Afh Financial Share Discussion Threads

[ronwilkes123] 08/5/2019 17:03

It's just on twitter someone mentioned ir here and not being able to get a response - intrigued if you do

[melody9999] 08/5/2019 16:51

Ron - I've asked the question

[ronwilkes123] 08/5/2019 14:02

Melody have you had a response toA query from ir

[ronwilkes123] 08/5/2019 13:30

I don't think that's wholly correct The trading pattern suggests a large seller the mms can't clear so have to keep dropping the price No one have an idea why no acquisitions since jan

[melody9999] 08/5/2019 13:08

Allstar - why not ask them?!

[dexdringle] 08/5/2019 12:40

I imagine the vast majority of sales are employees cashing in 3 year share options that have matured.

Don't bet against the CEO here - he's ruthless but he's a hell of an effective businessman....

[ronwilkes123] 08/5/2019 12:16

To be fair quepassaThey raise an interesting pointFurther no acquisitions since January for an acquisitive growth company ?

[quepassa] 08/5/2019 11:26

thank you for creating an interesting buying opportunity with your lack of understanding of the way their accounts and receivables work.

all imo. dyor.
qp

[ronwilkes123] 08/5/2019 08:57

Is it to do with the way they acquire businesses ?If I was you I'd pm que pass on here - I don't think this board is visited often

[allstar_07] 08/5/2019 08:08

Hi, does anyone know what the large increase in trade and other receivables in 2018 results is?

[ronwilkes123] 07/5/2019 15:42

Huge seller here - can't get a quote for anything all dayHmmm

[gosoftly7] 04/5/2019 09:12

If they achieve their new and ambitious targets, would we expect their ROC and ROE to become similar/ better than CLIGs?

[melody9999] 02/5/2019 08:24

Great report GHF. I added a few more today at 319. Noticed mostly buying over last couple of days but being reported as sells

[glasshalfull] 01/5/2019 11:27

Good morning folks,

I’m currently writing up the constituents of my (fantasy football) portfolio & now getting round to “The Consolidator”...AFHP.

The table below doesn’t copy over v well from Twitter so here is a direct link for anyone interested.



(#5) AFHP (AFH Financial) – The Consolidator

* Share Price 315p
* M/Cap £134.2m
* Enterprise Value £115.9m
* Shares in Issue 42.6m
* Stock Rank 35 (Quality 53 / Value 35 / Momentum 41)
 
Background

AFH Financial Group provide independent financial advice & wealth management services to over 20,000 clients across the UK. They currently have over £5bn of Funds Under Management (FUM) & are effectively a smaller version of St James’s Place (STJ) a £6bn m/cap. Due to increased regulation, the sector has observed considerable consolidation in recent years with AFHP one of the most active consolidators, greedily buying businesses up at a valuation that works out at 4 x post-completion EBITDA & therefore each acquisition is IMMEDIATELY earnings enhancing from Day 1. They made 16 x acquisitions in 2018 & 4 x in 2019 so far. They always acquire on an earn-out model with 50% up-front & 50% via deferred consideration based on increased targets. The deferred pay-out ratio is very high at 90% (or an overall 95% of total consideration) which highlights successful integration & forms a great reference point for potential vendors. Alongside this acquisitive growth they augmented this through the delivery of 13.6% organic growth in FY18.

Margins, Profitability & Earnings up significantly

The beauty of this buy-build model is the synergistic benefits of shared central costs & thus the cost base of AFHP is rising at a far slower pace which is reflected in the fantastic op. profit margin improvement that has become evident in recent years: -

• 2015 – 8%
• 2016 – 9%
• 2017 – 11%
• 2018 – 16%
• 2019e – 18%

The undernoted table highlights their enviable financial performance & current forecasts DO NOT factor in any further acquisitions, which we can expect with a degree of certainty as The Consolidator of 20 x acquisitions completed in the last 15 months & with over 1,400 IFA businesses in the sector there’s plenty to go for. We know any acquisition will be earnings enhancing from the off.

