Mortgage aggregator Australian Finance Group Ltd (ASX: AFG) recently delivered a record-breaking quarter, and the team at Macquarie says the numbers are signalling it's a good time to buy the stock.
AFG is a mortgage aggregator, or in layman's terms, the company that stands behind a mortgage broker with the financial firepower to fund the loans.
AFG does more than just fund loans; it's also a technology company with a product suite that helps brokers manage their loan book.
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Strong quarterly numbers
And it appears that making it easier for brokers to do their business is translating to good business for AFG.
The company said in a recent update that it had a record-breaking first quarter, with mortgage lodgements reaching $30.6 billion, up 10.5% on the previous quarter and up 26.5% on the same quarter last year.
AFG Chief Executive David Bailey said at the time the results demonstrated the strength of the market, "highlighted by an increasing presence of investors and a continued rise in average loan sizes".
He went on to say:
Refinance activity has eased, now at just 17% of all lodgements. This marks a notable decline from 26% a year ago, as the wave of refinancing driven by fixed rate expiries and rate competition has moderated. First home buyer activity remains stable at 11%, consistent with the same quarter last year but slightly lower than the previous quarter. Affordability pressures and competition from investors may be influencing this segment.
The company's chair, Greg Medcraft, speaking at the company's annual general meeting last week, said FY25 had been a "defining year" for the company, which posted a net profit of $35 million, up 21%.
More strong growth to come
Mr Bailey told the AGM that the company was looking to grow the loan book in its AFG Securities division from $5.5 billion currently to $9 billion by FY29, which was an "ambitious" target.
Macquarie analysts, looking at the quarterly results, said the growth in the AFG Securities division of 22.7% over the quarter was a positive for the company, as it was a high-margin area for AFG.
The analysts said operating conditions continued to support net interest margins and the growth of the company's loan book.
The Macquarie team have a price target of $2.96 on the share, compared with $2.39 at the time of writing their report, and once dividends were factored in, they were predicting a total shareholder return over a year of 29.2%.
They are forecasting a dividend yield for AFG of 5.3% this financial year, increasing to 6.4% by FY28.
