Growth in a relatively flat market
This morning’s pre-close trading update confirms that Mortgage Advice Bureau (Holdings) Plc (LON:MAB1) has achieved good growth in 2017 and that 2018 has started well. Specifically:
14% yoy rise in average adviser numbers to 1,008 (31 Dec 17: 1,078);
17% rise in revenue to £109m (1H17: £50m; 2H17E: £59m);
3% increase in average revenue per adviser (i.e. productivity)
Group PBT for the year 2017 is “in line with the Board’s expectations”
Cash over £22m (including over £13m of unrestricted balances)
The number of Appointed Representatives (ARs) which use MAB continues to grow. Peter Brodnicki, CEO comments “[MAB has] a strong pipeline of new ARs and we remain confident about delivering our growth plans, both organically and from new ARs.”. Full year results are due on Tuesday 20 March 2018.
Zeus view
This trading update confirms MAB is delivering double-digit revenue, profit and dividend growth through growing adviser numbers and benefits of scale.
Unrestricted cash balances have risen by more than £2.1m (June 2017: £10.9m): this is encouraging. We leave our PBT, EPS and DPS forecasts for 2017 and 2018 unchanged (page 2).
For 2017 we expect:
16% yoy growth in gross profit to £25.7m (1H17: £12m; 2H17E: £14m);
Gross profit margin of 23.7% (1H17: 24.1%; 2H17E 23.3%);
13% yoy growth in PBT to £14.2m (1H17: £6m; 2H17E: £8m);
13% rise in EPS to 22.9p (1H17: 10.4p; 2H17:12.5p);
15% rise in the total DPS to 21.0p (interim DPS of 9.5p; final DPS: 11.5p)
For 2018 we expect EPS to rise 21% to 27.8p (consensus: 26.5p).
Valuation
At 626p Mortgage Advice Bureau (Holdings) Plc shares are trading on 23x current year 2018 earnings and, with prospects of 16% growth in 2019, a Price-Earnings-Growth ratio of 1.4x. This valuation reflects the quality of MAB’s cashflow, earnings and dividend stream.
