Bell Financial Group Limited 

Full-year Profit Rose 20% on PCP: Bell Financial Group Ltd (ASX: BFG) posted full-year net profit after tax amounting to $24.7 million which reflects the rise of 20% on PCP. However, the company’s revenue rose by 7% and stood at $220 million. The top management of the company had stated that they delivered robust operating performance and have made substantial progress on the number of growth initiatives. The group has increased the ownership of online broking business Third Party Platform Pty Ltd (TPP) to 100% from 56.63%. The management added that TPP’s award winning online broking platform is utilized by the retail clients (Bell Direct) as well as by the financial planners and institutions (Desktop Broker).


Financial Highlights (Source: Company Reports)

Also, the company is possessing decent margins’ position as its net margin witnessed YoY improvement of 0.9% to 11.3% in FY 2018 which reflects its improved capability to convert the top line into the bottom line.

TPP To Be A Primary Contributor: The company expects that TPP would be a strong contributor to the company moving forward, and it also expects that the acquisition would be delivering meaningful regulatory capital savings, and ongoing operating synergies because TPP’s platform and technologies are rolled out and integrated across the group. BFG stated that technology is very important when it comes to future growth. The company has a solid pipeline of work and they are also committed to deploying and growing the business.

Stock Recommendation: In the past one year, the company’s stock has delivered the return of 10.10%. The company is trading at an attractive TTM P/E multiple of around 9.94x. Also, the company’s dividend yield stands at 8.28% which can be considered at the decent levels.  If we look at the stock’s YTD performance, the stock has risen by 2.42%. Talking about the valuation parameter, the company’s stock seems to be slightly undervalued as its P/CF ratio stood at 6x while the industry median (Investment banking and investment services) of 11.9x. Therefore, it can be considered that the stock is offering a decent level to make an entry. However, the company’s Board had stated that cyber risk is an increasing area of concern throughout the financial services industry. The company is focused on the ongoing development of cyber security measures. Considering the above-mentioned factors, we give a “Buy” recommendation on the stock at the current market price of A$0.850 per share (up 0.592% on 13 March 2019).  
 

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