Our opinion on the current state of AFORBES(AFH)Alexander Forbes (AFH) is a prominent financial services company that provides asset management, insurance, healthcare, retirement consulting, and wealth management to both corporate and private clients. It operates not only in South Africa but also has a presence in five other African countries: Namibia, Nigeria, Botswana, Uganda, and Zambia. Historically, the company's share price has experienced a significant drop, falling from just over R10 in February 2015 to around 430c today. This decline was largely attributed to the leadership of its former CEO, Andrew Darfoor, who was said to have lost the confidence of the board and institutional investors, compounded by the resignation of the financial director, Naidene Ford-Hoon, after less than a year with the company. Changes to the board have been significantly influenced by Patrice Motsepe's African Rainbow Capital (ARC).
In its financial results for the year ending 31st March 2023, Alexander Forbes reported an 8% increase in operating income and a 22% rise in headline earnings per share (HEPS) from continuing operations. The company highlighted, "The group balance sheet remains robust, supported by the strong cash flow generated from continuing operations, with a sound regulatory surplus position of R1,516 million and available cash of R933 million." Subsequent trading statements further reflect the company's recovery and growth: for the six months to 30th September 2023, HEPS was estimated to increase by between 85% and 105%, attributed in part to the base effects from the performance of discontinued operations in the prior year.
Looking ahead to the year ending 31st March 2024, the company anticipated that HEPS would increase by between 23% and 33%. This optimistic forecast is attributed to "solid growth in operating income owing to acquisitions and new business." Currently, the company trades at a P/E ratio of 10.77 and has recently sold its group risk and retail life business for R100 million, potentially to fund further acquisitions.
Given these factors, Alexander Forbes is considered to be reasonably valued at current levels and is seen as being in a steady upward trend. This assessment suggests that the company could be a worthwhile investment, especially for those looking at financial services stocks within the South African and broader African markets.
