Discussed last Friday on Ausbiz "The Call" last Friday.

Luke Winchester (Wini) mentioned that he owned it in his fund but had trimmed the position due to concerns about headwinds to their corporate advisory business. Claude agreed but believes SEQ will be a much bigger business in a few years time.

As a shareholder, I sent Gary Crole, Sequoia CEO an email to clarify their exposure to corporate earnings.

This is Garys response -

"In our case the Sequoia corporate revenue has not been a big business for us, it contributed about 7% of EBITDA in 2021 and will be about the same again for FY 2022 

I do not expect any fall off in our case in 2023 as the reality is we are coming off such a small base. 

Our diversification of revenue and EBITDA is the big-ticket item for us. 

The setting of the sum of parts , diversified revenue tortoise like approach commenced in 2019.

At the time we set a 7-year plan, and in this year’s accounts which will be reported on August 18 and I will spend a lot more time in presentations discussing the sum of our parts.

Many of our businesses such as smsf admin, legal documents , general insurance broking are all experiencing sure and steady growth in markets that are all significant and really do de risk the seasonality issue the report may have focussed on 

Hope this answers the question and hope you attend one of the presentations post the result

Garry"

Sequoia provided a trading update today confirming top end of guidance and announcing a buyback. Their business should be doing very well in this environment and many investors will be requiring advice from their financial advisors and Morrisons will clip the ticket on increased volatility and balancing of portfolios. Disclosure I own in Strawman and one of my biggest positions personally.

Sequoia upgraded guidance on Coffee Microcaps to $13M EBITDA for FY22, which is equal to cash earnings. Growing at over 15% per annum. Run rate $1.25m per month, $15m per annum, 12m cash, EV $80m, 5x cash to EV multiple run rate. Very cheap for a growing company.

Another great result for SEQ, knocking it out of the park again. Growth and value in one.

On ausbiz Wini (Luke Winchester) and Claude Walker both gave SEQ a buy rating and see the business as undervalued.

Dominator provided a great investment analysis on this business on Strawman two weeks ago, which is aligned to my own thesis having owned it for some time.

Adding to this is the likely listing of OpenMarkets and potentially Fin Clear providing market awareness of the value of the Morrisons business, which in my view is worth more than the current market cap of SEQ.

Morrisons is like a toll road that clips the ticket on trades and therefore benefit from high volatility markets whether they are going up or down. Unlike Selfwealth it caters to sophisticated investors and funds and is not price sensitive. It's growing as SEQ offers a range of products tied in with the Morrisons platform and its likey to grow revenues by around 25% this year, as indicated by the company.

The media has suggested a market cap of $160m for Open Markets and up to $1 billion for Fin clear, is being pitched and if they were to come to market at those types of valuation, it would highlight the value of the Morrisons asset within the sum of parts valuation. Morrisons is just 1 of 20 businesses in the group.

SEQ has an enterprise value of around $85m and is more profitable and growing faster than Open Markets.

This could be the cheapest growth company on the market. Sharecafe presentation below -

Main points indicating extreme value -

• $90m market cap
• $18m cash
• $72m enterprise value
• Generating $1m cash per month, $12m per annum
• Cash to enterprise ratio of just 6
• Organic growth at 15% per annum, plus acquisitions
• Their Morrisons business alone which makes up around half their EBITDA, is growing as fast, is more profitable than Openmarkets which intends to list for $100m
• Worth double in my opinion

Well worth watching for those interested from 19 minutes onwards https://www.sharecafe.com.au/2021/11/22/webinar-recap-tti-seq-wsi/?fbclid=IwAR1OyfX1VA7nkkTerrbZGed__rIBAm_t3NmP9K4XG5_Qvd4cb2ZFMJBPuMo

Sequoia's Morrisons Trading Platform -

Interesting article in the Financial Review regarding online trading platform Stake to offer $3 brokerage on trades. I agree with Arrowtrades on this and don't think it bodes well for Selfwealth as they will find it very hard to compete. 

For Sequoia however I really don't think it will have any impact. Their Morrison platform offers a much wider range of services to Financial Planners, Fund Managers and high net worth investors. Selfwealth and the other discount brokers haven't had any impact on their growth over the last year and while Selfwealth's growth has slowed, Sequoia's has continued to grow massively. Its a completely different market to these discount brokers and this has been proven over the last year. The other great thing about Sequoia is that their business is much more diversified and they are growing in all areas. 

Morrison Securities invested heavily in people, technology and systems to build out capability in clearing in 2019.

• Morrison’s is actively winning new business with contract note turnover up more than 300% in 2 years.

• TheSpecialistInvestment brand offers the sophisticated and self-directed market, product that is innovative and thematic.

• Morrison revenue increased from $10.2M in 2019, $14M in 2020 to $24.4M in FY21  

  • Stock on HIN increased from $1.5bn to $4bn in last 12 months.

  • Increased contract notes by 200% over last 12 months.

  • Cross-marketing opportunities emerging as AFSL holders using Morrison’s for clearing are made aware of other Sequoia operations.

The Morrisons segment of Sequoia's business accounted for 40% of the companies EBITDA, $4.6m. If this was a seperately listed business I think it would justify the current market cap on it's own. 

Still very undervalued in my opinion trading on 5.5x earnings.

SEQ did $7.5m EBITDA in the second half and have flagged a minimum of 15% organic growth going forward. I deserves a EBITDA multiple of 10 and I am estimating $17m EBITDA in FY 22 plus they have around $9m in cash. Very under the radar and well managed business. Market cap of just $93m and cash earnings equal to EBITDA. 

Catalysts include earnings growth and aquisitioins

FY2021 Highlights • Significantly improved EBITDA of $11.5M, up 139% vs. pcp of $4.8M • Accelerating 2H21 momentum, with EBITDA of $7.5M • Strong NPAT $5.5M, up 187%

Worth listening in on the webcast session today at 10.30. 

Huge profitable growth taking place and momentum growing in the business with $7.5m in EBITDA in the second half of 2021. Cash of around $9m and a market cap of just $85m. 

Maybe one for our monthly meetings, very under the radar. 

Financial results to be released on the 19th of August. 

I am expecting guidance to be given of over $10m EBITDA for FY 22. 

SEQ are in a massive upgrade cycle and have a mantra of under promising and over delivering, a great quality. 

Market cap of just $82m currently, very cheap for a company with this sort of growth. Company goal of $32m EBITDA by 2025, one to watch. 

Sequoia Financial Group now trading on an EBITDA multiple of 7.5x having upgraded guidance to $11m. Seems way too cheap and if they can achieve their revenue target over the next few years it is likely to be a multi bagger. I like managements mantra of under promising and over delivering