The Selfwealth platform has been increasing quarter on quarter growth in the first period of FY22, however, shares are trading down around -40% over the past month. The group seems to be facing increasing pressure from new entrants to the market, so we take a look to see should I Buy Selfwealth Shares in 2021?

Should I Buy Selfwealth Shares – About

Selfwealth is an online brokerage platform allowing users to buy and sell both ASX listed and US-listed shares and stocks. The company has reported some impressive user growth over the past number of years.

Selfwealth seemed to have gotten its foothold based on the value proposition of providing some of the lowest cost CHESS sponsored brokerage on the ASX. SWF was allowing customers to transact for a flat fee of $9.95, which at the time was significantly lower than the big four bank brokerage rares of around $20 per transaction.

The company provides a decent trading experience to their customers. However, seems to lack pro tools for trading. There has been a swath of new online brokerages enter the market in recent times, from Superhero, Stake, Pearler and Sharesies, that it’s now getting hard to choose the best.

The platform seems to have gained decent traction over the past number of years with over 100,000 active Australian Investors on the platform and saving users considerable amounts on their brokerage.

ASX.SWF Platform Metrics (Source: https://www.selfwealth.com.au/)

Should I Buy Selfwealth Shares Price

Selfwealth Shares are trading down about 44% over the past twelve months to change hands at $0.36 per share. Selfwealth has a market capitalisation of $82million at the current price.

Over the past 5-years, shares are up 105% from $0.17 per share.

Selfwealth last raised capital at a share price of $0.35 per share raising over $10million. This represents a large portion of the company float being raised at $0.35. This may be a key resistance level over the short term.

Selfwealth Shares – Investor Sentiment

You may ask yourself, what do other investors think of Selfwealth shares? After surveying 142 Investors about their current SWF.ASX shares sentiment: BUY-HOLD SELL, as well as their target price over the next 12-months here are the results;

Should I Buy Selfwealth Shares Investor Sentiment

The results from this survey show there seems to be a strong Hold investor sentiment on SWF shares.

Selfwealth Shares – Competitive Landscape

In the Aussie online brokerage scene, there are a number of players from the large big 4 banks to the smaller upstarts such as Pearler and Superhero. We have a guide to the best ASX Share Trading Platforms.

In this review, we previously ranked Selfwealth as the best Low-Cost Platform. However, this advantage may be dwindled away over time with new entrants into the space. A key competitor we see for this is Stake entering the CHESS sponsored space at $3 per trade. By undercutting Selfwealth, Stake will take the game to SWF. This may result in SWF having to cut their brokerage prices even further to compete on price.

Whilst there are also some other online brokers out there offering cheaper fees such as superhero and they’re $5 per ASX trade. There is a level of differentiation as most others are not CHESS sponsored.

Selfwealth ASX Dividends

Does Selfwealth Pay a Dividend? Selfwealth does not currently pay a dividend.

Selfwealth Shares – Fundamentals

The company trade on a market cap of $82million, with a price to book of over 14x and a price to sales of 4x. These numbers are both significantly higher than the ASX average.

The group have negative earnings per share of (-$0.003) meaning that they do not yet make a profit. This also results in the group negative PE ratio. Selfwealth looks close to turning EPS positive if they can continue to increase revenue and decrease expenses.

Current Share Price$0.35
Market Cap$82,611,399
Price/Book14.67x
Price/Sales4.1x
PEn/a
EPS-$0.003
DPS$0
NTA/Share$0.03
Selfwealth Shares Fundamentals

Investors must be expecting significant growth in the future to be able to justify the above fundamentals. Should the company not be able to deliver the growth the share price may be volatile.

Selfwealth Shares – Latest Financial Information

The latest financial update provided by the company at the time of writing was the groups first quarter 2022 report. For the latest ASX releases be sure to check Selfwealth’s Investor Centre.

Should I Buy Selfwealth Shares? Latest QoQ Financials from 1Q22 Update
Latest QoQ Financials from 1Q22 Update

One of the most interesting metrics from the group’s update is that quarterly active traders grew 86% over the last 12 months yet revenues only 32%, with quarterly trades only up 15%. Securities held on HIN may not necessarily be a great metric as this will depend on the underlying performance of the market as well.

Further in the report, it seems that SWF is also struggling to meaningfully grow their number of trades for US stocks, with numbers very much consistent from back in the March Quarter when the function arrived.

The above seems to indicate that traders are making fewer trades per customer on the platform.

YearRevenueNet Income
FY21$17,610k-$646.6k
FY20$7,682k-$2,782k
FY19$2,591k-$3,447k
FY18$1,063k-$5,348k
Selfwealth Historical Financials

The half-yearly result in FY22 will be an extremely telling result, we would like to start seeing a positive EPS from the company. However, revenue would likely have to increase substantially.

