SelfWealth Limited (ASX Code: SWF)

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SelfWealth Limited (‘SWF’ or the ‘Company’) listed on the ASX on 23 November 2017 and
provides Australian investors with a range of investment services. Specifically, the Company
provides: a flat fee online brokerage service at $9.50 per trade, irrespective of trade size,
representing Australia’s lowest cost retail brokerage service; a Peer to Peer (P2P) network for
clients to track the portfolio performance of other clients (in real time) on a depersonalisedbasis
as well as a Leaders Model Portfolio based on a select slice of the portfolios of the top
10 best performing clients; SelfWealth Adviser Platform (SWAP), currently in beta testing
with a select group of financial advisers and due for commercial rollout at the beginning
of 2Q 2019, and; the imminent launch (scheduled for first half 2019) of Australia’s first
representative SMSF ETF (the SelfWealth SMSF Leaders Fund (ASX code: SELF)), powered
by data from 55,000+ SMSF portfolios through a commercial agreement with BGL Corporate
Solutions. Importantly, in what is a very strong endorsement of the underlying construction
methodology and appeal of the product, the ETF will receive an anticipated A$100m seeding
from ETFS Capital (originally ETFS Securities, founded by Graham Tuckwell). The ETF, which is
the Company’s largest strategic play to date, is based on SelfWealth’s core IP that generates
its Leaders Model Portfolio and in back-tested performance has generated 411 basis points
of outperformance per annum over the S&P/ASX 200 Total Returns Index over a four-year
period. SelfWealth was founded by current CEO and largest shareholder Andrew Ward and
its service offering evolution has remained faithful to the original and founding concept of
providing self-directed investors, notably Self Managed Super Funds (SMSFs), an affordable
and empowering solution to track the performance of any and/or high performing SMSF
investors. With a rapidly declining quarterly cash burn rate, expectations of continued growth
in key earnings metrics, a refocused marketing direction, improved functionality, and a capital
raise / rights issue announced in December 2018 for an expected $2.46m, we believe the
Company is well positioned to capitalise upon what is a globally unique product and service
offering.
INVESTMENT VIEW
SelfWealth is undoubtedly a high risk, high return investment proposition. We believe the
Company’s core IP provides a compelling and unique value proposition. We expect the
solution and the ETF - an ETF powered by SMSFs for SMSFs - will resonate strongly with
the target market. However, notwithstanding these positives, there is substantial uncertainty
regarding the degree of commercial traction of both the ETF and the core model portfolio
software solution. Calendar year 2019 will prove a particularly important year in providing
indications of the degree of market receptivity. The seed investment by Graham Tuckwell’s
ETFS Capital not only provides immediate FUM scale for the ETF but, given the significant
due diligence undertaken by and experience of ETFS Securities, provides reassuring thirdparty
confirmation of the strength of the underlying methodology and ability to outperform
the S&P/ASX 200 index. Our valuation of $0.23 per share implies considerable upside risk,
but investors should note that there is a high degree of inherent risk in earnings forecasts for
the Company, irrespective of the fact that we believe we have erred on the conservative side.
On account of this, SelfWealth is inherently a speculative investment but certainly one, in
IIR’s view, that has strong investment merit.