# KPG - Kelly Partners Group Holdings



## System (30 May 2017)

Kelly+Partners is a single-brand accounting network consisting of 15 owner-driver operating businesses across Greater Sydney and one operating business in Hong Kong. The network is focused on providing accounting and taxation services to private small and medium enterprises (SMEs). 

The Company holds a controlling interest (>50%) in each operating business (excluding Kelly Partners Oran Park), and provides intellectual property and centralised management services to the network. Operating business owners in each entity own the remaining interests in the underlying operating business.

It is anticipated that KPG will list on the ASX during June 2017.

http://kellypartnersgroup.com.au


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## galumay (30 October 2019)

Another business I have researched recently, a lot to like and most of my metrics for an investible business were met or exceeded, unfortunately the company operates with significant debt and thats always a hard no for me, so another rock turned, but alas no hidden gems! On to the next one.


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## peter2 (30 October 2019)

Thank you for these type of posts. I'm interested in the rocks you take the time to look at. 

The price of KPG has fallen consistently (in a bullish market) since listing. Price is now trading sideways with very low volume (untradable for me). I'll put in in my spec watch list.


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## omac (21 August 2020)

A decent result for the FY. Not sure I'll buy more yet, but for me they are fairly priced and depending on how you define their TAM there is a decent amount of growth possible so buying at a bit of a premium might be ok, still only a ~ $54 m MC, so probably a bit under the radar, if they can grow to ~$100 m MC will get more coverage etc. 

On the surface to managment seem like good capital allocators, but also seem to be doing eveything at once (aquisitions, increase div, buybacks, etc) not bad but I'm always cautious of the "Buffett" imitators as it can be more of a sales pitch than reality. 
               Currently not too phased by the debt (only 1 x cashflow, or 2 x if you want to be conservative), usually the same as Galumay and not a fan of debt, but (famous last words,haha) being an accounting business I assume its accountants maximising capital efficiency etc and not a requirement to maintaining operations (eg manufacturing). It's defintinely something I'm watching and as covid shows conservative balance sheets sleep easy.


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## galumay (10 August 2021)

I had a deep dive into KPG to see if I could find any conviction given the strong run in share price and the enthusiasm some investors I respect, had for the business. In the end I couldn't find the conviction and here are a few of the reasons. 

The debt still troubles me, a lot of it is in the partner businesses, but overall its more than I like to see and its complicated to break out and understand.

The promotional nature of the founder, as @omac mentioned, he is big on the Buffett stuff, but then strongly promotes the total return to investors - which is almost entirely due to multiple expansion. Another words Mr Market has delivered nearly all this 'value', not KPG. A very un-Buffett approach. The founder has gone to a lot of effort to promote the business as being very shareholder friendly, which sounds good until you really ask how, because its not at all obvious!

The complicated structure of the company, holding 51% interest in all the acquired practices means making any sense of the financial reports is torturous, the Founder attempts to smooth over this by again using a Buffettism - KPG's version of Owners' Earnings, trouble is this is nothing like Buffett's process. Also he quotes variously the group OE, the parent OE and sometimes per share, sometimes not.

So when you try to breakdown the financials you have to try to work out the impact of the 51% holdings and it seems to me that nearly all the  costs are 100% attributable to the company shareholders own part of, but only 51% of the profit. You can see the clear result when you see how EPS is calculated and hence why it is so low - its only roughly 51% of the total profit, the rest goes to the minority interests.

Its even more impact on the FCF, if you back out the $1.3m Covid grants this year the company ended up with a 0 cash position, partly because they chose to also pass cash back to the partners to pay down debt (here is the debt issue again). But also because once profits are distributed and dividends paid there aint much left! It also distorts the dividend payout ratio which is calculated on total cash not the proportional amount.

In saying all that, I am not even sure how much of that is strictly true, because the financials are so opaque and difficult to break down, but my guesstimate is that FCF to the shareholders of KPG is slightly more than the reported EPS and on my quick & dirty DCF implies a range of value that is less than half the current share price.

Anyway, my ddep dive didn't deliver any more conviction!


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## divs4ever (10 August 2021)

to me under $1.20 looked good ( not great ) 

 i am totally puzzled on what investors see at 3 times that price 

 yes they are picking off smaller players to imply growth 

 the monthly divs will lure some that are chasing divs  ( but i expect going back to 3 monthly divs in the mid-term )

 and as a holder of CUP also ,  opaque financials seem to be par for the course , but of course that might be part of the franchise system ( so many small parts  that the paperwork is never fully up to date )

 cheers


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