The Praemium Ltd (ASX: PPS) share price is down 16% or 9 cents to 46.5 cents this morning after the fintech platforms provider admitted that the private wealth arm of Australia and New Zealand Banking Group (ASX: ANZ) will not renew its service contract.
The ANZ contract reportedly generated 8% of Praemium’s annual revenue or $4 million so it’s no surprise to see investors head for the exits this morning. A lot of fast-growing junior tech businesses can be dependent on a handful of large clients which increases the risk for investors if a large client chooses an alternative supplier as in this instance.
On the bright side for Praemium it’s also recently announced that it has signed new or renewed deals with Asgard Capital Management “from November 2019, for up to 6 years, with a minimum contract value of $6 million per year”. While both Morgan Stanley and Shaw and Partners have both agreed contract extensions worth around $1 million per year.
In fact Praemium stated that all the new agreements signed this financial year will more than offset the revenue decline from the lost ANZ contract. This suggests today’s share price falls may be something of an overreaction, although Praemium does have a certain amount of growth baked into its valuation which means the stock can fall heavily if it does not deliver.
Other fast growers to watch in the platform space include Hub24 Ltd (ASX: HUB) and Netwealth Ltd (ASX: NWL), either one of which may have picked up the ANZ contract off Praemium. In fact Netwealth shares are up 5% to $9 today
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Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia owns shares of Netwealth. The Motley Fool Australia has recommended Hub24 Ltd and Praemium Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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