Centrepoint Alliance: A Hidden Gem in Australia's Financial Services Sector?

The financial services sector has faced turbulence in recent years, with regulatory headwinds and economic uncertainty testing even the most robust players. Amid this landscape, Centrepoint Alliance (ASX:CAF) has quietly built a compelling growth story, fueled by strategic acquisitions, improving fundamentals, and a dividend payout that has steadily risen. At a current market cap of just AU$78 million, the company's valuation appears disconnected from its trajectory—making it a compelling opportunity for income-focused investors seeking resilience and upside.

A Decade of Momentum, Now at a Crossroads

Centrepoint's journey over the past five years reflects a company transforming from a niche player into a scalable financial services provider. Let's start with the numbers:
- Total shareholder return (TSR) since 2020 stands at 356%, combining a 218% capital gain and AU$0.125 in dividends per share (see below).
- Earnings growth has outpaced the broader Capital Markets sector by a staggering margin: 49.8% annually versus the industry's 6.6% average.

This performance underscores a shift from a reliance on organic growth to a strategy of strategic acquisitions and tech-enabled scaling. Yet, despite these achievements, Centrepoint's valuation remains muted—its price-to-earnings (P/E) ratio of 12.5x lags behind peers such as AMP Limited (ASX:AMP) at 15.8x and Count Financial (ASX:CNT) at 20.4x. This disconnect suggests investors may be overlooking its growth catalysts.

Acquisitions as Growth Catalysts: The COG and Brighter Super Plays

The company's strategic M&A activity has been pivotal in unlocking value:

1. COG Financial Services' Stake (November 2023):
2. A AU$13.1 million investment by COG for a 20% stake not only injected capital but also brought strategic expertise.
3. COG's non-executive director, Peter Rollason, joined Centrepoint's board, aligning the firms' goals in wealth management distribution.

4. The partnership contributed AU$1.1 million to Centrepoint's FY24 pre-tax profits, demonstrating immediate financial synergy.

5. Brighter Super's Advice Book (June 2025):

6. Acquiring 316 members from Brighter Super's portfolio for AU$1.22 million (at a 1.25x revenue multiple) added ~AU$1 million in annual revenue and strengthened Centrepoint's salaried advice arm, Financial Advice Matters (FAM).
7. A three-year referral arrangement with Brighter Super ensures sustained client retention and adviser transitions.

These moves reflect a disciplined approach: Centrepoint targets “sweet spot” acquisitions of 5–10 adviser firms, avoiding overpaying while bolstering its AU$1 billion in funds under advice.

Tech-Driven Innovation: The IconiQ Platform and Competitive Edge

Beyond M&A, Centrepoint's IconiQ platform—launched in collaboration with tech firm FNZ—positions it to capitalize on the shift to digital-first financial services.

• Features:
• Access to global investment managers and competitive pricing.
• Flat administration fees and aggregated pricing for families.
• Tools to streamline superannuation and investment management.

The platform supports over 1,500 independent financial advisers, enhancing Centrepoint's distribution reach. With a free cash flow yield of 7.06% (vs. an industry average of ~5%), the firm has the liquidity to further invest in tech integration without diluting shareholders.

Dividend Sustainability: A Steady Income Stream

Income investors take note: Centrepoint's dividend payout has grown steadily from AU$0.012 per share in 2020 to AU$0.03 in 2024, with a 78% payout ratio (below the 90% danger zone). Key positives:
- Strong cash generation: The 7.06% free cash flow yield suggests dividends are well-covered.
- Growth runway: With AU$10.4 million in acquisition financing and a lean balance sheet, the company can reinvest in accretive deals while maintaining payouts.

Industry Challenges and Centrepoint's Resilience

The financial services sector faces headwinds, including margin pressure and regulatory scrutiny. Centrepoint's 2.4% net profit margin in 2024, down from 2.9%, highlights this risk. However, its diversified revenue streams (advice, tech, and lending services) and scale via FAM mitigate volatility.

A failed bid for Diverger (acquired by Count in 2024) underscores competition, but Centrepoint's focus on partnerships (e.g., with FNZ and intelliflo) and its mid-cap agility allow it to pivot quickly—unlike larger rivals constrained by bureaucracy.

The Investment Case: Why Now?

For income-focused investors, Centrepoint offers:
1. Valuation upside: At AU$0.29 per share, the stock trades at 12.5x forward earnings, below peers. A rerating to 15x would imply a 20% price gain.
2. Dividend yield: At 4.8%, it's attractive in a low-yield environment, with room to grow.
3. Catalysts ahead:
- Final 2025 results could surprise to the upside.
- IconiQ's scalability and further acquisitions (the AU$10.4M facility remains underused).

Conclusion: A Rare Opportunity in a Crowded Sector

Centrepoint Alliance isn't without risks, but its disciplined M&A strategy, tech-driven differentiation, and improving fundamentals position it to outperform peers over the next 3–5 years. At current valuations, the stock represents a compelling entry point for investors seeking both income and growth. With a dividend yield above 4% and a P/E ratio lagging competitors, this could be one of the few ASX-listed financial services stocks where price growth is overdue to catch up to fundamentals.

Consider Centrepoint Alliance for a portfolio needing resilience in a tough sector—and a yield that outperforms cash.