A few thoughts. The conference call felt amateurish, some questions that you would have expected management to have thought about like cost/income ratios, regulatory, were not clearly articulated. It did not inspire confidence. That is fixable. However, the key message that I thought management wanted to pass to investors was that growth is back to BAU. I also liked that they will sacrifice short-term profitability for premium growth.
The stock is cheap but as is correctly pointed out it's cheap for a reason. It's just not clear to me that those reasons are fundamental or are in proportion to the market cap of the business.
1) If you believe that FIG knows how to value the trail asset correctly then the AUD55.8mm is effectively deferred cash flow and given the size of this item book-value is very real in a Graham/Greenwald type way. They really went out of their way to give comfort on the calculations of this asset and audit of it.
2) Page 11 of their deck I think is telling, as the in force premiums continue to grow scale economies kick in - so new sales and keeping those upfront costs under control is important but i rather they spend up for customers given how profitable the policies become - further, retention will be a key metric to watch.
3) I do worry about what type of moat if any they can develop and potential regulatory impacts.
Good luck everyone!
FIG Price at posting:
40.0¢ Sentiment: Hold Disclosure: Held
