MA Financial bets big on real estate, lifts profit after stronger than expected half
MA Financial booked a stronger than expected half as its investment in residential property lender MA Money starts to pay off.
MA Financial Group has flagged a boost in earnings as its investment in residential property lender MA Money starts to pay off and its funds management and Finsure mortgage aggregation businesses continue to experience strong growth.
The investment bank, formerly known as Moelis Australia, also announced two key institutional initiatives including an Australian real estate investment vehicle with Warburg Pincus and a strategic partnership with Humm Group that will tap demand for loans via its private credit business.
After lagging behind the broader share market this year, MA Financial’s share price surged 16 per cent to a seven-month high of $5.13 after its interim results came in stronger than expected and the company flagged “materially higher” underlying earnings per share in the second half of 2024.
Statutory net profit fell to $13.5m in the first half from $17.3m in the previous corresponding period.
Underlying net profit fell 27 per cent to $17.8m despite 5 per cent growth in underlying revenue.
But the company said the fall in profit reflected the impact of investment in future growth, including scaling the MA Money platform, expanding the Group’s Private Credit business into the US and investing in the growth of the MA brand.
Strategic investment in growth initiatives represented an $8.6m drag on earnings before interest tax and amortisation as expected. This expense is expected to fall about 50 per cent in the second half as MA Money reached profitability after strong loan book growth and a steady rise in its net interest margin. The interim dividend was unchanged at 6 cents a share fully franked.
Underlying profit beat a UBS forecast by 8 per cent and the dividend was twice its expectation.
“MAF continues to move through a transition period, but reiteration of medium-term targets, MA Money moving towards profitability, strong momentum in assets under management flows and some new products to be launched all sets the business up strongly,” UBS analyst Tim Piper said.
Asset management recurring revenue margin was “slightly soft” but he expects that to improve in the second half of 2024. Loans issued by MA Money in the first half rose 231 per cent to $1.6bn versus the second half and continued rising to $1.6bn by August.
MA Money recorded a net interest margin of 1.1 per cent, up 20 basis points versus the second half.
Assets under management rose 13 per cent to $9.7bn over the 12 months to 30 June 2024.
Total gross fund inflows rose 16 per cent or $1.1bn in the first half.
Non-institutional net inflows rose 24 per cent in the first half amid strong domestic inflows as the Group’s funds were increasingly benefiting from positive research ratings, their presence on investment platforms and inclusion in adviser group model portfolios, the company said.
Excluding institutional flows, gross inflows rose 33 per cent in the half amid continued strong demand for MA Private Credit funds.
Equity capital markets activity remained “very subdued” and equities commissions slipped.
But corporate advisory fees rose 22 per cent to $22m reflecting improved M&A activity.
The transaction pipeline “remains robust” and the business had a positive start to the second half, with announced transactions expected to add an additional $11m fees in the full-year.
MAF Financial joint Chief Executive Officer Julian Biggins said underlying earnings per share in the second half of 2024 are expected to be materially higher as MA Money transitions to a profitable monthly earnings contribution and its established businesses continue to grow.
“We believe that the Group is in great shape and ready to deliver strong earnings growth,” he said.
MA Financial has reached a turning point where its investment in MA Money will start to generate “quite material revenue”, Mr Biggins told The Australian.
“The market’s been watching that very closely as a validation in terms of delivering on that investment,” he said. “From a standing start 18 months ago it now has a loan book of $1.6 billion.
“We see that as a significant opportunity to play in that residential market as a non-bank lender.
“And we have Finsure – the best aggregator in the market – processing around one in 12 home loans, so that gives us a lot of intelligence around the residential home loan market.”
He said the funds management business had repositioned to generate more recurring revenue.
“Now we’ve also got MA Money starting to generate earnings growth which means we’ll deliver material earnings growth in the second half, going into 2025 and that’s what the market’s been waiting for. That’s what we’ve been rewarded for today.”
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