Centrepoint Alliance Limited

CAF Details

FY19 Bottom-line Turned into Profit After FY18 Losses:Centrepoint Alliance Limited (ASX: CAF) operates in the financial services industry within Australia. The company provides a range of financial advice and licensee support services (including licensing, systems, compliance, training and technical advice) and investment solutions to financial advisers, accountants and their clients across Australia, as well as lending mortgage aggregation services to mortgage brokers. On November 15, 2019, CAF published result of its Annual General Meeting 2019. The company’s chairman highlighted that FY19 was a turnaround year, with a profit before tax of $1.2 Mn as compared to a loss of $3.4 Mn in FY18.Gross profit for FY19 stood at $30,664,000 as compared to $32,275,000 in FY18. Expenses for FY19 stood at $29,444,000 as compared to $35,666,000 in FY18.EBITDA for FY19 was reported at $2.4 Mn as compared to a loss of $1.6 Mn in the previous year. This result can be attributed to a significant reduction in legacy claims against the prior year and was delivered despite a decline in revenue due to rebate runoff. 

Company’s strategy has been supported with 86% of firms in its authorised representative network transitioning to the new pricing model, and an 80% increase in new onboarded advisers in FY19 compared to FY18.

Its business services to advisers, comprise complete suite of services such as governance and compliance systems to help advisers manage regulatory obligations; advice tools, technologies and services to help advisers provide quality advice; business management services and support to help improve advisers’ business performance; and client growth templates, guides and methodologies to engage existing and new clients.


FY19 Income Statement (Source: Company Reports)

What to Expect:As per the release, underlying demand for financial advice remains strong, despite significant disruption being experienced by advisers. Rising costs, increasing regulatory requirements and revised education standards are transforming the industry. Rebates are in rapid decline across the industry and the rate of runoff is not within the company’s control.  CAF’s transition to fee-based revenue model is expected to help it in delivering a sustainable return for its customers and shareholders in the long run.

Stock Recommendation:CAF’s share generated a positive YTD return of 28.57%. The stock is trading above the average of its 52-week high and low level of $0.175 and $0.081, respectively. Its gross margin and EBITDA margin for FY19 stood at 26.1% and 2.0%, better than the FY18 results of 25.8% and -1.4%, respectively, implying an improvement in the company’s fundamental. Its current ratio for FY19 stood at 1.49x, better than the industry median of 1.47x. The company has its entire focus on assessing partnerships, acquisition opportunities and enhancing shareholders’ value, as it moves the business towards a revenue mix sourced predominantly from service fees paid by advisers. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.135, up 3.846% on November 15, 2019, taking cues from the Annual General Meeting 2019.

 
CAF Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.