Into FY2017

Today is the first day of TGA's FY2917. My rough guesstimates for FY2016 and FY2017 are set out below.

I do not think that regulatory changes are likely to be introduced soon enough to have a meaningful impact on TGA's FY2017 NPAT, other than occasioning expenses responding to a perceived risk, which I have factored in by using a baseline that includes such costs ($.9 million in H1 of FY2016). I doubt if anything that TGA does on this front is going to have an impact on what Government does, so in my view the $1M plus likely to have been expensed in FY2016 was probably wasted.

TGA does not have a significant seasonality factor, so a crude guesstimate of performance can be made by simply assuming H2 to be similar to H1. The Reported NPAT for H1 was $15.4M, which included a provision for repaying customers $2.8M that sprung from customers historically terminating payments after the exact expiry-of-contract date. This suggests NPAT for H2 should be about $15.4M + $2.8M = $18.2M. I have assumed that half-on-half growth would be offset by additional expense – hiring two extra executives, for instance. Using 151 million share count for FY2016, my guestimated NPAT of $15.4M + $18.2M = $33.6 delivers a Reported EPS guesstimate of 22.25c.

Assuming no further NCML impairment expenses in FY2017, the Reported NPAT for FY2017 should get a fillip of $1.76M, because the 5-year amortisation of the NCML Customer Relations asset ends in FY2016. Of course, some new amortisation could be applied. I suggest that FY2017 Reported NPAT should be 5% higher than twice the NPAT for H2 FY2016, plus $1.76M – that is, $36.4M x 1.05 +$1.76M ≈ $40M. Using 152 million as the share count, that delivers a Reported EPS guesstimate of 26.3c for FY2017.

I expect DPS should be 13c for FY2016 (5.5c already paid), and 14c for FY2017. The reduction of payout ratio in FY2017 may occur because the boost in NPAT of $1.76M will have no impact on cash flow.

My figures are lower than the Morningstar Analyst Estimates (used to be called Thomson Consensus Estimates), which are currently:

.......... 2016 2017
EPS ... 24.5 26.6
DPS ... 13.0 15.0

I have no idea what the SP is going to do, even if my guesstimates transpire to be reasonably correct. It will be interesting to learn what the FY2016 Annual Report reports (due in second half of May). It may give us a better feel for the future prospects of the business.