Netwealth Remains Overvalued Following Weaker Than Expected First-Half Result

We have maintained our fair value estimate for Netwealth at AUD 5.70 per share following its first-half result, and at the current market price of AUD 7.80, continue to believe the shares are materially overvalued. The notable aspect of the result was management’s fiscal 2020 earnings guidance, which was weaker than we expected, and we’ve cut our fiscal 2020 earnings forecasts accordingly. However, the impact on our fair value is small and offset by other earnings adjustments and the positive time value of money effect on our financial model. At the current market price, Netwealth trades on a fiscal 2020 P/E ratio of 51 versus 31 at our fair value.