iSelect: AGM 2016
Recommendation
After a horror first half of 2016, iSelect's 2016 result suggested the business had stabilised in the second half and the good news from iSelect's recent AGM is that this appears to have continued into 2017.
The company's previously problematic Health division is performing better so far in 2017 compared to the prior period, although it's still experiencing some affordability issues in certain segments of the private health insurance market. Nevertheless, management expects this division to grow at two-to-three times the industry growth rate.
Management also expects the Energy & Telco and Life and General Insurance divisions to be drivers of growth in the near term. So far at least the results are also encouraging: Energy & Telco and Life and General Insurance grew revenue 34% and 33%, respectively, in 2016 and the 'early indication [so far in 2017]...is that this growth is continuing'.
Over the longer term, we think iSelect has potential to substantially increase its share of industry commissions in each division while also expanding into other markets. For example, it has recently expanded into credit cards and mobile phone plans.
Management reaffirmed guidance of 2017 earnings before interest and tax (or EBIT) of between $21m and $24m but now expects EBIT to be at the 'upper end' of this range assuming no deterioration during the remainder of 2017. Along with further evidence that the business has stabilised, this means we're increasing our price guide. Our Speculative Buy price moves to $1.40 (from $1.20) and our Sell price also rises, to $2.20 (from $2.00). HOLD.