KPG - Kelly Partners Group

[Thelilyinvestor]

Kelly Partners is a micro-cap in the Australian Stock Market, the company is growing fast through acquisitions and improving those acquired businesses.

Brett Kelly, the Founder and CEO looks like an amazing capital allocator and business man + extremely focused on growing EPS.

Just curious if anyone else has had a look at this, I believe it can grow earnings between 10-20% for 10+years 

I leave you atached the Owners Manual so you all can have a quick look. 

KPG-Owners-Manual.pdf

[ContrarianValue44]

18 hours ago, Thelilyinvestor said:

Kelly Partners is a micro-cap in the Australian Stock Market, the company is growing fast through acquisitions and improving those acquired businesses.

Brett Kelly, the Founder and CEO looks like an amazing capital allocator and business man + extremely focused on growing EPS.

Just curious if anyone else has had a look at this, I believe it can grow earnings between 10-20% for 10+years 

I leave you atached the Owners Manual so you all can have a quick look. 

KPG-Owners-Manual.pdf 472.22 kB · 13 downloads

Took a look at it a few days ago, it's probably not quite cheap enough for me though. Also KPG historically trades near today's valuations or at even lower valuations, so do you have any catalysts for a re-rate of the stock?

[Ronchong]

I looked at it a while back but the company is so promotional that it turns me off. There's a reference/quote to buffet/value gurus every few slides!

[Thelilyinvestor]

5 hours ago, ContrarianValue44 said:

Took a look at it a few days ago, it's probably not quite cheap enough for me though. Also KPG historically trades near today's valuations or at even lower valuations, so do you have any catalysts for a re-rate of the stock?

I also normally go for cheaper stocks but I think pure earnings growth will re-rate the stock= consistent organic growth + acquisitions + improving margins (scale) + buybacks + growth in dividends + new line of businesses like wealth management they are implementing, all this forces are acting together right now...

At around PE 18 I believe is almost "inevitable" they will grow earnings 15%+ per year for a couple of years.

The downside for me is that it all depends on the Founder Brett Kelly, he is the driving force of the company so my thesis depends entirely on him running the company.

 

[thunder_son]

I looked at the company for a couple for of days and was quite impressed. Only thing I didn't like was that EBITDA was down in 2019 and they don't mention anywhere why that is, I had to figure it out myself. Nothing wrong with EBITDA being down one year by 2% but why try to hide it? Instead just explain why

What worries me is, what is their moat? What would stop Deloitte, EY etc. from creating some subsidiary to target all SMEs and what would be KPG's response to this? This would definately squeeze the margins. Maybe I am missing something, but for now I only see Brett Kelly as the moat.

Doing a DCF I find the company at fair price to intrinsic value at a 15% discount rate. And cheap at a 10% discount

Meaning: check

Management: check

Margin of safety: discussable

Moat: Questionable

Inputs?

Update:

As interest rates seem to be rising, this might affect KPG as they use debt for their growth/acquisition strategy

Edited May 19, 2021 by thunder_son