23 Oct 2018
Plenty of reasons to like Kelly Partners (KPG)
While one might feel the urge to flee when the words ‘accounting practice’, I think it’s fair to say that everyone is looking for a defensive sector. Well, what could be better in these turbulent times than investing in one of the two certainties in life, TAX!
The reality is that the Australian Tax Act is not getting any simpler, citizens will always look to reduce their tax bill as much as possible, and governments will continue to capture as much tax as they can. In the foreseeable future, this is simply not likely to be an industry in decline.
What’s more, a consolidation model like KPG has decent underlying growth with EPS growth in FY18 of 25%. Of course, this gets harder as the business grows but KPG is a tiny player in a huge market with ample opportunity for growth many years into the future. FY19 looks to be off to a strong start with two additional acquisitions in NSW announced already along with a new office in Melbourne.
For those that like regular cash flow, KPG pays quarterly dividends, currently 1cps fully franked. And it trades on, what we think, is a highly attractive PE of just 11x FY19.
Given such attractive metrics, from the current share price circa $1.25, we comfortably see upside of 50% or more in the near-term for this defensive growth business.