IOOF Holdings Limited 

IFL Details
 
Decent Increase in FUMA and Strong Net Inflows: IOOF Holdings Limited (ASX: IOF) provides financial advice and distribution, portfolio and estate administration investment management and ex-ANZ wealth management. As on 31 March 2020, the market capitalization of the company stood at $1.16 billion. The company has recently released its interim results for the period ending 31 December 2019, wherein it reported an increase of 5.2% in funds under management, advice and administration (FUMA) to $145.7 billion and statutory net profit after tax of $115 million. In the same time span, the company witnessed an organic growth with extended scale and reach and strong net inflows of $1.4 billion. The decent financial and operational performance of the company enabled the Board to declare a fully franked interim dividend of 16 cents per share which was paid on 16 March 2020. 


1H20 Financial Highlights (Source: Company Reports)

ANZ Completes Sale of OnePath P&I to IOOF: The company has recently announced that it has completed the purchase of OnePath P&I business from ANZ for a consideration of $850 million. This acquisition will play a key role in the company’s leading advice-led wealth management business and will result in efficiencies and improving outcomes for members, clients and shareholders. The acquisition is also expected to result in EPS accretive with estimated cost synergies of $68 million pre-tax p.a. 

Future Expectations and Growth Opportunities: The P&I acquisition is expected to improve the scale and reach of IFL and is likely to provide transformational opportunities. IFL is anticipating significant financial benefits from the step-change in scale and the synergy opportunities, supporting the company’s ability to lower the longer-term cost base.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation

Price to Book Value Multiple Based Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of IFL is trading close to its 52-weeks low level of $2.720, proffering a decent opportunity for accumulation. Since IFL is a technology-driven organization, the impact of outbreak of COVID-19 to the business is minimal. During 1H20, net margin of the company witnessed an increase over the previous half and stood at 4.9%.In the same time span, Debt/Equity ratio of the company was 0.26x, lower than the industry median of 0.64x. Considering the trading levels, improvement in margins and positive outlook, we have valued the stock using the price to book value based valuation approach and have arrived at a target upside of lower double-digit (in percentage terms). Hence, we recommend a ‘Buy’ rating on the stock at the current market price of $3.66, up by 11.246% on 31 March 2020. 

 
IFL Daily Technical Chart (Source: Thomson)
 

Cashwerkz Limited

CWZ Details
 
Business Strength and Sales Update: Cashwerkz Limited (ASX: CWZ) is a fintech which provides online term deposit and cash marketplace for Retail, SMSF, Advised, Wholesale and Institutional segments. As on 31 March 2020, the market capitalization of the company stood at $23.98 million. The company has recently appointed Mr Jon Lechte as the Chief Executive Officer. The company has also stated that it has 51 ADIs on the platform and has recently confirmed agreements with JBWere and a pilot program with Mozo platform. CWZ expects the sales pipeline will continue to be executed in the coming quarter.

Strong Track Record for Growth: The company has recently released its interim results for the period ending 31 December 2019 wherein it stated that CWZ has grown from $325 million in active funds to $1.1 billion in the span of approximately 3 years. During 1H20, the company has reported a decline of 10% in loss to $3.6 million. 

Growth in Active Funds (Source: Company Reports)

Future Expectations and Outlook: The company is scaling for growth and is building a strong pipeline of opportunities and strategic partnerships. In the past one year, it has secured global banks and hence, is leveraging its relationships. CWZ is expanding the scalable technology to solve problems internationally and expects a continued sales pipeline in the coming quarter is very well placed for any opportunity in FY20. The company also expects to demerge its wholly-owned subsidiary, Trustees Australia Limited.

Stock Recommendation: As per ASX, the stock of CWZ has hit its 52-weeks’ low level of $0.150. During 1H20, gross margin and net margin of the company has witnessed a decline over the previous half. In the same time span, current ratio of the company stood at 3.55x as compared to 10.7x in the previous half. On the TTM basis, the stock is trading at a price to book value multiple of 2.2x, almost in line with the industry median (Software & IT Services). Considering the trading levels, fall in margins and demerger of Trustees Australia Limited, we recommend our investors to keep an eye on the stock and give a watch stance at the current market price of $0.150 on 31 March 2020. 
 
CWZ Daily Technical Chart (Source: Thomson)

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