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#Bear Case
Added 2 months ago

For me there is too much debt and the balance sheet has a lot of intangibles.

Debt to equity is 121%. Debt to market cap is 38%

Balance sheet has $41M in liabilities. Only $15M in current assets. $49M non-current assets. Most of this goodwill, then leases and then loans to partners.

Not sure what the debt covernants are, but in a falling market this is not for me.

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#HY20 Results
Last edited 2 months ago

The company is expanding well, recording a 23% growth in revenue and 53% NPATA growth for the first half of FY20.

Driven by price and volume increases and acquisitions, all of which appear to be delivering attractive returns. 

Still a large market opportunity and company appears to be executing well on its strategy -- one which is clear, disciplined and well practiced.

I believe their revenues are more defensive than you might initially expect, and it's great to have such a strongly aligned CEO (owns over 50% of shares).

It pays a quarterly dividend, which at the current price (77c) is yielding 5.3% fully franked.

Founder and other directors bought shares recently.

Results presentation here

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Last edited 3 months ago

Some initial notes

A roll-up play for SME sized accountancy practices. Generally not interested in services business OR roll-ups, BUT...

  • Still at an early stage. This is when roll-ups work best, when incremental gains from a low base really help move the dial, and the acquirer has a lot of low-hanging fruit. (only 15 offices in Greater Syndey area!)
  • Appear to be getting good organic growth, so revenue growth not just purely a function of acquisitions
  • Genuine partnership model with acquired partners retaining 49% interest
  • Average age of acquired partners is just 42
  • Well practiced at acquisition with 20 completed since inception
  • Business is profitable with +'ve operating cash flow. Pays a quarterly dividend (ttm of 4.4c Fully Franked, or 5.5% at current share price)
  • High target ROI for acquisition ~35%
  • Large target market -- 10,000 firms or $12b in revenue

Looks like they had a disaapointing first half with the CBD location not performing to expectations. Nevertheless, it has proven to be a very worthwhile investment.

Profit expected to be flat this year, but management confident of ~5% per annum growth over coming 5 years (this legitimiately appears very conservative).

Company guiding for NPATA of $4.3m for FY19. Which means shares are on a PE of ~ 8.6x (amortisation of acquired customer lists are excluded -- which is very reasonable in my view).

Seems cheap given likely growth. Was impressed by management at a recent conference I saw them present at.


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