Sunday Business
May 6 -- Should a company that has consistently grown its earnings by more than 30 percent a year see its share
price trade at a discount to the market? If it is real, and sustainable, like financial services company IFG Group,
then it merits further investigation.
Although quoted in euros, it is listed in London and Dublin. The operational divisions are International Trustee
and Financial Services. Both have contributed to the company's enviable growth record. International Trustee consists
of the provision of timeshare trustee and an international corporate trust business.
The timeshare business is growing steadily and has been appointed to act as trustees for a new development in
Spain for Marriott Vacation Club International. The corporate trust business is growing both organically and by
acquisition, as regulatory pressure forces consolidation in the sector.
Future growth is in the Financial Services division, where its most important activity is its financial advisory
services through the company's growing independent financial adviser (IFA) network.
More than 50 percent of the IFA market in the UK are firms with five employees or fewer and are under increasing
pressure from regulators and the greater need for technology investment.
IFG Group acts as a consolidator. It values firms acquired solely on the level of recurring revenue generated from
the existing business the company has, thus avoiding overpaying for the potential business.
Assuming modest growth, the net value for the existing recurring revenue over the next 15 years is forecast at
euro150 million, compared with the company's current market capitalisation of euro120 million. This ignores the
current profits and future potential of the trustee business and any growth in the IFA network.
The company trades on a price/earnings of 10.9 times this year's earnings, despite compound annual growth of 39
percent over the past five years. This is a growth stock on a value stock rating and deserves better.
UKpound preceding a numeral refers to the United Kingdom's pound sterling.
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