Trading PE on forwards NPAT is 22x approx.This is incorrect.
As I see it there are two main items in your NPATA number.
The biggest one is that you are including the earnings from minority interest share ("underlying group").
You cannot include earnings that do not belong to you.
As an aside, this is a misuse of the term "group".
The second item is amortisation of legitimate expenses. Given this is a roll-up it will also be recurring.
Otherwise you should be asking why the old DPS payout ratio is only half the statutory EPS.
17 years of 30% CAGR revenue growth
I presume your number is correct but anyway it is almost all acquisition growth, e.g. pure organic growth is just a couple percent in last few years.
The acquisition growth has been paid for in debt.
The debt levels are close to maxed out (somebody should ask the bank why?) and now require related party debt.
CEO gives himself a pay rise and is now selling shares.
IMO there's two ways to interpret this - either he is milking it whilst he can or he puts it back into related party debt to keep the show going. Neither is positive.
Dividend cut is being sold as a good thing because it is reinvestment in the business rather than a necessity to also keep it going.
Bankers will be watching closely IMO and may already be making noises.
How do you consider debt levels maxed out? Have seen other companies on much higher gearing. This company generates high levels of cashflow sufficient to make debt repayments. What is the issue with acquisition growth? The company has stated in its materials that it aims to grow as a serial / programmatic acquirer (like Constellation Software).
Industry leading EBITDA margins
The Big 4 do not publish results (because it's a partnership) so this comparison is irrelevant. Besides net margins are single digit and declining YoY so KPG is not even beating itself!
From following these guys I dont think they aspire to compare with the Big 4 especially with the news on PWC lately.. EBITDA margins are 30% which across any industries are high??
Long runway of growth and proven execution
It's a simple accounting firm and it's operating against giants where being a giant matters - what growth are people expecting from a standard accounting firm in a standard industry? There is no moat here. It's an ok firm but no more than that.
Ask yourself why organic growth has been minuscule whereas the Big 4 have done mid-teen percentage growth in the past couple of years. And even that is only ok but it's expected from the accounting industry given it's a standardised & mature industry.
IMO organic growth matters as long as its comparable to inflation otherwise margins gets eaten up. Not sure what's the issue with acquisition growth as pointed above this is the company's strategy in growing?
I stand by my call - IMO either valuation gets it or the bankers do. GLTA.
(20min delay)