Wamsteker became CEO in May 2021, PPS has sold its international business for $65m and doubled the revenue of its Australian operations – for a CAGR of 16%. You could argue that hasn’t kept pace with NWL and HUB (21% and 35% respectively), but few businesses have.

No doubt the market and long-term holders are far more frustrated with the share price performance since then (-50%) and the public rejection of the bid from NWL that implied $1.50/share.

That is all irrelevant now. What matters today is that the underlying business is stronger than it’s ever been, the stock is as cheap as it’s ever been and the arrival of a new board and substantial shareholder turnover makes the initiation of a strategic review, and potential sale, the right thing to do for shareholders.

What is Praemium Worth to an Acquirer?

When analysing a company in a transaction, it is easy to see things only from the selling shareholder’s perspective. Absent an irrational buyer, a successful transaction needs to leave enough on the table for an acquirer to generate a satisfactory return.

Luckily, the platform and wealth management software industry has a long list of comparable transactions we can look to.

In situations like these, revenue multiples are the most useful tool to assess value. You’ll note the larger targets tended to attract higher sale multiples, which is logical, and PPS would likely be the largest transaction of those listed above. Strategic value, which isn’t immediately obvious in the table, also lends to higher multiples – those targets that had the strongest franchises in their chosen niches tended to extract more value from the acquirer.

In several of the above the acquirers were listed companies, which gives us unique insight into their perspective and rationale for acquiring the targets. For example, several clearly detailed their cost-out targets, and when comparing across deals it becomes clear that these are fairly standard across transactions.

These businesses are effectively software businesses, occasionally with a services element, as is the case for Praemium’s Scope+ offering. That means they have high gross margins, a large, fixed cost base of technology, service and support staff and then very high incremental margins once these fixed costs are covered.

In the event of a transaction, it almost always results in substantial duplicate costs primarily across technology and administration. Typically, the acquirer tends to ‘lift and shift’ the acquired customer base to one platform, realising substantial savings. While these savings may take time to realise, owing to various service and supplier agreements that need to run their course, they tend to be both easily quantified and low risk to achieve.

Broadly speaking, acquirers tend to be able to safely realise 25-40% savings from the cost base of targets.

The below provides a simplified look at PPS today as a standalone entity. It is trading on 2.4x EV/Revenue and 7x EV/Operating Profit on our estimates –significantly undervalued in absolute terms, and particularly so based on comparable transaction multiples.

We can then apply standard cost synergies to determine what PPS would earn in the hands of an acquirer.

There are numerous potential acquirers of PPS but the most well-known are NWL and HUB, so let’s look at what a transaction could do for their EPS, assuming the most conservative of cost synergies (the below assumes <5% cost synergies).

It becomes clear that the right price for PPS in a transaction is in the range of $1.00-$1.40/share based on comparable transactions and standard cost synergy assumptions. The below compares the price paid to the effective multiple paid by these acquirers.

*Operating profit = EBITDA – CAPEX

PPS trades at ~60c/share today, which highlights how disconnected from reality the share price is. The board has an opportunity to create significant value for shareholders in a relatively short space of time.

Worth keeping in mind is that Netwealth lobbed a non-binding offer that valued PPS at $780m in equity value in 2021. That compares to PPS current equity value of ~$300m today, despite revenue and EBITDA both doubling since.

Why Would NWL or HUB buy PPS?

For a while, many in the market felt that the higher both NWL and HUB traded the more likely they were to acquire PPS, as the arbitrage between multiples became more attractive. In time, we took a different view.

As NWL and HUB’s growth continued at rapid rates for many years and their share prices followed, conversations with industry participants suggested they simply didn’t need to acquire PPS. There were plenty of opportunities elsewhere.

The chart below shows growth has begun to slow modestly for both the larger competitors. Their share prices have halved in the span of 12 months. A highly accretive acquisition of Praemium would go a long way to boosting near term EPS growth and supporting stronger share price performance, as well as achieving several strategic initiatives.

Praemium is a very different business to when NWL came knocking five years ago and offered $1.50/share. Their technology platform has been refreshed and their lead in HNW has been sustained. Both NWL and HUB have made aggressive pushes into that space and while both have made progress neither have wrestled the mantle off PPS.

It is true that with NWL and HUB’s share price well off their highs that their scrip has arguably become less useful to offer in a transaction. But you need to consider what’s happened to the price of PPS relative to these larger competitors. Using EV/Revenue as a simple proxy, PPS is currently trading as cheaply as it ever has.

An acquisition of PPS would also grant the acquirer significant strategic advantages to the detriment of the other.

For HUB it would add 25% ($32b) to their non-custodial FUA, equivalent to two years of inflows. For NWL, it would add 23% but would ensure they reach their “Dx30” strategic target of doubling FUA by 2030.

For both it would create an effective duopoly amongst the independent platform providers with all the benefits of changing market structure that might create.

The substantial synergies described earlier would be on offer to both, though HUB24 does have a proven ability to extract the type of cost synergies we’ve discussed in this note (Xplore, Class, myprosperity) which is relevant to gaining the market’s backing in a potential PPS transaction.

Scope+ is a market leading software solution for Praemium targeting stockbrokers and wealth managers. The equivalent business in HUB24 is PARS, with significant overlap likely to lead to substantial synergies, in addition to those from combining the core platform businesses.

There are differing characteristics amongst the client base NWL and HUB have been strong in (retail, mass affluent, super) vs that for Praemium (HNW & UHNW, private markets, international), both positive and negative. For example, PPS client portfolios tend to be much larger, require a broader service offering, are far more complex and have a greater need for diversity of assets, whole of portfolio reporting and tax consolidation. NWL and HUB have structurally higher net inflows (for now anyway) partly due to the PPS client base tending to be older and wealthier, and therefore more likely to be in pension mode and drawing on their assets comparatively more than NWL and HUB.

However, the two markets are increasingly blending into one. The HNW market is the fastest growing segment and over time NWL and HUB’s own client base will look more like PPS does today. This is why both HUB and NWL have sought to aggressively expand into this market.

PPS provides an ability to take a clear market leadership position overnight, at the expense of the other. Even if you believed that HUB and NWL could win these clients away from PPS, the sticky nature of their offering means it would take years if not decades and would need to be weighed up against the opportunity that now presents in a potential transaction.

You don’t have to take our word for the strategic merit either. Below are direct quotes from Netwealth at the time they announced their non-binding offer for Praemium:

“The Proposed Transaction, if implemented, would be expected to create substantial value for both Netwealth and Praemium shareholders given the compelling strategic rationale and material cost and revenue synergies…would build upon the respective strengths of both companies to enhance the position of the combined group as the fastest-growing wealth management platform in Australia…deepen its relationships and technical capabilities with both existing and new advisors…and deliver an outstanding customer experience and product offering through the integration of Netwealth’s highly rated tech portal with Praemium’s industry leading investment portfolio and non-custodial administration.”
- Netwealth, ASX Announcement, November 2021

HUB and NWL are the most obvious acquirers. But there are several other players that may be looking at PPS and for whom a transaction would make sense including legacy platform providers, integrated wealth management software players and domestic and international private equity.

The timing of conducting a strategic review now is entirely logical and, in our view, in the best interests of long-term shareholders.

A new board, substantial shareholder turnover and the exit of a long-term CEO make it likely that a sale at fair value today may be more attractive than embarking on another multi-year standalone journey under a new CEO.

So, our message to potential acquirers, as a large Praemium shareholder, is simple: shareholders are accepting bids.