Mortgage Advice Bureau (Holdings) Plc (LON:MAB1) interim results to 20 June 2017 reveal profitable growth:
* 14% yoy rise in average adviser numbers to 974 (1H16: 851);
* 15% yoy rise in revenue to £49.6m (1H16: £43.1m; 2H16: £49.7m);
* 20% yoy growth in gross profit to £12.0m (1H16: £9.9m; 2H16: £12.2m);
* Gross profit margin rose to 24.1% (1H16: 23.1%);
* 19% yoy growth in PBT to £6.3m (1H16: £5.3m);
* 23% rise in 1H17 EPS to 10.6p (1H16: 8.6p);
* 22% rise in interim DPS to 9.5p (1H16: 7.8p)
MAB has continued to invest in FinTech: “MAB has never been better positioned. … In an ever-evolving world of digitisation, MAB’s goal is to combine the very best of digital customer solutions, telephony and face to face advice with the customer in control of how they research, receive advice and transact.” Peter Brodnicki, CEO.
Current trading is “in line with the Board’s expectations”. While “the market is likely to be relatively flat in the near term, [MAB] is] confident that [its] strategy … will continue to drive growth in MAB’s market share year on year and deliver attractive returns to investors.” MAB’s market share rose 10% to 4.4% (1H16: 4.0%).
Zeus view
These results confirm that MAB’s business model continues to deliver high double digit revenue, profit and dividend growth through increasing market share and benefits of scale. Our revenue, EPS and DPS forecasts (page 2) are unchanged.
We are pleased to see MAB invest in strengthening its management team (e.g.: mortgages & protection proposition directors), improving processes and investing in digital technology. This should support growth in the medium term.
In our opinion the quality of MAB’s growth should be reflected in its valuation multiples. The risk discount rate applied to forecast dividends should be below 15%.
Valuation
At 482p MAB shares are trading on 21x current year’s earnings and, with prospects of 21% growth in 2018, a Price-Earnings-Growth ratio of 1.0x. We calculate that on our forecasts and assuming a terminal value based on a 4.3% dividend yield, 540p cum 9.5p dividend, is consistent with a risk discount rate of 15%.
