The All Ordinaries Index (ASX: XAO) closed the day largely stable, at just 0.08% down on Wednesday. But the share price of one particular ASX All Ords stock presented a completely different story.
Shares in Australian Finance Group Ltd (ASX: AFG) jumped 4.36% throughout the course of the day.
The increase follows a steady month of gains, increasing 22.97% in the month of May alone.
That's a significant gap between AFG's result and the All Ords increase of just 3.09% over the same period.
Trading at $2.28 per share on Wednesday, AFG's share price closed at the highest level seen since February 2022.
Why are AFG shares flying?
At its May meeting, the Reserve Bank decided to decrease the cash rate by 0.25 basis points, to 3.85%, and analysts expect there could be much more to come. The move has sparked confidence in the sector and points to a potential wave of house price increases.
The combination of even lower interest rates, higher property prices and better business conditions has fuelled strong demand for credit.
With an extensive broker network, AFG appears to be well positioned to meet the rising demand for home loans, BankingDay notes.
In particular, AFG's manufacturing arm – AFG Home Loans – is expected to drive the lions share of business revenue growth and profitability.
In April, AFG Home Loans announced it had had its highest third-quarter lodgement volume results on record, increasing by 5% on the same quarter in 2024.
AFG Chief Executive Officer David Bailey said AFG Securities' lodgements are up 20% on the same period last year and represented 56% of all AFG Home loans lodgements.
But AFG's share price surge isn't only due to a market-wide uptick in mortgage lodgements and refinancing, there are other factors at play.
MPA points out the theory that AFG has potential corporate activity on the horizon.
Although a full takeover bid is considered less likely, the possibility of some mechanism allowing AFG's founders to reduce or exit their stakes has been floated. This group of original Perth associates collectively holds nearly 20% of AFG's shares.
This recent investor enthusiasm for AFG echoes its strong position within the Australian mortgage market.
What do analysts expect next for AFG?
According to analysts, one-year price forecasts for AFG's share price have a maximum estimate of $2.35. The average price forecast for the company's share price over the same period is $2.
The maximum estimate represents a 3.29% increase from Wednesday's closing price. Analysts' average price prediction represents a 12.08% decrease.
