Australian Finance Group’s residential lodgements increased 33% year on year in the March quarter and 34% in April, although the broker notes last April was benign given the bank Royal Commission and a pending election. Home loan lodgements were down -34% in April due to bank competition. Mezzanine funding has been secured to provide covenant relief.
Cash generation, a debt-free balance sheet and annuity style revenues underpin the broker’s investment case. Outperform and $1.95 target retained.
Sector: Banks.
Target price is $1.95.Current Price is $1.44. Difference: $0.51 – (brackets indicate current price is over target). If AFG meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges – negative figures indicate an expected loss).
