Ann: KPG Market Eye conference presentation, page-3

The founder of this company is a really lucid thinker who understands his business, and the industry in which it operates, incredibly well.

More importantly, he understands valuation principles and even more importantly than that, the concept of value-at-risk.   

The reason this is critical to the company's mission is because KPG is the classical professional service roll-up story.  And those who have observed roll-ups over time will know the road is littered with the carcasses of roll-ups that ended up, in fact, rolling down.

So, given the growth in the business is going to be driven overwhelmingly by acquisitions, you want to be sure that they aren't going to be paying too much and, critically, that the assets of the businesses being acquired don't walk out the door not long after the bank has cleared the acquisition cheque.

The CEO knows this risk and has demonstrated that he knows how to manage it.

While I sense there is a bit of bench depth in terms of the quality of management behind the CEO, it remains a bit of a "Trust Brett" investment.

Which I'm happy to given he's been doing it quite successfully for a while and still clearly has a lot of fire in the belly.

But the elevated key person risk means that the portfolio positioning for such an investment can never be overly hairy-chested.

For added context, since listing in 2017, KPG's Revenue has grown from $30m to a run rate of some $50m today, and its pre-tax earnings from $6.8m to somewhere close to $9m today.  
All without any recourse whatsoever to shareholders for funds.

Interesting to note that the CEO cites the insurance broking industry in Australia - which has been very successful in creating a lot of value for shareholders - as some sort proxy model for growth this the accounting services field:

  


That, combined with the fact that it is still a minnow in a large targeted market which is highly fragmented, suggest to me that KPG has every chance to becoming a $100m company over the next 3 two 5 years, and a $300m company in a decade's time.

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