Investment bank Moelis Australia Ltd (ASX: MOE) has seen its share price hit a 52-week high of $3.95 today, a 68% jump so far since listing in April 2017 at an IPO price of $2.35 per share.
According to the company’s prospectus, Moelis has grown from a small boutique financial advisory business to a financial services group active in two core segments: Corporate Advisory & Equities and Asset Management. It also has a strategic alliance with the US-listed investment bank, Moelis & Company, and Moelis & Co has retained a 40% holding in Moelis Australia.
Macquarie Group Ltd (ASX: MQG) is obviously much larger and has more business operations, but Moelis could grow into Australia’s second-largest investment bank behind Macquarie.
While still in its infancy, Moelis generated $62 million of revenue in the 2016 financial year (FY16) and pro forma earnings before interest and tax (EBIT) of $18.8 million.
In the calendar year 2016 (CY16), Moelis generated $13.9 million in net profit and is forecasting $16.8 million in CY17.
At the IPO issue price, shares were trading at an adjusted P/E of 14.6x, with an annualised dividend yield of between 2.2% and 3.6%. That may not appear attractive, especially considering the 68% increase in the share price since the IPO, but Moelis should be considered a long-term investment i.e. at least three to five years. Of the ~$60 million raised in the IPO, roughly $44 million will be used by Moelis to grow the company, according to the prospectus.
While the current price might be high, Moelis might be one financial stock to watch closely – particularly when it reports its half-year in August 2017.
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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