Australian Finance Group Limited

This report is an updated version of the report published on the 28 July 2022 at 3:36 PM GMT

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Australian Finance Group Limited (ASX: AFG) is a consumer lending company that is engaged in the mortgage origination and lending business. The company run its business from two segments that are AFG Wholesale Mortgage Broking 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 ~43.54% of the total shareholding. Lennox Capital Partners Pty Limited and Challenger Managed Investments Limited are holding a maximum stake in the company at ~6.28%, each, respectively.

1.4 Key Metrics:

During 1HFY22, the company improved its times' interest earned to around 417.2x relative to 288.8x in 1HFY21. In addition, the asset turnover ratio for the 1HFY22 stood at 0.09x, compared to 0.08x in 1HFY21.

Section 2: Business Updates, Financial Highlights & Dividend History

2.1 Business Updates:

2.2 Results Highlights of 1HFY22 & AFG Securities Portfolio Geographic Distribution: NSW state reported the largest average mortgage size, around AUD 758,290 in 4QFY22. The company remains well equipped to offer value to its brokers, and improved returns for shareholders, owing to improving customer outlook and government stimulus activities.

2.3 Dividend History: AFG shows a clear track record of paying dividends to shareholders in 1HFY22. The company issued a dividend of 7 cents per share, up by 19% from 1HFY21.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: Price/Earnings Per Share 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 not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is July 28, 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.

Disclaimer

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