Yr end Oct Revenue PBT Dil EPS

2015 £21m £1.6m 5.5p
2016 £24.1m £2.0m (+25%) 6.6p (+20%)
2017 £33.6m £3.5m (+75%) 10.3p (+56%)
2018 £50.7m £7.8m (+123%) 14.6p (+42%)
2019e £81.5m £14.3m (+83%) 24.7p (+69%)
2020e £89.0m £16.3m (+14%) 28.0p (+13%)
 
Worthwhile commenting on the share price which fell considerably in Q4 2018 in line with the general market turbulence at the time…but has failed to recover in line with peers & the market. The CEO noted that their Protection Business (£10m revs) is not correlated to the market & grew organically by +30% in FY18 while the investment management side is impacted slightly on the basis that if the FTSE All Share falls by 1%, there is a 0.4% impact on FUM.

The share price peaked at 415p in mid-Sept 2018 & has lost (-100p) or (-24%) in the last 6 months despite forecasts being upgraded following positive FY18 results with a confident outlook & also an UPGRADE on their 3-5yr timeframe KPI’s issued in 2017 targeting £5bn FUM / Rev £75m / EBITDA margin 20% due to the fact they achieved 2 out of 3 KPI’s after ONLY 2yrs with the revenue target set to be achieved in FY19.

So, the new 3-5yr KPI’s are targeting £10bn FUM / Rev £140m / EBITDA margin 25% which is further reflection on their confidence following a positive start to FY19.

In conclusion, AFHP’s earnings growth has been meteoric for the last 3yrs & they are on course to deliver +69% EPS growth in the current year through double digit organic growth & also acquisition. I have used the Diluted EPS rather than Adjusted EPS in my calculations but even on the lower metric they are on a PER 12.5 & shares look fantastic value & a great risk/ reward investment at the current share price IMHO.

Also worth pointing out that they’ve ramped up the dividend annually by 30-50% in recent years from a low base, with div yield of 2.8% now approaching a meaningful return.
 

Kind regards,
GHF

[jrr1] 30/4/2019 14:57

yes all looks good, doubling FUM in 5 years and turnover 2.5 times.
not a lot going on with this at the moment whereas there was regular acquisition news.
maybe they are sighting bigger acquisition's which take longer or they may even be the target as was LGT.

[aishah] 30/4/2019 10:31

I have added recently having been on watchlist since SCSW did a write-up in Feb issue.

Shares Mag had a buy rec in Jan:
"Like many other service industries, the IFA business is highly fragmented and AFH has seized the opportunity to acquire high-quality firms and teams often for five times earnings or less.

The firm has its own acquisitions team and thanks to its strong balance sheet, bolstered by organic cash-flow growth and two timely cash raises last year, it is equipped for further acquisitions.

Having already hit two of its three 2020 targets by the end of 2018, £5bn of FUM and a 20% EBITDA (earnings before interest, tax, depreciation and amortisation) margin, the firm has set out new targets.

In the next three to five years it is aiming for FUM of £10bn, an EBITDA margin of 25% and revenues of £140m."

[jrr1] 17/4/2019 15:19

been a bit quite of late ?

[jrr1] 03/4/2019 07:48

interesting news with LGT, hopefully further consolidation with AFH.

[riverman77] 14/3/2019 21:02

Fantastic under the radar company which I've held for a while. Looks set for further stellar growth as company cheaply buys up small IFAs swamped with burdensome regulations and admin. Benefits from sticky recurring revenues and very high margins. All this justifies a high teens earnings multiple in my view, Recent price has been a bit weak so meaningful discount to peers. Founder Alan Hudson maintains a big stake.

[quepassa] 12/3/2019 10:52

Very good piece of research released this morning by Edison on peer group competitor Lighthouse Group.

Importantly, Edison give sector comparisons where AFH compares very favourably to sector in terms of 2018 p/e of 15.6x against a sector average of 14.4x.

However Edison given a forecast 2019 p/e of just 10.5x for AFH against a sector average of 14.4x which would make AFH look particularly cheap.

Indeed, the cheapest forecast 2019 p/e in the whole sector by some considerable margin. This makes the current share price look particularly compelling and may point to significant room for upwards momentum to bring it into line with sector average.

In terms of dividend yield, it must be admitted AFH lag the pack with a yield of 1.8% against a significantly higher sector average yield of 3.3%.

Nonetheless, AFH is a strong growth stock and this year management have increased shareholder dividend by a massive 50% and re-stated their commitment to a PROGRESSIVE dividend policy.

Edison also give a favourable Background and Outlook for the whole sector and whilst commenting that current macro uncertainties are generally a dampener, comment that

"there are a range of longer-term factors that seem likely to prove favourable
for the financial advice industry".


ALL IMO. DYOR.
QP