Agreements With Santander And Intesa Will Reinforce Market Position And Diversify Revenue Sources

Key Takeaways

• Strategic expansion into alternative assets and ETPs aims to enhance revenue through diversification and attract new clients.
  
• Strong innovation focus and key partnerships support diversified, higher-margin revenue streams and operational stability.
  
• Heavy reliance on strategic partners and ambitious expansion plans present concentration and execution risks impacting revenue diversification, stability, and potential earnings growth.

Catalysts

Operates as a B2B WealthTech company that connects fund houses and distributors in the United Kingdom and internationally.

• Allfunds Group's strategic expansion into alternative assets and exchange-traded products (ETPs) offers significant growth potential, potentially increasing revenues through diversified asset offerings and attracting new clients interested in these investment categories.
  
• The company's substantial pipeline of client migrations and wins, particularly in previously underrepresented regions, provides a strong future revenue stream, with expectations of converting a significant portion of the pipeline into concrete migrations, thus enhancing revenue through increased assets under administration.
  
• With a strong focus on innovation, including the launch of new digital tools and services powered by advanced analytics and AI, Allfunds is positioned to leverage these enhancements for subscription revenue growth, aiming to diversify income streams with higher-margin digital solutions.
  
• Allfunds' commitment to ongoing share buybacks and increased dividend payouts reflects their strong cash flow and capital generation capability, suggesting potential positive impacts on earnings per share (EPS) due to reduced share count and improved investor confidence.
  
• The strategic agreements with key partners like Santander and Intesa reinforce Allfunds' market position while diversifying revenue sources, likely contributing to stable or improved net margins as foundational client relationships strengthen operational predictability and efficiency.

Allfunds Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Allfunds Group's revenue will grow by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -26.7% today to 25.5% in 3 years time.
• Analysts expect earnings to reach €198.4 million (and earnings per share of €0.35) by about March 2028, up from €-168.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €257.6 million in earnings, and the most bearish expecting €145 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.4x on those 2028 earnings, up from -20.9x today. This future PE is greater than the current PE for the NL Capital Markets industry at 11.4x.
• Analysts expect the number of shares outstanding to decline by 1.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.77%, as per the Simply Wall St company report.

Allfunds Group Future Earnings Per Share Growth

Risks

• The competitive landscape in key markets like Central and Northern Europe, Asia, and the Americas is unpredictable, potentially impacting Allfunds' future revenue growth if client win targets are not met.
  
• The company's significant reliance on key strategic partners like Santander and Intesa exposes it to concentration risk, which might affect revenue diversification and stability.
  
• Changes in interest rates and cash balances could lead to decreased net treasury income, potentially impacting net revenue growth if alternative revenue sources do not grow sufficiently.
  
• The expansion plans into new offerings such as the ETP platform and the German market are ambitious and carry execution risks, which could affect earnings if not successfully implemented.
  
• The costs associated with personnel, especially due to variable compensation linked to performance targets, could impact net margins if not managed in line with revenue growth expectations.

Valuation

• The analysts have a consensus price target of €7.575 for Allfunds Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €9.4, and the most bearish reporting a price target of just €5.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €778.7 million, earnings will come to €198.4 million, and it would be trading on a PE ratio of 27.4x, assuming you use a discount rate of 6.8%.
• Given the current share price of €5.78, the analyst price target of €7.57 is 23.8% 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.