Mortgage Advice Bureau (referred to as “MAB”) (LSE: MAB1) provides mortgage advice services in the U.K. through a network of mortgage intermediaries and Appointed Representatives (AR). The company offers its services over the telephone and face-to-face, as well as providing advice on protection and general insurance products. The company was founded in 2000 and was listed on the London AIM in 2014.

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Vigilant Leadership



Short-term Incentive arrangements

  •  Measures – Actual profit achieved compared to the highest previous profit achieved.
  • Reward – Maximum award of 200% of base salary.

Long-term Incentives

  •  Measures – 50% based on Total shareholder return and 50% based on Earnings per share growth.
  • Rewards – Share options, maximum entitlement to anyone individual of 325,000 shares (0.64% of shares outstanding).

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Long term prospects

Persistent products

MAB business model certainly is persistent and holds a long-runway. U.K. Consumers have two methods of obtaining a mortgage. 1. Go to their retail bank. 2. Go to a mortgage intermediary (broker) and get advice on thousands of mortgage products. The intermediary market share in the U.K. Is >70%. As consumers choices are limited and as more lenders distribute their mortgage products, for cost reductions, through mortgage intermediaries, the long-term prospects for MAB are strong.

In addition, it is good to note that MAB’s business model is not directly reliant on increasing housing transactions prices or intermediaries market share.

Technological advancements

MIDAS Pro – In-house technology platform, which strengthens intermediaries positions by generating more leads, increasing adviser capacity, customer retention and repeat sales.

Emerging technology – Adoption of new technologies allowing appointed representatives (AR) firms and their advisors to complete high level market research and make mortgage applications simpler and quicker.


  1.  Changing markets – The Group operates in a highly competitive environment with competition from both other intermediaries and direct lenders.
  2. Availability of mortgage – Exposure to lending to a significant reduction in the availability of mortgage lending.
  3. Appointed representative model – The Group has full (AR) model regulatory responsibility for the actions of its network of ARs, who employ or engage the advisers.
  4. Key personnel – The Group could lose some Remuneration is regularly reviewed, and the Group’s listing key employees who support the labour-intensive business model.


  1.  The Group aims to be at the forefront of providing advice to consumers, leveraging its MIDAS technology.
  2. The Council of Mortgage Lenders forecast in December 2015 that gross mortgage lending would increase to £237 Billion in 2016 and £261 Billion in 2017, both years being considerably lower than the peak of £363 Billion in 2007.
  3. Whilst the Group has ultimate regulatory responsibility, the commercial liability (eg. complaint redress) is with the ARs.
  4. Remuneration is regularly reviewed, and the Group’s listing key employees. on AIM in 2014 enabled share based incentive plans to be put in place for all employees.

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Stable and Understandable Business Economics



Understandable Business Economics


The speciality finance mortgage advice industry, which MAB operates within has seen growth supported by steady improvements in the U.K. Housing market and an expanding demand for consumer credit. The increasing difficulties with securing mortgage funding from conventional lenders (banks) has also supported growth in the industry. Nevertheless, the industry is heavily labour-intensive as indicative by high salary costs as a percentage of gross profits. The highly skilled workforce is required in this industry to asses loan applications and to manage risks.


* Spike in April predominantly due to changes in stamp duty legislation.

Rank In Industry

  •  MAB is one of the leading U.K. Mortgage intermediary network.
  • 4.1% market share
  • Total market worth is approximately c.£ 6 Billion

Operating segments

1. Provision of financial services (Mortgage and Insurance advice)

Competitive advantages (MOATS)

  1. Scalable business model (Capital efficient)
  2. Network effects (950+ advisors and 130+ AR’s)
  3. National consumer brand
  4. In-house proprietary technology (USP)

Barriers to entry

* FCA regulatory requirements      * Labour-intensive business model                             * Established network connections      * Highly complex

Brexit Implications

In despite, of the relative uncertainty following Brexit, the U.K. Housing market has remained relatively stable both in terms of new mortgage lending and property transactions.

Appointed representatives focus on local market share and therefore to date Brexit has little to no impact on organic growth strategies.

The U.K. Housing market and mortgage lending remains underpinned by the same fundamentals it was prior to Brexit.

Revenue streams and Income sources


  •  All sources of income continue to display positive signs of growth.

Substantial shareholdings (Major owners)


* Peter Brodnicki = CEO since 2000 (founder).

Growth strategies

  1.  Growth in market share through improving regional network partners and brand profiling.
  2. Increasing geographical spread across the U.K. And testing new international markets (Most recently in Australia).
  3. Necessary acquisitions helped by strong and consistent free cash flow.
  4. Growth in U.K. Mortgage lending.


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From computing a Discounted future free cash flow model and a earnings power model for Mortgage Advice Bureau using a 14% growth rate and 10% discount rate to today’s present value to be Intrinsically valued between £ 4 – £ 5 per share, equaling £ 204 Million – £ 258 Million for the entire company, conservatively. 

An approximate 20-30% discount to the current market price would be sufficient for an attractive purchase price ( £ 3 – £ 3.50 per share), establishing a new Enterprise value / E.B.I.T of 13x. Patience is key with this well run operation.

Annual reports

Thank you for reading,

Jordonlee W. Smith

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