Kelly Partners Group has delivered exceptional financial performance in FY24, with revenue growing 29.2% to $108.1m driven primarily by strategic acquisitions (26.2% contribution) while organic growth contributed 3.0%. The company's unique Partner-Owner-Driver® model continues to demonstrate effectiveness, with EBITDA margins improving from 23.4% in FY23 to 29.6% in FY24 as management progresses toward their 35% target.

The strategic transformation toward international expansion has accelerated significantly, with US operations now contributing 12.2%-15.2% of group revenue through seven office locations across California, Texas, and Florida. The recent Florida acquisition represents the company's largest US transaction to date, with annual revenues of $10.8m-$12.5m, bringing the group's revenue run-rate to approximately $134m.

Financial metrics remain robust with exceptional cash conversion of 96.9%, owner's earnings growth of 30.8%, and consistent debt repayment (23.2% of net debt repaid in FY24). The cessation of dividends in February 2024 reflects management's prioritization of growth investments, particularly in the US market where they see significant expansion opportunities. The company's gearing ratio has improved to 1.28x despite increased acquisition activity, demonstrating disciplined capital management alongside aggressive growth strategy.

Kelly Partners Group Holdings Limited (ASX: KPG) is a specialist chartered accounting network established in 2006 by Brett Kelly, operating across 35 locations spanning Australia, Hong Kong, India, and the United States. The company distinguishes itself through its proprietary Partner-Owner-Driver® model, where KPG maintains 51% ownership of operating businesses while local partners hold 49%, creating strategic alignment between corporate objectives and partner incentives.

The business model generates revenue through chartered accounting and related professional services, with accounting services comprising 95% of FY24 revenue and complementary services including wealth management, finance broking, and human resources consulting contributing the remainder. KPG serves approximately 25,000 SME client groups, primarily private business owners and high net worth individuals seeking specialized accounting expertise.

The company has achieved significant growth through both organic expansion and an aggressive programmatic acquisition strategy, executing over 80 partnerships since inception. From its origins with two offices in North Sydney and Central Coast, KPG has expanded internationally since 2015, with particular acceleration in US market entry since 2023. The strategic focus on markets with large Australian expatriate communities supports the vision of becoming "Australia's global accounting firm for private business owners."

Kelly Partners delivered exceptional FY24 results, with revenue growing 29.2% to $108.1m driven primarily by strategic acquisitions contributing 26.2% growth while organic expansion added 3.0%. The company completed six acquisitions during FY24 with estimated annual revenues of $10.0m-$12.6m, demonstrating continued execution of their programmatic acquisition strategy.

Profitability metrics showed significant improvement, with underlying EBITDA increasing 49.6% to $35.2m and margins expanding from 27.3% to 29.6%. This margin improvement reflects operational leverage as fixed parent entity costs are spread across a larger revenue base, plus integration synergies from standardized systems and processes. The company's established accounting businesses achieved 30.8% EBITDA margins, providing a clear pathway toward management's 35% target.

The international expansion strategy gained significant momentum, with US operations now representing 12.2%-15.2% of group revenue through seven office locations. While US margins currently lag Australian operations (20.0% vs. 33.3%), this reflects the early stage of integration and provides substantial improvement opportunity. The company's operational scale expanded materially, with equity partners increasing 23.1% to 96 and active client groups growing 21.1% to approximately 23,000, supporting the platform for continued growth.

Our financial projections anticipate continued strong performance with revenue growth moderating from the current 29.2% to a more sustainable 15.0% CAGR over the five-year forecast period. This trajectory reflects the full-year impact of recent acquisitions, particularly the Florida partnership, while assuming continued programmatic acquisition activity at 6-8 deals annually contributing 12.0%-15.0% growth.

EBITDA margins are projected to improve progressively from 29.6% toward 36.5% by FY29, driven by operational leverage, integration synergies, and gradual convergence of US operations toward Australian profitability benchmarks. The US segment is expected to grow at 25-30% CAGR, increasing its contribution from the current 12-15% to 20-25% of group revenue by FY29.

Free cash flow generation is forecast to more than double from $19.5m in FY24 to $57.0m in FY29, representing a 15.8% CAGR while maintaining strong conversion ratios above 100%. Capital expenditure is projected at 2.0-2.5% of revenue, below historical levels as one-time infrastructure investments are completed. The forecast assumes disciplined working capital management with lockup days stabilizing in the 55-60 day range and continued debt repayment at 20-25% of net debt annually.

Our DCF analysis yields a base case fair value of $10.27, positioning the current share price of $10.50 as effectively at fair value with modest 2.2% downside. The valuation incorporates a 12.5% WACC reflecting KPG's acquisition-driven growth profile and international expansion risks, with a 3.0% terminal growth rate recognizing continued industry consolidation opportunities.

The scenario analysis demonstrates significant valuation sensitivity to execution outcomes, with the bull case ($14.50, +38.3% upside) assuming accelerated US expansion and superior margin achievement, while the bear case ($7.20, -31.4% downside) reflects integration challenges and competitive pressures. The wide valuation range highlights the execution-dependent nature of KPG's value creation model.

Multiple-based approaches provide supporting evidence, with precedent transactions ($11.25) reflecting a premium for KPG's network effects and integration capabilities. The consensus price target range of $9.00-$11.00 aligns with our valuation corridor, while the 52-week trading range ($4.92-$10.50) demonstrates significant recent appreciation as the market recognizes improved performance and strategic positioning.

The primary risk concentration centers on execution of the international expansion strategy, particularly the successful adaptation of the Partner-Owner-Driver® model to US market conditions. While management has demonstrated strong acquisition integration capabilities with 80+ successful partnerships, the stakes are higher with international expansion given the larger scale and unfamiliar operating environment.