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KPG - Kelly Partners Group Holdings

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@debtfree

ASX ANNOUNCEMENT - KPG

Monday, 16th September 2024

Accounting Network in 48 countries chooses Kelly+Partners

Kelly Partners Group Holding Limited (“Company”, ASX:KPG) announces today that it has executed agreements to partner with Kudos International, a network of 55+ accounting firms located in 48 countries.
A wholly owned subsidiary of Kelly Partners Group Holdings Limited will acquire 50.1% of the business with the remaining 49.9% held by Alun Morgan, co-founder and CEO of Kudos International using our Partner-Owner-DriverTM model, with a 10 year long term commitment to the new partnership.
Assisting in that growth will be Alistair Bryant MBE, formerly Executive Director of BKR International (5th largest international accounting association) who joined Kelly + Partners in February 2024.
Kudos is a member of the Forum of Firms, an association of international networks of accounting firms that perform transnational audits. The Forum promotes the consistent and high quality standards of financial reporting and auditing practices worldwide.
The Co-Founder and CEO of Kudos International, Alun Morgan said:“Kudos International is a network focused on the future which has expanded its footprint significantly over the recent years.
I am delighted to enter into this partnership with Kelly +Partners which we have planned over a number of months.
This partnership will enable us to move forward with even more ambitious growth plans whilst enhancing the offering to current and future members.”

The network is not material to KPG, however it establishes the first step of building a Kelly Partners Global Network as part of Kelly+Partners’ strategy to grow globally and become Australia’s first global accounting firm.

A summary of partnerships completed since July 2024 are as follows.#

Date of completion Location Type Revenue to Group ($AUD)1
16 August 2024 St Petersburg, FL Marquee $10.8m to $12.5m2
1 October 2024 United Kingdom Marquee $0.3m to $0.4m
Total $11.1m to $12.9m

The Board of Directors of Kelly Partners Group Holdings Limited has approved the release of this document to the market.

hold KPG ( 'free-carried' )
 
Seems extremely overvalued @divs4ever?

P/E = 74
P/B = 15
Massive gearing
For an accounting firm, WTF?
Chart looks like it's topping.
How do you find all these obscure companies?

Not Held

WEEKLY
big (75).gif
 
Like I have stated in other threads before these types of service based "roll-up" stories tend to go good for a while and then they eventually blow up later down the track (a lot of them still survive but they limp along at a much lower level of profitability and valuation). Not 100% of the time but I would say in Australia it would be a majority of cases.

Think ABC learning, G8, Count, Healius and many others. I've already talked about the mechanics of why this occurs in other threads. But if I owned this stock I would definitely be looking to take profits now before it blows up further down the track.

In accounting practices there really is not too much benefit from scale. Sure you get a small amount of marketing benefit from having national advertising campaigns and maybe slightly lower costs on the software you use in your business but those are both offset by the additional corporate overhead that comes with a large corporation. Additionally its a personalized service. If you buy Jack Black Accounting pty ltd. Clients want to deal with Jack Black or else they would have chosen a big company like HR Block from the start. Even if you put a long-term agreement in place what happens when Jack Black retires? Most business owners selling into these corporate roll-ups its a plan for eventually transitioning to retirement. And once they exit the business is usually worth a lesser amount.

The main game with these things is playing the public to private multiple arbitrage game.

Based on underlying earnings of $0.178 Kelly Partners Group is trading on a trailing p.e. of 43.

You can typically buy a small local accounting business on average for around 4.3 times p.e. literally 1/10 of the multiple that the stock is trading at. So Kelly Partners Group can just decide to issue a huge amount of shares through share placements, etc and buy up lots of small accounting firms. Of course this business model only works for as long as the stock price is flying high. So far they have avoided issuing shares but with the share price where it is they would be silly not to take advantage and issue some shares.

I do not own the stock but if I did I would sell before it comes crashing down. I have seen this story play out too many times already.
 
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Kelly Partners group has around $8 million of underlying earnings and a market capitalization of of around $336 million. If you gave me a check for $336 million I could buy hundreds of small accounting firms and cobble them together into a big company and it would generate at least $50 million of earnings instead of only $8 million.
 
finicky said:
Seems extremely overvalued @divs4ever?

P/E = 74
P/B = 15
Massive gearing
For an accounting firm, WTF?
Chart looks like it's topping.
How do you find all these obscure companies?

