Netwealth: Product Enhancements Likely Replicable

We retain our fair value estimate on Netwealth at AUD 10.10 per share. Despite shares falling over 7% following the update for the first three months of fiscal 2024, which was broadly as expected, shares remain overvalued. The market is likely overlooking the trade-off between Netwealth’s revenue growth and margin expansion. We continue to forecast Netwealth’s market share gains to be slower than in the past five years due to resurgent competitive pressures. Moreover, we expect ongoing growth investments and fee compression to limit margin expansion.