AFG Financial IPO, page-2

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Australian Finance Group founders, Macquarie to sell down in IPO
Date
May 4, 2015 - 6:47PM

Australian Finance Group's managing director Brett McKeon will focus on organic growth as the mortgage broking group kicks off of an initial public offering that will see its founders and shareholders including Macquarie Group pare their stakes.
AFG is seeking to sell 101.5 million shares to raise between $121.8 million and $140.1 million, based on an indicative per-share price range of $1.20 to $1.38, according to the prospectus. The shares will begin trading May 22.
Mr McKeon said on Monday executing existing strategies to increase AFG's loan book and broker numbers were "front and centre," as the company sought, among other things, to grow its own branded and commercial mortgages.
"The industry has certainly gone through some consolidation and it will keep going through further consolidation," he said, noting that AFG would be in a position to assess acquisition opportunities in six to 12 months.
Mr McKeon said the company was in talks to add lenders to its panel and expects broker-originated mortgages will account for 60 per cent of the market in the next two years, up from 50.4 per cent in 2014. AFG's loan book amounts to more than $100 billion.
The company competes with brokers, including Mortgage Choice. Risks in the prospectus include a heavy reliance on banks and lenders, the health of the housing and wholesale lending markets and the conduct of its brokers.
Shares prompt caution
"I think we may have passed the top of the mortgage cycle," Baillieu Holst analyst Nick Caley said, noting some caution around stocks, including Mortgage Choice.
The prospectus outlined that at the mid-point of the range, about $35 million in new shares will be issued, while $95.9 million will reflect a sell-down by existing shareholders.
Directors and founders including Mr McKeon, Malcolm Watkins, and Kevin Matthews will cut their holdings, as will shareholders Macquarie, Allianz, and TAL. None of these are exiting completely and remaining shares owned are escrowed.
Existing shareholders will own 52.7 per cent of the company, which will have a market capitalisation of $257.8 million to $296.4 million. AFG is forecasting a $17.8 million pro-forma net profit for fiscal 2015, and the IPO reflects pricing of 14.4 to 16.6 times forecast earnings.
AFG has more than 2300 brokers and a panel of 30 lenders. It earns revenue largely from commissions banks and other lenders pay brokers for introducing and retaining mortgages. Macquarie is the lead manager for AFG's float, while Morgans is the co-lead manager. The IPO comprises an institutional and broker firm offer, and a $10 million priority allocation to staff, brokers and others.