We explore three companies across various industries that have demonstrated strong growth potential through their financial performance, market positioning, and strategic initiatives as they exited FY24. This blog highlights three companies—Humm Group, Praemium, and Australian Clinical Labs—that are well-positioned to achieve strong results in FY25.
With each company operating in different sectors, from financial services to healthcare and fintech, their ability to innovate and adapt to shifting market conditions makes them particularly compelling. All three companies have strong net cash balance sheets and pay attractive dividends. We will take a deep dive into each company and offer insights into why these stocks deserve attention.
Humm Group Limited (ASX: HUM)
Humm Group (ASX: HUM), a diversified financial services company, offers products ranging from buy-now-pay-later (BNPL) services to commercial leasing. Despite a challenging fiscal year, Humm reported a normalised cash profit of $60.6 million, reflecting a 19% decrease from the prior year. This drop was largely influenced by a weaker first half of the year, impacted by rising interest rates, economic uncertainty and increased competition in the BNPL sector.
However, there were several positive developments in the second half of the year, which signal well for Humm’s future prospects. The company experienced a 16% improvement in normalised cash profit compared to the first half. Additionally, net interest income grew by 5% in the second half, demonstrating a measure of stability amid rising interest rates. Humm’s net interest margin also held steady at 5.5%, showcasing the company’s ability to manage its margins even as the broader economic environment remained challenging.
Another key highlight for Humm was its ability to reduce operating expenses by 20%, achieving cost savings of $13.6 million in the second half compared to the first. This reduction in costs significantly improved the company’s cost-to-income ratio, which fell from 64% in the first half to 53% in the second half. The company’s ability to implement significant cost-saving measures underscores its commitment to operational efficiency and its focus on driving profitability despite market headwinds.
Humm’s consumer business also showed signs of improvement, with normalised cash profit after tax increasing from $6.5 million in the first half to $11.8 million in the second half. This turnaround was largely driven by the company’s efforts to rebuild and refocus its consumer division around customer needs and preferences. Humm is now concentrating on further improvements in its consumer business, with an eye on delivering sustainable, long-term growth.
Looking ahead, Humm remains focused on expanding its commercial portfolio, which has continued to demonstrate strong growth potential. The company is exploring opportunities to enter new regions and sectors, positioning itself for further expansion. A new funding program with Moelis Australia (MAF) for commercial receivables is also expected to increase the company’s capacity for capital-light growth, a key strategic priority moving forward.
At a current market cap of $400 million, Humm could potentially deliver a $70 million profit in FY25, with the possibility of a sector re-rating on the horizon, should the RBA opt for interest rate cuts early next year, the stock may experience significant upward momentum. Humm could present an intriguing opportunity for investors who are willing to look beyond its recent challenges and focus on its long-term growth potential.
Praemium Limited (ASX: PPS)
Praemium Limited (ASX: PPS), a provider of investment platforms and portfolio administration services, has been making waves in the financial technology sector. The company delivered solid financial results for the year, with EBITDA reaching $21.5 million. This represents a notable improvement on market expectations, driven by a particularly strong second-half performance. EBITDA increased by 42%, rising from $9 million in the first half to $12.5 million in the second half. This uptick in profitability reflects Praemium’s ability to control expenses while capitalising on strong revenue growth.
In fact, Praemium’s revenue for the second half grew by 15%, reaching $84.9 million, an indication of the company’s robust market position and price increases. This growth was underpinned by Praemium’s investment in capability, resilience, and IT security during the first half, which laid the groundwork for its subsequent financial success. Praemium’s scalable business model has positioned it well within the industry, with $57.4 billion in assets under administration, reflecting the company’s broad reach and strong standing in the financial services space.
One of the key strategic moves that has contributed to Praemium’s growth was the acquisition of the OneView business from Iress (IRE), a decision that has proven to be both strategic and revenue boosting. The acquisition enhanced Praemium’s revenue and EBITDA, further solidifying its position as a key player in the sector. The company’s ability to integrate the new business seamlessly while maintaining strong financial discipline is a testament to its management team’s expertise.
