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Mortgage Advice Bureau (Holdings) PLC

Mortgage Advice Bureau (Holdings) Plc Australian Joint Venture with Purplebricks Group Plc

Mortgage Advice Bureau (Holdings) plc (LON:MAB1) announced today that further to MAB’s interim results announcement on 28 September 2016, MAB has completed its investment in its new joint venture in Australia, MAB Broker Services Pty Ltd (“MAB Broker Services”). MAB has entered into this new joint venture with Mortgageport Management PTY Limited (“Mortgageport”), a mortgage manager and mortgage broker based in Sydney. MAB and Mortgageport have each subscribed for interests of 45% in MAB Broker Services for consideration of A$4,500 each, with the remainder of the shares being held by senior management of MAB Broker Services, including Darren Cantor, Managing Director (General Manager Director of Mortgageport), and Steve Weston, Non-Executive Director. Steve is an Australian national who is the former CEO of Mortgages for Barclays Bank plc in the UK and has had held senior positions in the mortgage operations of St. George Bank and Challenger Financial Services in Australia.

The initial introducer to MAB Broker Services will be Purplebricks Australia the Australian arm of Purplebricks Group Plc (LON:PURP). MAB and Mortgageport will each be providing initial funding to MAB Broker Services via loans of A$0.25m (c. £0.15m) each and MAB and Mortgageport will provide further loan funding to MAB Broker Services of up to A$0.25m (c. £0.15m) each in the first year of trading should it be required. MAB’s investment into MAB Broker Services has been and will be funded out of the Company’s existing cash resources.

MAB Broker Services will trade under the Mortgage Advice Bureau brand and will offer independent mortgage advice, with protection at the core of its proposition, consistent with MAB’s UK business model. The joint venture will leverage many of the proven systems and processes adopted by MAB in the UK, with centralised lead generation, and telephone and regionally based advisers combining to deliver a comprehensive service to the Australian public.

Peter Brodnicki, Mortgage Advice Bureau (Holdings) plc Chief Executive, commented: “As in the UK, our model in Australia is all about the customer experience and providing consumers with the choice of how they receive information and advice, and how they transact. Average property prices and mortgage sizes are higher in Australia than in the UK, with procuration fees also higher.

“We see many opportunities for the new business, which will benefit from our wealth of experience in the UK. The intermediary sector in Australia is yet to be the subject of regulatory change to the extent seen in the UK. We anticipate that this is likely to happen at some point in the future, and we will be well positioned to take advantage of the opportunities that we would expect to arise.

“Against this backdrop, and with a partner of the quality and ambition of Mortgageport, our partnership with Purplebricks, and Steve Weston’s continued involvement, we believe that the timing to test our expertise overseas in an attractive market couldn’t be better.”

Zeus Capital view
We expect the JV to have no impact on FY 16 and no material impact for FY17. However, in our view this JV has potential to be very material over the medium term. We leave the forecasts unchanged for the moment.
Valuation – At 333p MAB shares are trading on a 5.4% 2016 dividend yield with prospects of 17% growth to 6.3% in 2017. In our opinion 400p is a credible September 2017 target price, as MAB would then be trading on a 2017 PER of 17.0x, a PEG of 0.9x and a 5.3% dividend yield with prospects of a 6.3% dividend yield in 2018. If MAB shares reach 400p over the next year, the Total Shareholder Return would be 26%.

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