Monumentalist

Investment Analysis: ALEXANDER FORBES GROUP HOLDINGS LIMITED (JSE: AFH)

Date: 9 January 2026 Analyst: [Gemini]

Step 1: Data Gathering & Source Verification

Reporting Periods Used:
Interim Results: For the 6 months ended 30 September 2025 (Published 1 December 2025).
Annual Results: For the year ended 31 March 2025 (Published June 2025).
SENS Announcements Reviewed (L12M):
Interim Results & Dividend Declaration (1 Dec 2025).
Final & Special Dividend Finalisation (June/July 2025).
Trading Statement (Nov 2025) â Signaling the earnings range.
Strategic Acquisitions/Disposals (Ongoing integration of acquired books).

Step 2: Metric Extraction

Market Cap: ~R10.2 billion
Share Price: 790 cents (R7.90) â Price data as of closing 8 Jan 2026.
Dividend Yield (L12M): 7.2% (Ordinary) + Special
Calculation: Final 2025 (33c) + Interim 2026 (24c) = 57 cents Ordinary.
Bonus: A Special Dividend of 10 cents was also paid in July 2025. If included, the total yield rises to ~8.5%.
Status: Reliable, high-yield payer. Interim dividend grew by 9%.
Liquidity Check: MODERATE / LIQUID
Average Daily Volume: Typically R5m - R15m traded daily.
Status: Liquid enough for most retail portfolios, though not a high-frequency trading stock.
P/E Ratio: ~14.3x (Continuing Ops)
Calculation: Price (790c) / TTM Continuing HEPS (~55.3c).
Note on Earnings: While reported earnings showed volatility due to one-offs, Normalised HEPS surged 41% in the latest interim period (to 35.2c), suggesting the "forward" P/E is significantly cheaper (closer to 10x-11x).
Net Asset Value (NAV): N/A
Reason: As a capital-light services business, P/E and Dividend Yield are the primary valuation metrics.

Step 3: Operational & Strategic Analysis

Business Overview Alexander Forbes (Alexforbes) is South Africaâs largest retirement fund administrator and a major multi-manager investment house. Its business model has shifted from "admin-heavy" to "advice-led," aiming to capture the entire value chain: consulting to the fund (corporate), administering the assets (admin), and providing financial advice to the individual members (retail).

Performance Trend (Interim Sept 2025 vs Sept 2024)

Revenue: Solid Growth. Operating income up 9% to R2.33 billion.
Profitability: Strong Underlying Momentum. While reported earnings were messy (down 9%), Normalised Profit from Operations rose 18% and Normalised HEPS jumped 41%.
Driver: High client retention, new business wins, and the impact of higher interest rates on cash floats.
Assets: Total Assets (AuA and AuM) increased a massive 23% to R696 billion, boosted by market performance and net inflows.

Sector Context

Macro Factor (Retirement Reform): The "Two-Pot" System. Implemented in September 2024, this system allows members to withdraw a portion of their savings.
Impact: This has been a net positive for Alexforbes in the short term. The massive volume of withdrawal requests generates transactional fee income. Strategically, it gives Alexforbes a "touchpoint" to engage with members and upsell them into retail preservation products, reducing the leakage of assets.

Step 4: The Verdict

Bull Case ( The "Advice" Moat): Dominance paying off. Alexforbes is successfully executing its turnaround. The "Two-Pot" system has proven to be a catalyst for engagement rather than a crisis of outflows. With Normalised HEPS growing at >40% and a dividend yield north of 7%, the stock offers a compelling mix of growth and income. The 23% growth in assets under administration provides a long runway for future annuity revenue.
Bear Case (The Cost Creep): Margin Pressure. The Cost-to-Income ratio remains high at 81.0%. Transitioning to a digital-first, advice-led model is expensive. If the market turns (reducing asset-based fees) while inflation keeps wage costs high, that thin margin could evaporate quickly.
Fair Value Estimate: 900c â 950c
Basis: A 12x multiple on annualized "Normalised" HEPS (approx. 75c-80c) justifies a price significantly higher than current levels.
Final Rating: BUY
Rationale: The market is pricing AFH as a low-growth utility (10x forward P/E), but the underlying metrics (Assets +23%, Normalised Earnings +41%) suggest it is a growth stock in disguise. The 7%+ yield pays you handsomely while you wait for the share price to catch up.