AFL has had a number of negative developments in the past year, primarily relating to the activities of prior executives. Although It's my belief that the labour market has far improved lately and that new management are much more aligned with shareholders.

It's no doubt I was aggressive with my assumptions going in to the business, but I do like to think we will see some of the unit economics I was envisioning at the start... very low lockup (cash in trust to offset WIP and imminent debtor receipts as a result) on high margins due to an impressive gross margin on little overheads. I suspect net margins will gradually approach the double digits in the coming years.

Q3 was a step in the right direction, with $4.9m in revenue and $0.34m in NPAT to parent, a margin of 7%, with room to further optimise. A 7% margin on the current $20m revenue run-rate is $1.4m of annual profits, a multiple of about 0.5x revenue and 7x PE (Excluding the cash on hand from mkt cap). That's a multiple not too high a premium to private law firms if any so I struggle to see much more downside for this business in particular but hey... its constituent firms have been rolled up so retention could do anything and as such isn't without risk.

I've conservatively estimated $0.45 as a fair value using a reversion to 10% margins over the next 3 years then an inflation matching growth rate, but there is substantial upside if they get any growth where ROIC > WACC.