Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
The good times keep rollin’ with Steadfast
From humble beginnings, when it listed on the ASX in April 1996, Steadfast Group (ASX:SDF) has grown exponentially, and is now Australasia’s largest general insurance broker network, comprising brokerages with more than 500 offices across metropolitan and regional Australia and New Zealand. Considered a market leader and an innovator in insurance broking, Steadfast has been quietly growing its business which has allowed it to increase earnings, dividends, and upgrade guidance for FY22.
The Steadfast Network has 434 general insurance brokers in Australia, New Zealand and Singapore, who receive superior market access. These brokers have have access to over 160 products and services which support their business and allow them to focus on their clients’ insurance and risk management needs. Key benefits of being a Steadfast Network broker include improved policy wordings, broker services, exclusive access to Steadfast’s technology and triage support for challenging claims.
At its half-year results, the group posted a record profit result, above expectations, with underlying EBITA and underlying NPAT both up 19.3%. Here were some of the highlights:
- Underlying revenue of $437.8m, up 6.6%
- Underlying EBITA of $125.4m, up 19.3%
- Underlying NPAT of $60.4m, up 19.3%
- Underlying EPS (NPAT)2 of 6.98 cents per share, up 17.1%
- Interim dividend (fully franked) of 4.4 cents per share, up 22.2%
- Statutory NPAT of $73.4m (1H20 loss of $71.9m)
- Steadfast Network GWP grew by 13.9% to $4.5 billion in 1H21.
Insurer partners have access to more than $10.5 billion of gross written premium from the small-to-medium enterprise (SME) market through the Steadfast Network. Managing director and CEO Robert Kelly said, “Our underlying earnings growth for the period was predominantly driven by excellent organic growth in the group’s insurance broking and underwriting agencies and our prudent acquisition strategy.”
He added: “Our track record of earnings growth, continued price increases by insurers, our recent accretive acquisitions and deep pipeline of acquisition opportunities, position Steadfast well to deliver further increases in shareholder value over the long term.”
Since Steadfast reported its FY21 results insurers have continued to increase premium rates, and volumes have been on the rise. Underlying EBITA growth of 22.9% was driven by both organic and acquisition growth, as a direct result of the continuation of premium rises by insurers and the company’s continued drive for cost savings within the network. The board also declared a fully franked dividend of 4.4 cents, up 22.2 percent.
What really impressed the market, however, was the boost to FY22 guidance. The company expects to deliver at the top end of its guidance range:
There are currently nine broker ‘buys’ and two ‘holds’ on the stock. Macquarie has a buy recommendation with at target price of $5.50. The broker was especially happy with the update to guidance of 2.5%.
Strong organic growth continued across the network and 18 acquisitions were closed in the half, suggesting money to come. Macquarie raised its earnings forecast by 2.2% in FY22, and cuts by -4.9% in FY23. The broker has retained its ‘outperform’ rating, admiring the trapped capital pipeline and improved technology efficiency.
