AUB Group Limited 

AUB Details

Q3FY21 Financial Performance Update: AUB Group Limited (ASX: AUB) is an equity-based insurance broker that manages insurance-based products and portfolios on behalf of licensed insurance companies and provides risk services, such as loss adjustment, investigations, claims legal support, and rehabilitation services. The market capitalisation of the company as of 28 June 2021 stood at ~$1.62 billion. During the quarter, the company recorded robust performance with revenue growth and margin improvement compared with the prior period. AUB has reported a reduction in its Head Office Cost and has delivered savings of $2.3 million at the end of Q3, against full year target of $2.4 million. The company continues to perform well due to an increase in premium rates of 5.9% in Q3FY21. During the quarter, there was a Margin improvement flow due to the network consolidation strategy. The company has its insurances renewing, which is expensive by 20% than the prior year. AUB, currently has 700k clients, offers 1.4 million policies and 17 strategic insurance partnership and access to international placement via Austplacement in more than 450 locations as of Q3FY21.

Underlying NPAT Guidance (Source: Company Reports)

Outlook: The company has to strategize the FY21 priorities such as scaling up the portfolios, focused on M&A opportunities, enhance partner proposition, deliver market-leading technology capabilities. It has also affirmed its FY21 underlying NPAT guidance in the range of $63 - $65 million.

Key Risk: The company exposed to technology risk, due diligence risk and delays in client payment due to COVID-19 disruption and market volatility.

Valuation Methodology: Price/Book Multiple Based Relative Valuation (Illustrative)

 Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company expects the UNPAT outlook in FY21, issued in February 2021 to grow by 17.9% to 21.7% on FY20. The stock of AUB is trading above its average 52-weeks’ levels of $12.360-$22.800. The stock of AUB gave a positive return of ~31.41% in the past six months and a positive return of ~54.29% in the past one year. On a technical analysis front, the stock of AUB has a support level of ~$19.980 and a resistance level of ~$22.800. We have valued the stock using a P/B multiple-based illustrative relative valuation and have arrived at a target price with a correction of low double-digit (in % terms). We believe that the company can trade at a slight premium to its peer average P/B (NTM trading multiple), considering the decent financial performance, strategic partnership and improvement in margin. For this purpose, we have taken peers such as Steadfast Group Ltd (ASX: SDF), PSC Insurance Group Ltd (ASX: PSI), to name a few.  Considering the current trading levels and indicative valuation, the recent rally in the stock price, the COVID-19 disruption in operations, technology risk and the key risks associated with the business, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the current market price of $21.740, down by ~0.640% as of 28 June 2021.

AUB Daily Technical Chart, Data Source: REFINITIV

VGI Partners Limited

VGI Details

Business Update: VGI Partners Limited (ASX: VGI) is an asset management company that serve high net worth individuals, family offices, endowment funds, pooled investment vehicles, corporations or other businesses and other wholesale clients by investing in growth and value stocks of companies in public equity markets across the globe. The market capitalisation of the company as of 28 June 2021 stood at ~$449.55 million. As per a recent announcement, the company’s director, David Fletcher Jones, has undergone a change of interest in the company and has acquired 612 ordinary shares on exercise or settlement of 16,233 unlisted options.

FY20 Financial Result: During the period, the company has recorded normalised net profit after tax at $30.7 million, compared to $33.5 million in FY19. VGI has decided to give a final dividend of 28 cents per share, fully franked at 30% paid on 11 March 2021. The company’s Funds Under Management was at $3.2 billion at the end of March 2021.The company has reported cash equivalents of ~$42 million as of 31 December 2020, with no debt on the balance sheet.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company’s investment strategy is to invest into high-quality businesses trading below the assessment of their intrinsic value. VGI took the advantage of volatile market and will also look for selective short selling strategy.

Key Risk: The COVID-19 pandemic brought volatility in the market, economic slowdown across the globe, and has further potential to disrupt the investments markets in the near term.

Stock Recommendations: As per a recent announcement, VGI has appointed Jonathan Howie as its Chief Executive Officer. The stock of VGI is trading below its average 52-weeks’ levels of $5.800-$8.770. The stock of VGI gave a positive return of ~6.55% in the past nine months and a negative return of ~16.66% in the past one year. On a TTM basis, the stock of VGI is trading at an EV/Sales multiple of 7.8x, lower than the industry average (Financials) of 11.1x. Considering the current trading levels and valuation on a TTM basis, robust balance sheet, increase in funds under management, volatility advantage and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $6.500, up by 0.931% as on 28 June, 2021.  

VGI Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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