Mortgage Advice Bureau (Holdings) PLC Q&A with Zeus Capital (LON:MAB1)

Mortgage Advice Bureau (Holdings) PLC

Mortgage Advice Bureau (Holdings) PLC (LON:MAB1) is the topic of conversation when Zeus Capital’s Research Director Robin Savage caught up with DirectorsTalk for an exclusive interview


Q1: Mortgage Advice Bureau made its trading update on the 24th May and it’s due to release a pre-close trading update on the 25th July. Why have you published a 14-page research report today?

A1: Well, the research reflects on that first 2.5 years as a listed security on the AIM market and it looks forwards to growth for the next couple of years so it’s a really a position piece, an informative piece. It reminds investors that Mortgage Advice Bureau’s management has delivered on its promises at IPO despite difficult market conditions in the housing market and the quality of Mortgage Advice Bureau’s revenues and earnings I largely due to MAB’s business model which is highly cash generative and capital light.

Looking forward, we observe that MAB is set to deliver over 15% in its advisors and therefore higher than that growth in revenue and it has initiatives that are designed to increase productivity. I think that investors that read the research will recognise that MAB has a high-quality revenue and profit stream which arguably deserves to be more highly rated.


Q2: So, what do you expect MAB management to say in its interim pre-close statement on the 25th July?

A2: I expect they’ll repeat the theme set out in their 24th May AGM statement so there were two main themes, one of which was new business recruitment this year of advisors, recruitment of advisers is to be weighted to the second half of the year and second, that MAB specialist and technology-led approach continues to differentiate Mortgage Advice Bureau.

The first half of 2016 was particularly active, I’d expect the growth in revenue in the first half of 2017 to be subdued, relative. However, for the calendar year 2017 and calendar 2018, I would expect MAB’s growth to be driven by the number of advisers which, let me remind you, the management is very confident that they will be able to deliver adviser growth of over 15% for the next few years.


Q3: This year MAB shares are up 17% to 405p, up over 12% over the FT All-Share which itself is up 4%, where do you see MAB shares trading at over the next few months?

A3: Well, last time we spoke on Mortgage Advice Bureau, the shares were trading just below £4 a share, that was just after the full-year results, the shares have traded well in April and May, rising to a high of £4.90 on the 9th May and since then they have come back to around £4 a share. I think this looks like a good time to buy MAB shares, I remind investors of MAB’s ability to pay out earnings as dividends and really, we see the sensible way to value the stock is on a dividend yield.

In 2016, MAB paid out 100% of its exceptional gain and 90% of its underlying earnings, the forecast for 2017 DPS of 21p per share which is 15% above last year’s regular dividend so 15% growth is a sensible level of growth which is considerably more than you get in the market. At £4 a share, MAB trades on 5.3% dividend yield which is nearly 40% above the market yield and at £4.90 which is a pretty credible price, in fact it was a recent high, MAB shares will trade on 4.3% dividend yield which is a 13% premium to the market yield. So, with above market dividend this year and expected in 2018 and beyond, MAB shares are arguably still attractive so in short, MAB has both growth and yield attraction.

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