Baillieu research note says buy upto $5
Overall: IFL delivered a strategy update to the market. The update included key presentations across three core business imperatives: Advice (advisers and advice offering), Evolve (platform and systems) and Transformation (ANZ P&I and MLC acquisitions). We retain a BUY rating and $5.00 price target.
Key takeaways: Our main takeaway from the strategy day was increased confidence in the company's direction, despite the many challenges of the
COVID pandemic and a rapidly changing Australian financial services landscape. The integration of ANZ P&I, and the delivery of associated synergies, remains on track. The acquisition of MLC is also on track, with a small chance of early completion. Integration of MLC should be more straightforward than ANZ. Synergy targets for MLC are also unchanged and reiterated.
Propositions appear valid: The proposition of creating scale to achieve price leadership in platforms remains valid, in our view. The proposition of being an advice-led business also remains valid, with potential benefits from its owned and operated adviser model. That said, the culmination of this strategy requires investor patience. The MLC deal is not yet completed, while synergy and return metrics are predicated on a three-year integration.
Changes to earnings: We make no changes to our EPS forecasts, valuation or price target. Whilst the day provided no new financial information or other catalysts to alter forecasts, our confidence has increased, and a buoyant equity market provides support to the outlook.
Investment view: We maintain a BUY rating. Despite the opportunity for industry leadership on advice and platforms, and the increased confidence
taken from today's strategy briefing, we acknowledge the culmination of this plan requires investor patience. To account for this and the execution risk, we have a Higher risk rating. We hope – and expect – that IFL will continue to reward patient shareholders with an appropriate dividend. On our forecasts, IFL is offering a 5.9% fully franked dividend yield in FY21F, with significant room for growth over the ensuing two years.
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