Kelly Partners Group
Kelly Partners Group
Changing the accounting industry
Kelly Partners Group is a beautiful company.
Recently, we had a 1-on-1 with the CEO and the company also held it’s Annual General Meeting.
Let’s discuss what we learned.
What is Kelly Partners Group?
Kelly Partners Group is an Owner-Operator Quality Stock. The group can be seen as a serial acquirer in chartered accounting businesses that assists small and medium enterprises, private business owners, and high-net-worth individuals in managing their accounting, taxation, audit, and wealth management activities.
Today, Kelly Partners Group has 77 operating partners, servicing 15,000 SME client groups. The company operates in a regional oligopoly in Australia and can be seen as a market leader in a niche (small CPA firms).
The company’s Owner’s Manual beautifully shows what the company wants to stand for (click on the picture to expand):
Stock undervalued
First of all, it’s noteworthy to highlight that Brett Kelly, the founder and CEO of Kelly Partners Group, thinks the company is significantly undervalued.
He estimates that KPG is worth 10 AUD per share instead of 4.74 AUD (the price the company trades at today).
As a result, the company is doing a strategic review to determine whether it makes sense to delist KPG or to get a listing in the United States.
After talking with Brett Kelly, I am quite comfortable to say that it’s very likely (almost certain) that they will choose a listing in the United States over time.
Brett Kelly already spends 3 out of 4 weeks in the United States. A successful expansion to the US is one of the company’s key goals.
Annual General Meeting (AGM)
In the presentation of their AGM, Kelly Partners Group shares some great slides that can help you to understand their business model better.
Expansion to the United States
KPG’s long-term strategy is to expand its presence into other English-speaking markets (mainly the United States and the UK).
The US market is 10x the size of the Australian accounting market, providing a lot of opportunities.
The company gives an update about their expansion to the United States here:
In May 2023, KPG announced that they entered the United States for the first time through an acquisition.
The purchase of an unspecified accountancy firm will add between US $1.2 million and US $1.7 million in annual revenue to the group, with the entity to be renamed Kelly Partners Woodland Hills and form part of a strategy to target the inner ring of Los Angeles where Kelly Partners plans to continue to grow the business.
On the 4th of December, KPG announced a partnership with Maiden, an accounting business located in California.
Outlook
Kelly Partners Group announced the following 5-year plan in 2017 and properly executed on it:
Over the next 5 years, the company wants to achieve the following:
Grow to become a top 10 accounting firm in Australia
Use economies of scale to their advantage (combination of Finance, Insurance, and Wealth)
Expand to English-speaking countries (mainly US)
Strong compounder
Kelly Partners Group is a founder-led company with many ‘quality’ characteristics.
As you can see here, founder-led companies - on average - outperform the market:
The company is well-positioned and outperformed other compounders like LVMH, Constellation Software, and Acenture in the past:
Now let’s dive into the company’s last earnings and update our investment case.