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Impressive numbers - and a confident outlook.
Given the change of focus to cash generation and away from acquisitions the numbers were below Liberum's forecasts.
They've revised their numbers on the new model, and now go for:
last year - 28.5p EPS, 8.7p dividend
this year - 32.7p EPS, 10p dividend
next year - 35.6p EPS, 11p dividend
They have a new target price of 484p.
So the current year P/E is down to around 8.7, due to the prior concerns re cash generation (according to Liberum). Those concerns should now be addressed - if so, there is serious upside here.
Nice little in-fill acquisition this morning:
Https://www.investegate.co.uk/afh-fin-group-plc--afhp-/rns/acquisition-of-the-assets-of-groom-associates-llp/201911040700060607S/
Liberum retain their Buy and 568p target price:
Https://investing.thisismoney.co.uk/broker-views/
Edmond Jackson says Buy - a nice balanced article concluding that the investment rationale remains in place:
Https://www.ii.co.uk/analysis-commentary/stockwatch-director-share-buying-justifies-optimism-here-ii509352
For the record, here's a couple of extracts from Liberum's post-update note:
"AFH Financial Group*
Focus on organic growth should lead to a re-rating
BUY
Target price 568p | Published price 276p | *Corporate Broking Client of Liberum
AFH's business update provides clarity on their business strategy. The 3-5 year targets have been reaffirmed showing the firm’s continued growth ambitions, however, when the current pipeline of acquisitions is complete there will be an increased focus on generating organic growth and driving operational efficiencies within the business. We view this as a pragmatic decision that will allow time for free cashflow to be generated. This will in time provide the ability to fund future acquisitions and deliver progressive dividends to investors.
AFH now trades on a FY20 P/E of 7.8x, which, for a business with at least 8% net flows and focussing on cash conversion, offers significant value. A re-rating of the stock appears likely. Re-iterate
BUY."
"Financials and valuation
We continue to value AFH on 16.0x FY20 P/E which gives our TP of 568p. We believe the strong organic growth at AFH, its focus on operational delivery and a reduction of the perceived dilution risk will be viewed positively be shareholders. A significant re-rating appears likely as the current FY20 P/E of 7.8x is significantly below its historic average forward P/E of 13.0x and the 18.0x forward P/E it traded to in 2018. This appears particularly cheap when we have seen continued corporate activity in the wealth management space and interest in wealth managers from private equity. Our TP indicates 106% upside. BUY."
Liberum have issued a new broker note today and reiterate their Buy recommendation, with an unchanged price target of 568p.
Very reassuring RNS, good news. H2 trading is going well, no further funding will be required, organic growth continues to thrive, future acquisitions will be from free cash flow.....time to re-rate back upwards:
Https://uk.advfn.com/stock-market/london/afh-financial-AFHP/share-news/AFH-Financial-Group-Plc-Business-update/80821933
Lombardier seem to reckon the price is right. 0 to 60..., I mean over 6%. Looks a fast build to me.
Another acquisition for cash, this time £1.7m initially with the £1.5m balance again dependent on performance. Liberum have issued a broker note this morning and again reiterate Buy with an unchanged target price of 568p:
Https://uk.advfn.com/stock-market/london/afh-financial-AFHP/share-news/AFH-Financial-Group-Plc-Acquisition-of-Broadleaf-F/80749410
""This acquisition follows the recent acquisitions of Mulberry Independent Financial Advisers and AE Garment, bringing the total committed spend to GBP10.4 million since the Convertible Loan Stock placing in July 2019. The acquisition has been completed on a similar attractive multiple to previous transactions and extends the AFH footprint in the North West of the UK."
Liberum retain their 568p target and Buy rating.
They also leave their forecasts unchanged - 31.1p EPS to 31st October upcoming, and 35.6p EPS for next year.
With 8.7p and 10p dividends on top.
Excellent earnings-enhancing acquisitions this morning, with more to come soon from the sound of it. And this statement is encouraging too:
"The Company continues to enjoy strong organic inflows of funds from existing and new clients with low redemptions. During the current year double digit gross inflows continue to be achieved whilst outflows, including pension drawdowns, remain below 2%."
Hopefully the RNS re Polar Capital last night, together with the late upturn in the share price, indicates their selling has stopped and it's time for a decent rebound.
