ZICO Holdings: An integrated provider of multi-disciplinary professional services and is expected to ride on the ASEAN growth story. Through organic growth and M&A, UOB Kay Hian expects ZICO to deliver a ROE of over 25% and a 2-year net profit CAGR of 30%.
Zico’s model combines a high return-on-capital and a high-margin business with a willingness to re-invest cash into accretive acquisitions. Zico’s aggressive M&A strategy will allow it to consolidate a fragmented market comprising smaller competitors without the same access to capital as well as to deepen its competitive moat.
UOB Kay Hian reckons Zico has the potential to grow into a powerful presence in the ASEAN region and emerge as a genuine challenger to the big accounting firms as an integrated provider of professional and legal services. Slater & Gordon’s success in Australia and the UK has shown that buyouts of smaller rivals can be a highly value-enhancing strategy for shareholders.
House maintains BUY with TP of $0.57.
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