SEQ earnings upgrade

One of our portfolio holdings, Sequoia (ASX: SEQ), appreciated by +15% this week. A profit upgrade announced on Wednesday triggered the share price movement. In this post, we share our opinion towards this company and why we keep topping up our position on the way up.

Company overview

SEQ is an integrated financial services company providing a wide range of products and services to self-directed retail and wholesale clients.

Their products and services include:

● Wealth management, e.g. InterPrac Financial Planning

● Professional services division, e.g. SMSF administration

● Equity markets division, e.g. Morrison Securities

● Direct investment division, e.g. Financial News Network

The management team has a good track record in growing the company. In the three years between FY18 and FY20, SEQ grew its revenue and profit by 11% and 266%, respectively.

The management team delivered what they promised. They started a business improvement program to strengthen the business and expand the operating margin in FY18. The massive profit growth in the past three years has proven management quality in running the business. We continue to top up our position as our confidence in the management rises with their performance.

Profit guidance upgrade

On 22 April 2021, SEQ announced a profit update for FY21. Here is the updated profit guidance:

● Revenue: between $110m and $120m, up from $110m

● EBITDA: between $8.5m and $9m, up from $7m

Conclusion

At Glennon Capital, good management is one of our crucial selection criteria. We believe great investment returns come from companies managed by outstanding and experienced teams.

Till next week, happy investing.

Michael and Kenny