I would like your opinion please on the future for IOOF Holdings Ltd (ASX:IFL).
I bought at about $8/share several years ago mainly for the attractive dividend yield. The share price rose pleasingly to around $11/share but post the Royal Commission the trend has been bearish to around $5.30 now. Morningstar has fair value at $5.60 with a buy at $2.80 & sell at $9.8, quite a spread! I think that a pending acquisition of ANZ Pensions & Investments business could be important for the future. Is this acquisition likely to proceed? Even if it proceeds, are there other feature of the IOOF business that you like or don’t like for future value and dividend yield ?
A: Sorry to be the bearer of bad news, but I never liked the IOOF (ASX:IFL) acquisition strategy (buying financial planning businesses) and I am not that surprised that it has ended somewhat in tears. Very hard to say whether the acquisition of the ANZ business will go ahead – broker consensus opinion seems to be that there may be further delays.
Downside risks for IOOF are that customer remediation costs will be a lot higher than anticipated, and that like AMP, its tarnished reputation will impact funds flow and new business (i.e. customers will vote with their feet). The upside is that it is very cheap – and the dividend yield is very attractive.
According to FN Arena, the broker consensus target price is $5.63 (range $5.05 to $5.95), about 5% higher than the market price of $5.37. There are 4 neutral recommendations and 1 sell recommendation.
There is an old investment adage that “your first loss is your best loss”. I sense this might apply to IOOF.