Australian Finance Group Limited

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Australian Finance Group Limited (ASX: AFG) is engaged in mortgage origination and lending business, and it manages its business from two segments: Aggregation and AFG Home Loans (AFGHL).

 1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~41.83% of the total shareholding. Challenger Managed Investments Ltd. and Watkins (Malcolm) are holding a maximum stake in the company at ~6.25% and ~6.12%, respectively.

1.4 Key Metrics: The company has reported a growth in gross profit from AUD 99.0mn in FY21 to AUD 124.7mn in FY22. Further, the loan-to-value ratio improved in 1QFY23 to 65.6% compared to 69.4% in 1QFY22. Below is captured the trend of the operating margin and current ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22: During FY22, the company reported receipts from customers of AUD 734.03mn compared to AUD 597.06mn in FY21. Further, AFG recorded growth in normalized NPATA of 20% YoY basis and reached AUD 61.31mn in FY22 compared to AUD 51.30mn in FY21.  

2.3 Investing into the Future: AFG's strategy is to provide competition to Australian customers by strengthening the distribution network, providing competitive products and investing in companies that provide a competitive edge with the aim of generating wealth for shareholders. 

2.4 Dividend History: The company declared the final dividend of AU 9.6 cents per share, bringing the full-year dividends to AU 16.6 cents per share.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is November 10, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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