One of Australia's leading insurance brokers, Austbrokers Holdings Limited (ASX: AUB) on Wednesday reported its interim results for the half year ending 31 December 2014.
Here are eight key takeaways:
- Operating revenue increased 6% to $97.7 million
- Adjusted net profit after tax fell 14.8% to $12.5 million
- Underlying earnings per share sank 18%
- A fully franked dividend of 12 cents was declared. The stock will trade ex-dividend 9 April with payment date 30 April
- Broker income increased by 1.4%
- The client base expanded by 4.3%
- Premium funding income added 2.7%
- Underwriting agency income jumped 26%
Buy, Hold, or Sell?
Austbrokers is a well-regarded company with attractive business economics and a commanding Australian and New Zealand market share. The question for shareholders and investors alike is whether the current price of $9 a share represents fair value or not?
With management guiding the market towards a flat to 5% growth rate for adjusted NPAT in the full year, the implication is that the stock is trading on a price-to-earnings multiple of approximately 15.7x – assuming the lower end of guidance and after adjusting for the greater number of shares on issue. This is below the average multiple of the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO), which is trading on approximately 18.7x and could suggest a relatively attractive investment opportunity for long-term investors with a diversified portfolio.
