Mortgage Advice Bureau (Holdings) Plc (LON:MAB1) has released a pre-close update ahead of the publication of its interim results on Tuesday 26 September, which reveals:
* Revenue increased 15% YoY to £49m (1H16: £43.1m);
* Average adviser numbers rose 14% to 974,
* Total number of advisers rose 58% since 30 June 2016 and 6% since last year end to 1,008 on 30 June 2017 with “new business recruitment 2H weighted”;
* Revenue per adviser rose modestly compared to 1H16 which benefited from the 1H16 spike in Buy-to-Let applications;
* At 30 June 2017, the Group had a £19m cash position including £11m unrestricted cash balances.
The outlook commentary is “steady” and MAB remains “focussed on [its] market share growth.”
Zeus view
This statement is precisely in line with management’s AGM commentary, which said “new business recruitment to be weighted to the second half.” Management continue to guide that MAB will “achieve a minimum of 15% compound annual growth in Adviser numbers over the next few years.”
Our unpublished expectations were average advisers of 971 and revenue of £48.5m. We now expect revenue of £49.4m, which is 14.6% above 1H16 revenues of £43.1m. The unrestricted cash balances of £11m are in line with our unpublished forecasts. We leave our forecasts unchanged, even though MAB is marginally ahead of our expectations.
Valuation
At 453p MAB shares are trading on 19.7x current year’s earnings and, with prospects of 21% growth in 2018, a Price-Earnings-Growth ratio of 0.9x.
We calculate that on our forecasts and assuming a terminal value based on a 4.3% dividend yield, the current price of 453p is consistent with a risk discount rate of 19%. We set out our calculations on page 3 of this note.
Peter Brodnicki, CEO of Mortgage Advice Bureau (Holdings) plc, said: “Activity overall in the housing market has remained steady and was not unduly affected by the election in early June. There are some signs of softening home mover activity. However, for most of those moving home currently, it is not a discretionary decision, with lifestyle factors causing them to need to move. The remortgaging market both for residential and buy-to-let remains steady.
“We continue to enjoy a strong financial position and are focussed on our market share growth. Our technology developments are progressing well and will help drive our future market share growth and further strengthen MAB’s overall market position in 2018 and beyond.”
