Firstly NPATA is not NPAT as it excludes real costs, which haven't been paid for.Secondly, aspirations are fine but will they hit their revenue targets (roughly 13-25% YoY rev growth required which is way above recent history) and will they maintain maintain margins (given inflation and rising interest rate impacting interest on debt) as reflected by the poor 1HY? Recent history puts doubt on this.
Thirdly, maybe they have one good year but what will longer term organic growth look like? Recent history is poor at single digit growth so why should it change given the nature of the business and industry? And how does this support valuation (e.g. the PEG ratio)?
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.
I'm sure you can run your own debt ratios.
I've seen companies collapse at these levels.
For example, QIN had net debt to profit of 8x before its collapse back in 2018.
KPG are at that level now based on 1HY annualised.
Maybe they hit FY24 rev targets so the ratio improves slightly. Or maybe they don't.
Also consider the macro environment is different today to back then.
Ask yourself why there's now related party debt, dividend cuts, CEO pay rises, etc?
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).
Like I said, there's nothing wrong with arbitraging the private v public markets (especially in the early days).
After that it is about the price you pay relative value you get and then can impart on this, which is what Constellation Software did well. Realistically what can KPG do on the latter given it's a simple accounting firm.
Plus there's barely any synergies given the cost base.
So it is pure price arbitrage only. Expectations should be realistic.
Then there's the financing side of things. You have to pay for acquisition growth and the financing method chosen matters (needs no explanation).
And eventually this arbitrage opportunity runs out either at an opportunity level or financing side (e.g. GEM).
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??
Is that a question or statement?!
I'm not here to defend PwC but the Big 4 did mid-teen percentage rev growth, easily beating KPG. But even then the overall industry growth is only ok.
And also claiming to have industry-leading margins when your competitors run partnership models (and they are essentially the bulk of the market) is not a sincere or serious claim IMO.
by the way the group grew at average 5.1% p.a. organic growth, according to their FY22 results release
You're taking a different time period.
But if you're claiming there's a difference between 5% growth vs 2% then that's really scraping the barrel. That's especially the case at current prices.
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