Not Held

WEEKLY
View attachment 185017
Click to expand...
well i first bought it @ $1.10 in 2018 when it was paying 3 monthly divs

in 2019 i bought 2 more parcels @ 88 cents and 73 cents ( averaging down to 89 cents a share ) and have recovered the investment cash 4 times over , meanwhile it switched to paying monthly divs . and then in February this year suspended paying divs for an indefinite period

basically i just use a scanner ( several passes using various parameters ) and since i focus on div. yield a LOT of interesting stocks pop out in the sub $2 range , and i just whittle them down to areas i have a basic ( or better ) understanding of the business i was looking for this to cut costs by using more computers and spreadsheets ( and make nice profits that way ) instead it has pursued global desires , but the unsold part of the holding can sit in the bottom drawer a little longer to see what happens next
 
Value Hunter said:
Like I have stated in other threads before these types of service based "roll-up" stories tend to go good for a while and then they eventually blow up later down the track (a lot of them still survive but they limp along at a much lower level of profitability and valuation). Not 100% of the time but I would say in Australia it would be a majority of cases.

Think ABC learning, G8, Count, Healius and many others. I've already talked about the mechanics of why this occurs in other threads. But if I owned this stock I would definitely be looking to take profits now before it blows up further down the track.

In accounting practices there really is not too much benefit from scale. Sure you get a small amount of marketing benefit from having national advertising campaigns and maybe slightly lower costs on the software you use in your business but those are both offset by the additional corporate overhead that comes with a large corporation. Additionally its a personalized service. If you buy Jack Black Accounting pty ltd. Clients want to deal with Jack Black or else they would have chosen a big company like HR Block from the start. Even if you put a long-term agreement in place what happens when Jack Black retires? Most business owners selling into these corporate roll-ups its a plan for eventually transitioning to retirement. And once they exit the business is usually worth a lesser amount.

The main game with these things is playing the public to private multiple arbitrage game.

Based on underlying earnings of $0.178 Kelly Partners Group is trading on a trailing p.e. of 43.

You can typically buy a small local accounting business on average for around 4.3 times p.e. literally 1/10 of the multiple that the stock is trading at. So Kelly Partners Group can just decide to issue a huge amount of shares through share placements, etc and buy up lots of small accounting firms. Of course this business model only works for as long as the stock price is flying high. So far they have avoided issuing shares but with the share price where it is they would be silly not to take advantage and issue some shares.

I do not own the stock but if I did I would sell before it comes crashing down. I have seen this story play out too many times already.
Click to expand...
yes i have taken some nice profits especially after they paused paying the divs in February this year

what amazed me was the rise in share price AFTER they paused the divs and trotted out the 'growth story '

now gobbling up small accounting firms in Australasia .. i can see some nice cost savings , but with all this international expansion ( and umpteen different regulation changes each year ) gee things might get complicated
 
divs4ever said:
and then in February this year suspended paying divs for an indefinite period
Click to expand...
Actually not paying dividends makes a lot of sense. If you are going to try to be a "growth company" then why pay dividends for?

Far too many companies in Australia just recycle capital. They keep paying dividends then ask for the money back later via share purchase plans, rights issues and DRPs. To me that never made much sense.
 
Value Hunter said:
Actually not paying dividends makes a lot of sense. If you are going to try to be a "growth company" then why pay dividends for?

Far too many companies in Australia just recycle capital. They keep paying dividends then ask for the money back later via share purchase plans, rights issues and DRPs. To me that never made much sense.
Click to expand...
but i am rapidly approaching 70 , i invested in this for ( relatively ) steady income

if i just wanted capital gain , i would have bought bullion ( of one sort or another ) and let inflation do all the hard work



i had ( and made ) nice profit on other spec. stocks , like ISX , LNC , EML , BCT
 
@debtfree

unless folks believe the US and EU are going to go 'tax crazy ' i can't see where the growth is coming from , apart from consolidating the other smaller players , and the risks that brings on board

but the share price trends up despite all the logic , i can see

.. should i calculate an exit price ??? this is edging up to be a 10 bagger for me ( i have already rescued the original investment cash )
 
@debtfree

the current star of my quartet of yearly comp. picks , BUT portfolio-wise it no longer scratches an itch i have ( relatively steady income )

sure i have a nice capital gain here ( up over $7 a share ) but i bought for regular income

capital gains ( and some income ) i have elsewhere PME ( up $197.?? a share ) TNE up ( $23.?? a share ) MQG ( up $204.?? a share) and lesser examples ( but still 5+ baggers )

if i follow my own rules i should be calculating an exit price

the market is nervous and the extra liquidity might be useful

decisions , decisions , maybe tomorrow is the day ( to exit )
 
@debtfree

after considering carefully why I bought into KPG ( regular divs , that are now suspended, indefinitely ) and input from others on the forum ( thanks , folks )

i decided to and executed an exit a little over a week ago , as it no longer filled the goal i was aiming for ,

yes i crystallized a very nice profit ( over 5 times my initial investment .. not counting divs and franking credits ) and only time will tell if i was ultimately wise or not in the long term , it wouldn't be the first time i have left rather early in the company's journey to the stars

( i not longer hold KPG )
 

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