IOOF Holdings Limited

IFL Details

AGM Update: IOOF Holdings Limited (ASX: IFL) is engaged in the provision of financial advice to its clients. It also offers Portfolio & Estate Administration services and Investment Management products, suited to its clients' needs. The company has recently held its 2021 AGM on 25 November 2021, where the management has highlighted about its resilient UNPAT performance.

• Revenues reflected an increase of 31% to $770 million in FY21, aided by full 12-month contribution from the Pensions & Investments business (P&I) acquired from ANZ, and one month of MLC.
• Underlying net profit after tax grew by 19% in FY21 to $147.8 million.
• The management delivered full-year dividends of 23 cents per share during the period.
• The company has welcomed over 400 advisers to its licensed advice business as part of the acquisition and will look to focus on further integration of MLC Advice.

Trend in Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: The company is dependent on its platform for the smooth functioning of business activities, and any disruption to it can impact the company’s performance and credibility.

Outlook: The company is looking for expansion in the net operating margin through simplification of its business platform. The management is expecting its Pensions & Investments business to breakeven the netflow profile by second-half of 2023 financial year. The group has also put a proposal before its shareholders to approve the name change of IOOF Holdings to ‘Insignia Financial’.

Valuation Methodology: P/E 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: As per ASX, the stock of IFL is trading below its 52-weeks’ average levels of $3.050-$5.390. The stock of IFL gave a negative return of ~22.26% in the past three months and a positive return of ~10.68% in the past nine months. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at some discount to its peers, considering the net loss in FY21, and risk of synergy & integration with the acquired businesses. For the purpose of valuation, few peers like Netwealth Group Ltd (ASX: NWL), Pinnacle Investment Management Group Ltd (ASX: PNI), EQT Holdings Ltd (ASX: EQT) have been considered. Considering the expected upside in valuation & current trading levels, solid underlying performance in FY21, strategic simplification of business platform and optimistic outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $3.61, as on 01 December 2021, 11:44 AM (GMT +10), Sydney, Eastern Australia.

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 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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