How long have you held the stock?
Since August, 2013
What do you like about it?
Steadfast (ASX: SDF) is a network provider to, and consolidator of, insurance brokers across Australia, New Zealand and Singapore. Focused mainly on the SME market, SDF has invested for growth through continued consolidation of the insurance broking market and vertically integrating into underwriting agencies and ancillary services, limiting the impact of the recent soft premium rate cycle.
How is it better than its competitors?
Steadfast is one of two major network service providers in Australasia and has been the most acquisitive. Its success in attracting and retaining brokers and underwriting agencies can be attributed to the level of innovation and investment it has undertaken, providing cost and efficiency benefits to its members, whilst also increasing its own revenue line. As a large network, Steadfast has the advantage of scale in negotiations with insurance providers.
What do you like about its management?
Robert Kelly is one of the co-founders of Steadfast and has 45 years industry experience. He and CFO Stephen Humphries have earned the trust of the broker network and continue to drive benefits for them. Their strategic decision-making has led to a deeper integration with stakeholders while creating additional revenue streams and value for shareholders.
What is your target price on Steadfast?
We see the share price rising through $2.50 in the short to medium term.
At what point would you sell it?
If there were signs that the insurance rate cycle was coming under significant pricing pressure, we would consider our position.
There is also a level of key man risk with the stock. Whilst senior management ranks have been boosted in recent years, and there is considerable depth of experience, we would consider the retirement of Robert Kelly a negative. It is worth noting that he recently extended his contract until 2020.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
The stock has added just under 1% to our portfolio over the past 12 months.
Is it a liquid stock?
Yes, the stock is in the ASX200 index and trades around 1.2 million shares per day.
Where do you see the value?
Insurance rates have stabilised and there are tentative signs of an improvement at the small and medium end of the market, which is where Steadfast has the vast majority of its exposure. The company is very leveraged to rising insurance rates.
Additionally, Steadfast has been developing new systems, which will improve commission rates for its network and further consolidate its position as a favoured network provider. There is scope for additional profitable growth from its existing network, as well as the potential for further accretive acquisitions.
[1]Source: Yahoo
Simon Brown is an Investment Analyst at Tribeca Investment Partners
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