I, too, found the result to be a bit light-on.
I guess the fee pressure on the Platform Administration business will, at some stage over the rest of my life, start to abate. Although I'm not banking on it happening any time soon.
Of course, with the passage of time, as the Funds Management business continues with its double-digit growth, the Platform business becomes less of a drag on the growth rate of the overall company, i.e., by the simple law of numbers, the rate of growth of the Whole increasingly assumes the rate of growth of the fastest-growing Part.
Valuation-wise, despite the stock's strong share price over the past 12 months (and indeed the preceding years), it still does not look expensive,
at less than 15x FY2021 prospective P/E (
less than 13.5x, if one adjusts for the $16.7m of cash the company now holds. It has never been funded using borrowings.)
Part of the reason for that modest rating is that the company is still a small cap stock, but as the earnings continue to grow, so too will the valuation multiple continue to re-rate upwards , just as it has done when the business grew from being a micro-cap (when NPAT was less than $5m pa, it traded on single-digit P/E multiples), to a small cap (earnings now in approaching mid-teens, and P/E multiple in the low-teens):
View attachment 2915657
Currently, FID trades at a 20%-odd discount to the market multiple.
That's despite it being a far better-than-average business (>30$ ROE, growing at 10% to 12%pa with lower-than-average earnings volatility).
While FID is unlikely to be rated at a valuation multiple that is higher than the market, I do expect a gradual continued upward re-rating over time... a level on par with the broader market multiple is well within the realms of possibility in 3 or 4 years' time, I feel.
Which means that, in terms of investment returns, on offer is:
~10%-12% pa EPS growth
~5% -6% pa increase in the Valuation Multiple
So ~15%pa -18% pa Capital Growth, in addition to:
~ 4% Dividend Yield
....giving in a
Total Investment Return of around 20%pa.
Decidedly attractive, I think, especially when looking at other risk-adjusted returns on offer.
.
