Insignia Financial Limited
IFL Details
Q3FY22 Business Update: Insignia Financial Limited (ASX: IFL) is engaged in providing financial advice to its clients. It offers Portfolio & Estate Administration services and Investment Management products suited to its clients’ needs.
- Positive Net Inflow: IFL witnessed a positive net inflow of $18 million in Q3FY22, underpinned by inflows into Adviced Platforms, Workplace Super, and MLC retail asset management offerings, reflecting continued improvement.
- Market Volatility Pulls Down FUM: The Funds Under Management and Administration (FUMA) of $317.2 billion were affected by high market volatility, moving down by $8.6 billion or 2.7%.
Asset Management Snapshot; Company Filings
Key Risks and Challenges
With high volatility in equity markets, IFL may invest in prudent risk management, increasing hedging costs. Furthermore, the current geopolitical stress amid Ukraine and Russia may sustain, affecting capital markets globally.
Outlook
The Advice simplification strategy will integrate the MLC Advice and Bridges businesses under a refreshed Bridges advice model. Active advisers utilizing Evolve-based advised platforms stood at 402 at the end of March 2022, relative to 374 in December 2021.
Valuation Methodology: Price/Book Value 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 stock of IFL gave a negative return of ~23.05% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $3.150 - $5.390. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the current capital market disruption, the company might trade at a slight discount to its peers’ Price to Book Value multiple average. For valuation, a few peers like Perpetual Ltd (ASX: PPT), Pacific Current Group Ltd (ASX: PAC), Navigator Global Investments Ltd (ASX: NGI), and others have been considered. Given the decent financial performance, favourable net inflows, decent financial position, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $3.170, down by ~1.552% as of 07 June 2022.
Markets are currently trading in a highly volatile zone due to prevailing macroeconomic and geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
IFL 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 depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and is subject to the aforementioned factors.
Technical Indicators Defined: -
Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in stock prices tend to find resistance when they are rising, and an 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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