Hub24 Earnings: Evident Trade-Off Between Growth and Margins

No-moat Hub24’s fiscal 2024 results missed our expectations, partly due to transitional factors. Underlying net profit after tax grew by 15% from the prior year but fell 12% short of our forecast, mainly due to lower-than-expected group EBITDA margin, partially offset by a lower tax rate. The lower EBITDA margin included expenses for MyProsperity, a newly acquired, loss-making ancillary offering, which we expect to increase earnings over time through cross-selling. Excluding MyProsperity, EBITDA margin for Hub24's primary platform suite slightly expanded, in line with our expectations. We marginally lift our fair value estimate to AUD 27 per share from AUD 26, reflecting a minor reduction in medium-term tax rates.