I think you should at least try to calculate EV. In my calculation I did split Cash and other relevant Assets and Liabilities by NPBT attributable to AFL as a percantage of NPBT and subtracted the whole debt related to M&A.
By doing so you come to a more conservative upside.
You're generally correct! Using the same assumptions how different was the upside? I believe that it will be similar unless you foresee an increase in net debt and at that point you should use EBIT not EBT (NPBT).
So maybe a clarification would be needed, feel free to reach out to me on X or smth.
Net debt increased a bit because I used full debt but splitted the other assets and liabilities. Therefor it lowered the upside a bit.
Very nice interview with the Ceo recently! Thanks. Interesting that they plan a 10% NPBT (AFL) Margin in the shortterm. There is a significant upside if they are able to achive this. Do you have any insights what „shortterm“ is? Is it like in the next year or in three years?
Normalized NPBT attributable to owners in H1 FY 2025 was $561,000, so your "base case" is for Normalized NPBT attributable to owners to jump 179% half on half to $1.57m?
Claude, I think your point is a fair one, so let me explain my reasoning, and you can decide for yourself whether expectations should be adjusted lower or not.
First, AFL has provided information on the run rate of their acquisitions, which you can find in their presentations here: AFL ASX. I think this part is fairly linear if you trust what management is saying.
Now, regarding the Family Law business, they posted a 4.7% NPBT (owners) margin in H1 FY24, but that was probably an extraordinary half since it dropped to 2.5% in H2. I took the middle point of 3% as a normalized NPBT margin for this segment. If you want to play with an extreme case and adjust that margin down to 0%, you’d still get $0.8M from ACWE and $0.7M from ACF, which totals $1.5M. That would still represent almost 100% growth in NPBT (owners) for H2.
The business is naturally lumpy, partly because of its size and partly because of its nature. A lot of the work can be done in one half, and then you get paid all at once.
So, to answer your question: yes, they will need to grow NPBT by over 100% to justify the optimism around the acquisitions. But I don’t think management would be this bullish unless they were seeing clear signs of positive performance.
Thanks for the nice write up!
I think you should at least try to calculate EV. In my calculation I did split Cash and other relevant Assets and Liabilities by NPBT attributable to AFL as a percantage of NPBT and subtracted the whole debt related to M&A.
By doing so you come to a more conservative upside.
You're generally correct! Using the same assumptions how different was the upside? I believe that it will be similar unless you foresee an increase in net debt and at that point you should use EBIT not EBT (NPBT).
So maybe a clarification would be needed, feel free to reach out to me on X or smth.
Best,
David
Sorry for the late answer.
Net debt increased a bit because I used full debt but splitted the other assets and liabilities. Therefor it lowered the upside a bit.
Very nice interview with the Ceo recently! Thanks. Interesting that they plan a 10% NPBT (AFL) Margin in the shortterm. There is a significant upside if they are able to achive this. Do you have any insights what „shortterm“ is? Is it like in the next year or in three years?
Thanks! No, I have no idea, I should have asked ahaha
Normalized NPBT attributable to owners in H1 FY 2025 was $561,000, so your "base case" is for Normalized NPBT attributable to owners to jump 179% half on half to $1.57m?
Claude, I think your point is a fair one, so let me explain my reasoning, and you can decide for yourself whether expectations should be adjusted lower or not.
First, AFL has provided information on the run rate of their acquisitions, which you can find in their presentations here: AFL ASX. I think this part is fairly linear if you trust what management is saying.
Now, regarding the Family Law business, they posted a 4.7% NPBT (owners) margin in H1 FY24, but that was probably an extraordinary half since it dropped to 2.5% in H2. I took the middle point of 3% as a normalized NPBT margin for this segment. If you want to play with an extreme case and adjust that margin down to 0%, you’d still get $0.8M from ACWE and $0.7M from ACF, which totals $1.5M. That would still represent almost 100% growth in NPBT (owners) for H2.
The business is naturally lumpy, partly because of its size and partly because of its nature. A lot of the work can be done in one half, and then you get paid all at once.
So, to answer your question: yes, they will need to grow NPBT by over 100% to justify the optimism around the acquisitions. But I don’t think management would be this bullish unless they were seeing clear signs of positive performance.
That's a fair question you raise, Claude, thanks for the feedback. I'll get back to you when I have a bit more time :)