The company is currently experiencing perfect like conditions - hence the upgrade so soon post listing - yet the management team (CEO & CFO) are both actuaries and therefore super conservative!
Expect another upgrade in Feb. based on the research report released recently FIG should report 5c eps this year. On a conservative 14x PE that's 70c valuation at least!
For those that are uncomfortable at reported earnings can use the cash EBIT of $12m projected for next year. For a company growing at 50-100% pa a 15x Cash EBIT multiple is reasonable so that yields a 75c valuation as well.
The company at the moment is taking market share away from the bigger players in the direct funeral insurance market. I estimate circa 30% market share of all new business. That's probably as good as it gets for now. This product is very high margin, simple and affordable ($700pa).
They are launching mortgage protection insurance in April thru their own spectrum advisor group and exclusively with Finsure. Finsure group currently writing more loans than mortgage choice!!
Mortgage protection is 3x the size of the funeral market and even better, the management team and board have excellent trackrecord there! (Read Aus Life Insurance Group) they founded and sold the largest player in the space.
In terms of risk and ASIC review of the sector - this has no impact on FIG. The review is focused on advisors (FIG is a product manufacturer) and trying to taper the activity of Advisors churning clients for the sake of the upfront clip. To give some example, at the moment FIG only collects 40% of the premium as upfront hence already significantly below the proposed limits.
The main impact from the review will come on advisors and to some extent Spectrum and Finsure, but all that means is the advisor will make a bit less but still sell FIG's products (they still make a good margin on it).
As can be seen from the recent upgrade, the business has good earnings leverage and is getting better and more efficient in acquiring and converting customer leads.
The research report released forecasts 10c eps in 2019 and again on a conservative PE of 14x is worth $1.40 !! On 15x cash EBIT for 2019 I get $1.20.
The sector trades on an average multiple of 18x.
There was zero sell down at the IPO and management and board hold circa 40% so they obviously think there's much more to go......
I own the stock & no advice!
FIG Price at posting:
50.0¢ Sentiment: Buy Disclosure: Held
