this was a somewhat predictable upgrade for those of us who have been following bfg for a couple of years or more. they have been growing every business segment and their outlook statements have been bullish.
they see the cost efficiencies of growing scale and as a financial stock with a SAAS component they are destined to achieve ebitda margin expansion as revenue grows whilst costs remain flat.
they are also at a sweet spot in the cycle for both m&a and capital raises in the small to mid caps, so that has boosted earnings recently.
the buyout of the TPP platform and the beight future for fusion software are going to drive further growth in eps over the next 1-2 years, as is the new york office expansion.
even at 90c bfg is undervalued with a forward p/e not much over 10 and a high dividend payout ratio leading to a grossed up 10% dividend after franking credits.
most similar financial stocks trade with p/e’s of 15-20+ however bfg is restrained by its low liquidity and smaller market cap which stops the funds from buying in, as well as the difficult time after the IPO in the gfc which still defers investors with long memories who harbour a bias against bfg.
i see the sp hitting 1.00 this year as we have previously discussed so there is upside for capital growth as well as a sweet 10% divi at these levels.
disclosure: i have been overweight bfg since it was around 60-63c a year and a half ago
BFG Price at posting:
90.5¢ Sentiment: Buy Disclosure: Held
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