Wealth Transfer And Managed Account Adoption Will Support Long-Term Earnings Expansion

Catalysts

About Count

Count is an integrated provider of wealth management, accounting and related services to Australian clients and advice firms.

What are the underlying business or industry changes driving this perspective?

• Continued structural growth in Australian wealth accumulation and the accelerating transfer of wealth between generations is expanding the advice pool that Count can serve, supporting higher funds under management, revenue and adviser driven earnings.
• Rapid adoption of managed accounts across the advice industry, combined with low current penetration of Count investment solutions within its own 500 firm network, creates a long runway to grow SMAs, lift platform margins and increase recurring fee revenue.
• Rising regulatory and compliance complexity is pushing smaller advice and accounting practices toward larger integrated groups, and Count is positioned to consolidate these firms through disciplined acquisitions that enhance scale, operating leverage and net margins.
• Ongoing digitization of advice and accounting workflows, including CRM upgrades and scalable advice technology, should unlock operating efficiencies once transition impacts abate, improving EBITA margins and cash conversion over the medium term.
• Targeted use of AI and automation in outsourcing, marketing and technical support functions is beginning to improve productivity at partner firms, which can translate into higher adviser capacity, revenue per head and structurally stronger group earnings.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Count's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.2% today to 10.3% in 3 years time.
• Analysts expect earnings to reach A$17.9 million (and earnings per share of A$0.09) by about December 2028, up from A$8.9 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 17.1x on those 2028 earnings, down from 21.1x today. This future PE is lower than the current PE for the AU Professional Services industry at 20.5x.
• Analysts expect the number of shares outstanding to grow by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.35%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Count's heavy reliance on acquisitions to drive growth means escalating purchase multiples, integration costs and temporary productivity dips from CRM and system upgrades could dilute the benefits of scale and erode operating leverage. This may place pressure on EBITA margins and net profit growth over time.
• If macro or regulatory changes slow the Australian wealth accumulation cycle or reduce client appetite for advice, the targeted expansion of funds under management to A$10 billion and ongoing positive net inflows into SMAs and managed accounts may fall short. This could constrain revenue growth and weaken the higher margin wealth earnings mix.
• Increasing competition from large integrated players and private equity backed consolidators paying higher multiples for quality accounting and advice practices may limit Count's ability to secure attractive tuck in deals. This may reduce the pipeline of accretive acquisitions and dampen long term growth in revenue and EBITA.
• Execution risk around technology, including large scale CRM rollouts, advice tech and AI automation, could lead to repeated short term productivity disruptions at partner firms, delaying realization of efficiency gains and weighing on both segment level EBITA margins and group earnings growth.
• Legal and shareholder overhangs, such as the ongoing appeal related to the dismissed class action against Count Financial and the potential exit of a long standing major shareholder, could create valuation and sentiment headwinds. This may limit the share price multiple despite improvements in revenue, margins and net profit.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$1.48 for Count based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be A$173.2 million, earnings will come to A$17.9 million, and it would be trading on a PE ratio of 17.1x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of A$1.12, the analyst price target of A$1.48 is 24.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.