Wednesday 15 July 2015

Analysis of MLP

MLP, a German financial service company

Company: MPL (best viewed in German)

ISIN DE0006569908 | WKN 656990

Business: A German financial service company. They are specifically directing themselves towards academics to get lawyers, dentists, medical doctors, engineers etc. to start early to plan for for instance retirement. When you have them as customers also other products are offered and today they have wealth management, health insurance, property insurance etc. They do not exclusively offer their services to private people but they also offer it to institutions and companies.

Active: To my knowledge Germany only.

P/E: 14.4

contrarian values of P/E, P/B, ROE as well as dividend for MLP

The P/E for MLP is so, so with 14.4 but the P/B is great with 1.1 which gives us a by signal from Graham. The earnings to sales feels low with only 5% and the ROE is also not very impressive with 7.7%. The book to debt ratio is low with 0.2 but for being in the financial business I would say it is ok.
In the last five years they have had a very poor yearly revenue growth rate of 0.3 which is a bummer since most financial oriented companies (excluding banks making illegal transactions) have been doing well in the last couple of years. This then gives us a motivated P/E of 8 to 10 which means that MLP is a bit overvalued today on the market.
They pay a very nice dividend in the size of 4.4% which unfortunately correspond to 63% of their earnings so they must definitely improve their earnings.

Conclusion: Graham says yes to MLP and I am once again uncertain as I have been often lately. The P/E, P/B and dividend are great and only the ROE is looking bad. They also have a strong shareholder which is one of the founders sitting with around 24% and if you have read this blog for a while you will know that I do not like when the free float is too low. Here a good, solid, honest founder is still in the company (for wiki link in German Manfred Lautenschläger). They are also expanding pretty aggressively lately and are buying other smaller wealth managment companies. This I like but what annoys me is for instance when they buy something for a P/E of 85 AND they issue new shares as part of the agreement. I mean... come on! MLP is at P/E of 14.4 and you give shares away + cash to buy something at P/E 85! That is a huge management error in my opinion. As a shareholder in Talanx I already own almost 10% of MLP and maybe I should just leave it at that. Or?

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Matthias said...

To my knowledge they are also active in Austria.
When I was a Student, they have organized many Student events and
career fairs.

What is the impact of the internet to their business ? Fintech
business is booming if you look at all the insurance and financial comparision websites.

I think the whole sales/distribution of financial services will undergo a fundemtal change.

Fredrik von Oberhausen said...

Hi Matthias,

I was on my way to write German speaking region but since I could not explicit find the info I in the end wrote only Germany. Good to know that they are also present in Austria.

Clever of them to arrange student fairs to try to attract their future customers as early as possible.

The impact of internet on their business? I got absolutely no clue at all. I go by the basic principle that everything new means winners and losers and I know that I am not able to pick either of them.

How do you think it will change?

Matthias said...

Hi Fredrik,

fifteen years ago you relied on the knowledge and expertise of your bank agent in financial matters. Today this information is avaiable everythere for everyone.

I think this will hit the services industry hard as they cannot provide the same value to customers. The customers already know!

Fredrik von Oberhausen said...

Hi Matthias,

I would even claim that in many cases a private investor knows more than the bank agents. Each time I have communicated with them I have become upset due to the poor knowledge they have had and that they almost each time were unable to give me the answer and by digging a bit further I always found it myself.

This would mean the death of hedge funds and investment banking. I think that people very often are lazy and especially many elder people want to get the perks that the hedge funds and investment banks offer and since they have so much money anyway they do not really care about getting two % more per year as long as they get 6% and the wealth keep growing.

I could be wrong but I see the same problem with investment as with internet in general. There is simply too much information that it is almost impossible to find the good and true stuff and then to just hand it over to a bank agent makes life a lot easier. So things will change and still remain the same.

The people profiting from the change are the people that are prepared to dig a little and are taking advantage of the decreased transaction prices etc. coming with the change and we will become wealthy.

Matthias said...

Totally agree! Most People have a inactivity to change their
insurance, electricity provider or wealth management.

The Internet made access to financial Information easier but still you had to dig in, find the right insurance etc. This information has been avaiable since more than 10 years...

Usability is the key changer to the mass ! Today you just enter the insurance information on a site, get the cheapest offer and all administrative work is done by the site.