Mortgage Advice Bureau (... Share Discussion Threads

[hazl] 22/4/2015 10:33

pays a dividend as well

[hazl] 17/4/2015 16:51

good close

[hazl] 17/4/2015 11:39

excellent progress ....visibility is better

imo

[hazl] 16/4/2015 12:44

Not insubstantial trades

imo

[hazl] 16/4/2015 08:17

thanks gargleblaster!!

[gargleblaster] 15/4/2015 23:13

Just bought in today on the back of this write up in shrs mag - wish I had been quicker off the mark!


Fast cash at Mortgage Advice

Maiden results give glimpse of MAB’s quality

Frothiness in the initial public offering (IPO) market means investors need to be especially careful when looking at recently floated stocks.

Cash shells are coming on to the market and surging to fantasy valuations, as covered in Agenda – Gate Ventures.

Flying distinctly under the radar is Mortgage Advice Bureau (MAB1:AIM), listed in November. Profitable, fantastically cash generative and delivering returns on capital which are off the charts, investors can still buy the shares at little more than 10% above what institutions paid to access an over-subscribed IPO.

Before getting on to the numbers we should look at what the business actually does.

MGEADVICE BURU(HDG) (WI) - Comparison Line Chart (Rebased to first)

OUTSOURCING BUREAU

Mortgage Advice Bureau (MAB) is the brand used by the majority of the independent mortgage brokers, known as Appointed Representatives (ARs), that use its bureau services.

Derby-based MAB provides a route to market for these brokers through its relationships with lenders, its brand and a range of outsourced services, most notably regulatory compliance and its proprietary IT platform MIDAS.

Outsourcing these activities enables ARs to focus on meeting new clients and winning business.

Insurance commission is also a key revenue earner at MAB contributing 41% of revenues compared to 42% in the mortgage division. These are mostly cross-sells to mortgage clients, according to analyst Robin Savage at house broker Canaccord Genuity.

PROFITABLE

Profitability is only a twinkle in the eye of many entrepreneurs bringing their businesses to AIM. Mortgage Advice Bureau co-founder and chief executive Peter Brodnicki tells Shares the business he majority owns grew pre-tax profit 40% a year in the five years prior to listing.

Results just out (26 Mar) show MAB continues to expand at the same pace. Year-ahead earnings per share are forecast by Savage at 14.3p, from 12.7p this year – a growth rate of 12.6%.
Growth: MEDIUM

Market share continues to grow in a mortgage market still well below its 2007 peak.
Risk: HIGH

Regulatory changes, customer concentration and retention of key personnel are considerations.
Quality: MEDIUM

Excellent cash conversion and returns on capital are offset by a short public trading record.

CASH GENERATIVE

Small businesses can suffer working capital strains as they grow, hindering their ability to reinvest. Brodnicki says the opposite is true at Mortgage Advice Bureau. It collects commissions from lenders and takes its cut before handing over the funds to brokers using its platform, meaning it has a negative working capital requirement.

Capital intensity is also low in the business, meaning return on average equity last year came in at 59%. These factors explain MAB’s target dividend pay-out ratio of 60% of earnings, which puts it on a forecast yield of 4.8% (8.3p a share, broker estimate).

Risks at MAB centre around regulation, and a number are highlighted in its prospectus. Commission – a key part of MAB’s earnings – has come under fire from UK legislators over the past five years.

Mortgage regulation, through the Mortgage Market Review (MMR) and the forthcoming European Mortgage Credit Directive (EMCD) are also in the offing. CEO Brodnicki says
early outcomes from the MMR indicate the new rules will help rather than hinder the intermediary market.

Buy-to-let lending may also suffer when the EMCD is fully introduced, according to Savage, because of tougher rules on individual buyers – potentially reducing volume growth.
MORTGAGE ADVICE BUREAU (MAB1:AIM) 181p

Stop loss: 145p

Market value: £91 million

Prospective PE Dec 2015: 12.5

Prospective PE Dec 2016: 10.1

Prospective dividend yield: 4.8%

Bid/offer spread: 2.6%

Analyst price target: 227p* *House broker Cannaccord, 26 Mar

[hazl] 15/4/2015 14:50

also dividend in May

[hazl] 15/4/2015 13:09

nice quiet bb

[hazl] 15/4/2015 11:15

was that a bit of stake-building yesterday I wonder?

imo

[shutittrev] 28/11/2014 21:03

I've had a punt. Thanks.