2024 Beat Amid Strong Client Asset Growth

• In 2024, client assets were up 9% to $12.1B, exceeding our forecast by 1%. As a result, revenue rose 3% YoY, beating our forecast by 3%, drive by interest revenue on unallocated client capital.
• In 2024, 53% of revenue came from interest on unallocated client capital held in cash accounts at major Canadian banks/credit unions. Since May 2024, the Bank of Canada has cut rates six times (200 bp), with potential for one or two more cuts due to slowing GDP growth, high unemployment, and cooling inflation. Consequently, we anticipate interest revenue declining in the coming quarters.
• A key highlight of 2024 was a 2% YoY increase in services revenue from core divisions (Investment Account Services and Health Service Plans), driven by higher transaction volumes.

• EPS fell 0.2% YoY due to a 6% rise in G&A expenses, driven by salaries, wages, and bonuses. While the drop was expected, it still beat our estimate by 10% due to higher-than-expected revenue. Management expects only moderate growth in expenses in 2025.
• Dividends increased 24% YoY to $7.20, aligning with our estimate.
• Services revenue will likely continue benefiting from organic demand growth for alternative investments. OLY’s subsidiary, Olympia Trust Company, is currently in the process of registering as a federal trust corporation, which will allow it to actively market its services in ON. 
• OLY’s EV/EBITDA is 7.3x vs the sector average of 12.6x, a 41% discount. 

Price Performance (1-year)

Primary Services

• Investment Account Services (IAS): OLY is a trustee/custodian/administrator of self-directed registered investment accounts for alternative investments
• Health Services Plans: Administers health spending accounts for small/mid-sized corporations
• Currency and Global Payments: Facilitates the buying and selling of currencies for corporations and individuals
• Corporate and Shareholder Services: Offers corporate trust, and transfer agency services, such as maintenance of security holder registries, organizing annual meetings, and administering dividend reinvestments
• Exempt Edge: Provides IT services to exempt market dealers, issuers, and investment advisors 

The leading Canadian custodian/ administrator of alternative investments

OLY manages 137k+ accounts; its platform caters to a comprehensive range of investments not supported by banks, and other traditional trading/investment platforms

In 2024, 77% of revenue came from IAS (2023: 76%), 10% from health service plans (unchanged), and the remaining 13% from other services (2023: 14%)

Client assets were up 9% YoY to $12.1B vs our forecast of $11.9B

Financials (Year-End: Dec 31st)

2024 revenue was up 2.7% YoY amid higher client assets, and revenue from interest on unallocated client capital, beating our forecast by 2.5% 

Total services revenue from core divisions (IAS and Health Service Plans) was up 2.2% YoY, driven by higher transaction volumes

G&A expenses were up 5.7% YoY, exceeding our forecast by 0.9%

EPS declined 0.2% YoY, but exceeded our forecast by 10.1%, driven by higher than expected revenue 

Dividends increased 24% YoY to $7.20, aligning with our estimate. The payout ratio was 72% vs the historic average of 70%. Strong balance sheet

FRC Projections and Valuation 

Since client assets under administration exceeded our forecast, we are raising our 2025 revenue and EPS  

As a result, our DCF valuation increased from $133 to $142/share. Our comparables valuation increased from $137 to $145/share

We are reiterating our BUY rating, and adjusting our fair value estimate from $135.19 to $143.52/share (the average of our DCF and comparables valuations), implying a potential return of 40% (including dividends) in the next 12 months. Despite a slight EPS decline due to increased expenses, OLY demonstrated strong asset growth in 2024. However, we anticipate a material decrease in interest revenue this year, while recognizing the significant growth potential from the company's federal trust corporation registration, and the substantial discount in EV/EBITDA compared to the sector average.

Risks

We believe the company is exposed to the following key risks (not exhaustive):

• Operates in a regulated industry 
• The company's target market is niche 
• Although OLY dominates the alternative investment market, there is no guarantee that banks and large investment platforms will not enter this space in the future. 
• Earnings are significantly affected by fluctuations in interest rates
• Transaction revenue depends on market sentiment for alternative investments

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