Growth Focus: AUB Group Limited (AUB)

by Patrick Taylor

Date of Data Capture: 02/03/2020


Classification: Insurance Broker

Current Price: $13.76

Market Capitalisation: $1.02B

Forecast EBITDA Growth: 23.06%

Yield Estimate: 3.35%

Consensus Price Target: $14.68

# Covering Analysts: 4

Discount at Current Price: 6.69%

Price Target Trend (3-Month): Up +21.83%

Signal Timeframe: Quarterly-Monthly-Weekly

Trend Bias: Up-Down / Long-Medium

Short-term: Positive-Neutral
Medium-term: Positive
Long-term: Positive

Recommendation: Buy

Focus: (Dividend Income &) Capital Growth

Set up Notes:
• Formerly known as Austbrokers, this insurance and risk services specialist has been growing earnings steadily but also has forecasts for stronger growth expectations out to 2022.
• Persistent broad gains across sales, earnings and profits since 2017 have benefitted from margin growth and this is set to continue and grow stronger, supporting a growing dividend.
• Pricing shows a strong long-term uptrend, only occasionally pulling back in medium-term consolidations, and we think we have an entry opportunity with fresh shorter-term strength combining well with long-term momentum.
Support ($): 13.00, 12.00, 11.00 and 10.00.
Resistance ($): 14.00, 15.00 & clear.


Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

Most investors try to avoid risk, but we prefer to manage it – and this where our current focus sits with AUB Group firming higher on good performance and forecasting – price is now pushing higher against old resistance, but we believe this is an attractive opportunity for a growing insurance company that doesn’t come at too high a premium.

Originating in 1985, and previously known as Austbrokers, AUB Group is a risk specialist based in Australia, offering management, advice and solution services to clients throughout domestic markets, as well as a growing presence in New Zealand. The company operates on an equity-based structure, conducive to its open and active acquisition strategy, and the company’s direct investments into insurtech business offers great potential, as well as being well positioned for good organic growth with earnings tip to increase more than 23% on last year.

Performance has been mixed, with strong periods leading price higher, before contracting under slower growth conditions. Here we see good forecasting from analysts with strong expectations for sales growth to lead earnings higher, supported by increasing margins and profits out to 2022. This is expected to maintain and improve dividend yield, already handy at over 3%, though we are more focused on capital growth. Here we find the stock carrying strong earnings growth expectations, good analyst sentiment and current attractive discount to aggregate price targets with no negative sentiment views held, in fact price targets have risen by more than 21% in the last 3 months alone.

Prising history shows a strong longer-term uptrend occasionally interspersed with intermediate pullbacks and consolidations leading to favourable buying opportunities, best signalled in the quarterly frame. Here we see that same signal emerging here as price breaks through 12-month linear resistance, set in place since August 2018, in the last few weeks. We do see $14 resistance nearby overhead, which could cause some volatility, but should that break the stock is facing blue skies with good momentum.
Looking to take advantage of any short-term weakness we think we should see AUB pushing higher on positive signalling with good performance and forecasting in support, which is always good policy.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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