Selfwealth ASX Appendix 4C 1Q22 Income Statement

Selfwealth Appendix 4C 1Q22

Advertising costs in the quarter have seemed to increased significantly to $1,073k, this is up from the prior period ending 30 June 2021 of only $360k. Due to the nature of marketing spend a lot of the time this takes a little while to flow through to the top line. We will be watching very closely at top-line growth for the business in the next quarter and monitoring for advertising spend and revenue growth.

The group at the end of the quarter finished with $17.5 million in cash and equivalents, which has mainly increased as a result of the groups recent $11.146million share purchase plan.

Forward Looking Estimate and Opinion

The group reported revenue of $5.4million for the quarter, annualised this is around $21million which would represent around a 20% growth rate YoY. If the company does not manage cash burn over the period the EPS could actually head back over the year especially if the group intends to continue the increased spend on marketing.

However, marketing spend is a catch 22, should the company not commit money towards this then there is a risk other brands may win market share. We see SWF as having to increase this spend into the short term future to keep up with the aggressive marketing of superhero and Stake.

Ultimately the ideal outcome for SWF is that as whole alternative online brokers continue to win market share away from the Big 4 Bank brokerages.

Selfwealth ASX – Ownership and Insiders

Selfwealth Top 5 Shareholders

Founder and former managing director Andrew Ward, whilst stepping down from the role of managing director in May 2020 retains a significant portion of shares at 4.42% ownership.

The role of CEO has changed frequently since Andrew Ward Stepped down with Robert Edgley being appointed in May 2020 and then being Cath Whitaker being appointed in April 2021. It doesn’t seem that either Rob or Cath has a significant ownership stake in the business.

OwnershipNameSharesValue
8.23%Lggc Pty Ltd19,421,633A$6.8m
4.42%Andrew Ward10,426,444A$3.6m
4.16%Graham Newman Pty Ltd9,821,817A$3.4m
2.67%Tw Investments Pty. Ltd.6,300,000A$2.2m
1.82%Fusheng Investments Limited4,300,000A$1.5m
Top 5 Shareholders of Selfwealth Shares

SWF ASX Ownership Breakdown

Shares in Selfwealth are predominantly owned by the General Public with 54% of the shares on issue. This is followed by Private Companies at 22% and Individual Insiders at 12%.

The Individual Insider breakdown is made up predominantly of founder Andrew Wards shares at 4.42% and a number of other executives. We would like to have seen the current CEO have a bit more skin in the game here.

SWF ASX Recent Insider Transactions

Insider buying has been quite considerable over the past 12-month with a number of transactions taking place around the 60c a share mark.

Whilst these insiders may have seen value most have seen their investment fall over 50% since buying in at the levels below. This goes to show that insiders may not always know what is in store for the share price of the company for the short term.

DateValueNameEntitySharesMax Price
10 Sep 21+$114,628Tw Investments Pty. Ltd.C228,000AU$0.68
06 Sep 21+$17,009WK Super Pty LtdC50,000AU$0.34
17 Jun 21+$286,287Nicholas KephalaI651,242AU$0.44
17 Jun 21+$1,623,808Graham Newman Pty LtdC9,721,817AU$0.17
01 Mar 21+$5,350Stella KephalaI8,958AU$0.60
01 Mar 21+$5,340Harry KephalaI8,941AU$0.60
01 Mar 21+$5,400Athena KephalaI9,042AU$0.60
26 Feb 21+$25,604Tam VuI41,911AU$0.61
Selfwealth ASX Recent Insider Transactions

Selfwealth ASX – Prophets Take

Due to increased competition in the space from some high-quality entrants such as Stake and Superhero, it seems that Selfwealth may need to spend additional money over the coming quarters on advertising and further development of the mobile and web experiences for customers.

There seems to be a large focus of investors on the platform towards the FIRE movement, however, this market share also seems to be attacked by Pearler. Pearler currently offer’s free brokerage on a number of their ETF’s.

The group’s cost per customer seems to be rising, whilst the revenue per user seems to be falling. The group may be able to generate some increased levels of growth from rolling out their crypto offering as highlighted in their last 1Q22 report. However, we don’t really see this as a massive driver of growth due to crypto enthusiasts already being placed on a platform.

Prophet whilst having a position in SWF previously from $0.34 to over $1 has since sold out and is sitting on the sidelines. We see the execution risk and competitive landscape as major risks to the company over the medium term. We see the group having to ramp up marketing spending to continue to win market share and compete with new entrants into the space. We also struggle to see much of a competitive moat for this business.

The markets have been quite volatile over the past year, with Selfwealth also mentioning that trading volumes are increased during volatile times. Should the market become less volatile, this may also impact SWF trading volumes.

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