Nice write up for PFG in the latest Boat Fund Monthly Report:
Prime Financial Group (PFG) is an integrated wealth management and accounting
services business. PFG provides a range of services from financial planning, investment
advice, accounting and insurance. PFG has over $1.1B of FUM now and services over 40,000
clients nationally through its directly owned accounting practices or through its joint ventures.
The company has been around for 18 years and is led by the MD, Simon Madder, who owns
14% of the equity.
PFG is an acquisitive company and has over the years acquired minority interests in its joint
venture accounting partner groups. More recently the company has shifted its strategy to
consolidate these minority holdings and fully acquire high performing and strategic wealth
and accounting firms. We believe this strategy will help simplify the company’s financial
reporting and help investors better value the business going forward.
In mid June PFG updated the market that FY2017 NPAT will grow by 23% – 30% on underlying
FY2016 to $3.4M - $3.6M or approximately 1.8 cents EPS. Final dividend is also set to increase toa full year dividend yield of circa 5% ff. What’s more pleasing is the strong growth in FUM over
the period which is a lead indicator to further earnings growth in FY2018. We also expect that
the recent acquisitions of 100% of MPR Group and Altezza Partners accounting businesses, will
further add to next year’s revenue and earnings growth.
Like PEP, PFG ticks many of the boxes of the kind of business we look to invest in – a company
that has undergone a strategic shift and is now growing strongly, management and board
with large equity ownership, 80% recurring revenue base, a business that generates cash and
has low capex requirements, a sector with positive tailwinds, no brokerage coverage yet and
finally significantly undervalued. TBF estimates that PFG will earn between 2.2 cents to 2.4
cents EPS in FY2018 placing the stock on PER multiple of circa 8x and a fully franked yield of 5%.
Comparable peers such as Kelly Partners (KPG), Easton Investments (EAS), Centerpoint Alliance(CAF) and Count Plus (CUP) all trade on PER multiples of 15-20x. We value PFG at 34 cents.
PFG Price at posting:
20.0¢ Sentiment: Buy Disclosure: Held
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