Disclosure: Olympia Financial Group Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price Performance (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.
The leading Canadian custodian/ administrator of alternative investments
OLY managed 132k accounts at the end of 2023; its platform caters to a comprehensive range of investments not supported by banks, and other traditional trading/investment platforms
Source: Company / FRC
In Q1-2024, 76% of revenue came from IAS, 10% from health service plans, and the remaining 14% from other services
Client assets held by OLY were up 3% QoQ to $11.4B. We are raising our 2024 year-end estimate by 2% to $11.8B
In Q1-2024, revenue was up 9% YoY amid higher interest rates, beating our estimate by 3%
Source: FRC / Company
Services revenue was up 4% YoY, but 2% lower than our estimate. Interest revenue was up 15%, beating our estimate by 7%
Source: FRC / Company
*The primary source of revenue in the “Trust, Interest, & Other” category is the interest earned on placing undeployed client capital in cash accounts at major Canadian banks.
Source: FRC / Company
*Service revenue includes annual fees and transaction fees
*Trust, interest, and other’ primarily includes interest revenue
Services revenue from IAS was up 4% YoY, driven by an expanded client-base
Source: FRC / Company
*Service revenue includes annual fees and transaction fees
Margins improved across the board due to higher revenue
Source: Company/FRC
Source: Company/FRC
G&A expenses were up 6% YoY, and 5% higher than our estimate. EPS was up 10% YoY, but missed our estimate by 3% due to elevated G&A expenses
Dividends remained flat QoQ, but increased 57% YoY to $1.80, aligning with our estimate. The payout ratio was 75% vs the historic average of 70%
Strong balance sheet
As G&A expenses were higher than expected, we are lowering our 2024 EPS estimate by 3%, while maintaining dividends at $7.20/share
However, we are raising our long-term revenue/EPS estimates to account for potential expansion within ON. As a result, our DCF valuation increased from $115 to $135/share
Our comparables valuation declined slightly (from $136 to $134) due to lower 2024 EBITDA/EPS estimates
We are reiterating our BUY rating, and raising our fair value estimate from $125.67 to $134.83/share (the average of our DCF and comparables valuations), implying a potential return of 31% (including dividends) in the next 12 months. We anticipate robust performance in Q2-2024, given the relatively high interest rate environment. The next major catalyst for the stock will likely stem from OLY’s potential registration as a federal trust corporation.
We believe the company is exposed to the following key risks (not exhaustive):
Maintaining our risk rating of 3 (Average)