Tipped in the IC this morning:
Https://www.investorschronicle.co.uk/tips-ideas/2019/08/01/afh-financial-offers-undervalued-growth/
"Tips of the Week
AFH Financial offers undervalued growth"
Perhaps someone could post the full narrative later this morning for the record.
Note per today's RNS that there are "five potential acquisitions currently at various stages of the due diligence process".
So the good news flow should continue pretty quickly.
Excellent news this morning - the issue of CULS reduces dilution, with the conversion price set at 420p, and settles any doubts regarding likely further funding of acquisitions.
There's also a nice little statement that the confident trading in the last results outlook has continued with no change:
Https://uk.advfn.com/stock-market/london/afh-financial-AFHP/share-news/AFH-Financial-Group-Plc-Proposed-Conditional-Placi/80227652
Edmond Jackson likes AFHP and has tipped them as a Buy on the dips (that would be now then!):
Https://www.ii.co.uk/analysis-commentary/stockwatch-kicking-tyres-brokers-55-upside-target-ii508415
Conclusion:
"Company broker projects 55% median upside
In the next three-to-five years AFH aims to increase funds under management from £5.4 billion last April to £10 billion and earn £140 million revenue with an operating margin of 25%. That implies EBITDA operating profit of around £35 million. That's fine so long as quality doesn't start to get diluted buying companies, and there's no wider crisis of investor confidence.
Shore Capital (joint broker to AFH with Liberum which is also Nominated Adviser) posits that if AFH achieves such targets then compound annual EPS growth of 25% is possible. It estimates a fair value range for the share price of 490p to 650p (mid-price 570p) on a 12-month forward view, assuming EPS of 32.7p to 2020 and multiples of 15x to 20x.
Shore reckons that as contingent liabilities for acquisitions are paid down with cash flow over 2-3 years, the earnings multiple will drop into single figures. However, this assumes no further share issuance, with future acquisitions relying on cash generation once deferred considerations have been paid.
Buy the dips, mindful of long-term risks
Market jitters anytime are liable to hit AFH just like they would any relatively small financial stock. But, all-considered, I suggest buying such dips. Financial planning looks a relatively dependable sector with good margins, and clients may prove stickier to their funds than is my fear in a downturn, although do remember that asset manager revenues link to a fund’s underlying value. Add."
Commentary from Shore Capital - some nice share price targets:
"AFH's Valuation Lacks Future Deals Scenario: Shore Capital
0952 GMT - AFH Financial Group's current valuation isn't close to capturing either the quality or growth in earnings, says Shore Capital, citing the company's healthy pipeline for future deals. "Our three-year forecasts make no assumptions about future acquisitions and still project compound annual EPS growth of 25%," says the U.K. investment group. Shore adds that its initiation report set a fair value range of 490 pence to 650 pence, "with a blue-sky scenario at 765 pence" where AFH meets its aspirational three-to-five year targets to double funds under management to GBP10 billion and generate Ebitda of around GBP35 million on annual revenue of GBP140 million."
Agreed - terrific numbers. I had a small stake here prior to today, but topped up first thing this morning.
:)
Excellent growth across the board announced today:
"Revenues up 61% to £36.6 million (H1 2018: £22.7 million)
Underlying* EBITDA up 74% to £7.7million (H1 2018: £4.4 million)
Underlying* EBITDA margin increased to 21.0% (H1 2018: 19.5%)
Profit after tax up 80% to £4.5 million (H1 2018: £2.5 million)
Statutory Earnings per share up 56% to 10.71 pence (H1 2018: 6.85 pence)
Underlying* Earnings per share up 49% to 14.87 pence (H1 2018: 9.98 pence)
Funds under Management of £5.4bn, up 68% (H1 2018: £3.2bn)
Really as good as it gets.
GLA
GS
Joined in today. Cant see much downside at this price, unless they dont deliver the expected numbers
GLA
Close to a 52 week low.
Either way, added more today. I would expect the 1/2 year numbers due out next month to be very good given that aspirational targets were set in the AGM statement. Silly to do that unless you are pretty sure you have at least started the new year going in the right direction.
I picked my first block up in Feb after a big write up in SCSW which concluded with "the shares are lowly rated and there is scope for profits to double in the years to come. With growth delivered with metronomic reliability, AFH really is as good as it gets. Buy"
GLS
GS
https://www.afhwm.co.uk/investor-relations/media/19/03/afh-investor-conference-call-recording/
Good set of figures.
Nice call TheGekko, i missed out on a nice profit because of you.....