News: IFL IOOF Holdings HY Underlying NPAT Up 5 Pct, page-18

While I like to think I understand the business itself, I'm afraid I some months ago ceased to truly understand the risks facing the business.
(I guess some might argue that if you don't understand the business risks, you can't really understand the business.)

Accordingly, given the imponderables and the uncertainty following the Royal Commission fall-out, I gave up making explicit forecasts for future earnings for IFL.

Instead, what I have been resigned to doing, in relation to my investment in IFL, is to reverse engineer the investment, by solving for the degree of earnings reduction that is being priced into the share price.

That approach led me to believe that the share price at the time (~$4.85) was pricing an evaporation in profitability of such a degree that I couldn't fathom to be possible, namely in excess of half of current baseline earnings (Refer: https://hotcopper.com.au/posts/37330431/single).

I haven't listened to the webcast, but having scanned the accounts, as well as the presentation, there is nothing that I can see that makes me think that anything near 50% reduction in base case earnings [*] is on the cards over coming years.

Sure, a 10%, or perhaps a 20% reduction, maybe, but not 50% or 60% (which is what the market was implicitly telling us).


[*] Pro forma, assuming the ANZ wealth acquisition is concluded in its entirety.