Nice Up-grade, page-3

Company looks cheap, however there's some drawbacks here which make me hesitant.

First and foremost is the looming legislation coming in for 2017 with regards to unscrupulous life insurance providers & brokers. This involves the 40% phase-down of up-front commissions for the years heading into 1 Jul 2018, coupled with a maximum 20% for "maintenance fee commissions". There's also some reforms in there which will affect future policy retentions and 'clawbacks', discouraging financial swindlers and charlatans of the "Financial Advice" fraternity from replacing policies once the clawback period has drawn to a close. Directors have signalled that they believe the impact of these reforms to be immaterial, but only time will tell.

Cash conversion is also not great for this company, however it's too early imo to make a call on how the impending legislation will affect the company moving forward, how they'll adapt to it, whether there'll be an impact on margins, ROE and so forth. On an Forward FY17 EV/EBIT basis the company looks very cheap, and management should have a sizeable amount of cash for acquisitions moving forward. Should it continue on its current growth trajectory then the future could be very bright indeed, but as always; 'Caveat Emptor'.