Looking ahead, Praemium’s growth prospects appear strong. The company has identified a gap in the market for next-generation IDPs (Investment Data Platforms), which it is poised to address with its new offerings. This product innovation is expected to drive further revenue growth and expand Praemium’s customer base to address the non custodial market for high net worth investors. Additionally, the company has remained committed to disciplined capital management, evidenced by its 1-cent dividend declaration and its ongoing on-market share buyback program. Praemium’s net cash position of $44 million provides the company with ample financial flexibility to pursue further growth opportunities.
Praemium’s management team is optimistic about the company’s future, with our estimate projecting EBITDA of $28 million for FY25. With the company trading at an EBITDA multiple of 8.5x, it remains an attractive option for investors seeking exposure to the financial technology sector and dividend income. Praemium’s combination of strong revenue growth, operational efficiency, and product innovation makes it a compelling investment opportunity in a consolidating sector.
Australian Clinical Labs Limited (ASX: ACL)
Australian Clinical Labs Limited (ASX: ACL), a leading provider of pathology services in Australia, reported solid financial results for the fiscal year. Despite a significant 59% decline in COVID-19-related revenue, ACL managed to deliver flat total revenue of $696.4 million, a testament to the company’s ability to maintain stability in its core business operations.
ACL’s underlying EBIT came in at $62.6 million, in line with the company’s FY24 guidance. However, the second half of the year was particularly strong for ACL, with underlying EBIT improving to $39.1 million, representing an 11% margin. This is a significant improvement compared to the first half, where underlying EBIT was $23.4 million, with a margin of 7%. The company’s ability to drive margin expansion in the second half of the year reflects the success of its cost control measures and its focus on operational efficiency.
ACL has carried this positive momentum into FY25, with strong growth already evident in the early months of the fiscal year. In July, ACL reported revenue per working day growth of 7.6%, alongside volume growth of 5.9%. The company’s FY25 EBIT guidance of $65-$72 million suggests that ACL is well-positioned to continue delivering strong financial performance in the coming year.
The clinical sector, in which ACL operates, has benefitted from improving general practitioner attendance volumes and a focus on cost controls, which has enhanced profitability across the board. Furthermore, recent mergers and acquisitions in the radiology sector have bolstered investor sentiment to healthcare stocks. For example, IDX’s acquisition of CAJ at 10x EBITDA and HLS’s sale of Lumus at 15x EBITDA have highlighted the value within the sector. In contrast, ACL is currently trading at a single-digit EBITDA multiple, making it a relatively undervalued player in the healthcare space.
ACL also benefits from a strong balance sheet, with a healthy cash position that provides the company with the financial flexibility to pursue growth opportunities and return capital to shareholders. The company’s dividend yield remains attractive, offering investors a steady income stream alongside the potential for capital appreciation.
One recent development that has positively impacted ACL’s stock performance is the exit of Crescent, the company’s largest shareholder, which sold its 30% holding. This move has removed a significant stock overhang and improved liquidity, making ACL more accessible to a broader range of institutional investors. Additionally, the company is now well-positioned for potential inclusion in market indices, which could further enhance its stock’s visibility and attractiveness.
Looking ahead, ACL appears poised for a re-rating, particularly if it continues to deliver strong financial results in FY25 where we estimate it is highly likely to upgrade guidance at the AGM or first half result. The company’s competitive positioning, strong balance sheet, and improving market conditions make it an appealing option for investors seeking exposure to the healthcare sector.
The TAMIM Takeaway
As we evaluate these three companies the common theme that emerges is resilience and the potential for strong future performance. Humm Group, despite facing a difficult year, has shown signs of recovery and has positioned itself for future growth through cost-saving initiatives and a focus on its commercial portfolio. Praemium’s scalable business model, strong revenue growth, and product innovation make it a compelling option in the financial technology sector. Australian Clinical Labs, with its solid start to FY25, improving margins, and undervalued stock, presents an attractive investment opportunity in the healthcare sector.
At TAMIM Asset Management, we focus on identifying opportunities like these, where the fundamentals suggest significant upside potential. Each of these stocks represents a unique opportunity to capitalise on sector trends and company-specific growth drivers. As we move forward into the next financial year, these companies are worth keeping an eye on, as they may offer considerable returns for investors with a long-term perspective.
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Disclaimer: Humm Group (ASX: HUM), Praemium Limited (ASX: PPS) and Australian Clinical Labs Limited (ASX:ACL) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
