Pinnacle Investment Management Group Limited

 PNI Details

Rise in NPAT During 1HFY20:Pinnacle Investment Management Group Limited (ASX: PNI) is mainly involved in developing and operating investment management businesses. The market capitalisation of the company stood at $1.02 billion as on 7^th February 2020. The company recently reported its financial and operational results for 1HFY20 and stated that net profit after tax (NPAT) from continuing operations attributable to shareholders stood at $13.8 million, which is higher than $10.1 million reported in 1H FY19. The company experienced higher costs as compared to 1H FY19 because of the full-year effect of the significant increase in resources across FY19. 

PNI’s 15 Affiliates had FUM amounting to $61.6 billion as at 31^st December 2019, indicating an increase of 13.4% or $7.3 billion. This comprises net fund inflows amounting to $2.0 billion, market movement/investment performance of $2.3 billion and acquired FUM of $3.0 billion. During 1H FY20, the company acquired a 25% interest in Coolabah Capital Investments Pty Ltd. The initial consideration for the purchase stood at $29.1 million along with a further payment of $5 million upon the business achieving certain milestones over the upcoming 18 months to 4.5 years period. This acquisition has been financed by the debt facility availed from CBA.


Financial Performance (Source: Company Reports)

Focus for FY20:For the remainder of FY20, the company will continue to deliver growth within existing affiliates. PNI will also continue with investment for delivering medium term growth.

Stock Recommendation:The Board of the company declared a fully franked interim dividend amounting to 6.9 cps, payable on 20^th March 2020. The stock is currently trading at a price to book value multiple of 5.2x as compared to the industry average of 6.0x on TTM basis. Hence, considering the decent set of financial numbers in 1H FY20, current trading levels and outlook, we maintain a “Hold” rating on the stock at the current market price of $5.760 per share, up 3.411% on 7^th February 2020. 
 

OneVue Holdings Limited

OVH Details

Addition of New Funds:OneVue Holdings Limited (ASX: OVH) is a wholesale service provider to the wealth management industry. The market capitalisation of the company stood at $85.74 Mn as on 7^th February 2020. OneVue recently confirmed that one of the assets of SC Australia Holdings No 1 Pty Ltd is the 100% shareholding in the Madison Financial Group, under OVH’s secured interest. OneVue and SC Australia Holdings No 1 Pty Ltd would be working with Madison for enabling a sale of the business.

During Q2 FY20, the company reported 170,431 items processed in its fund services business, which reflects a growth of 26% on pcp. This rise came in as a result of addition of new funds and an increase in transactions from existing funds. Also, the company continued to experience strong growth with record FUA amounting to $6 billion in Platform Services, showcasing a growth of 36% on pcp. Revenue for FY19 witnessed a contribution of 64% and 36% from fund services and platform services, respectively.


Financial Highlights of FY19 (Source: Company Reports)

Business Prospects: The company would perform a trial for AI in its customer service centres. The company is expecting 2020 to deliver increased scale benefits as well as margin expansion via accelerated FUM mainly on Platform either organically or through a material transaction.The company is also planning to design a permission-based interface for members and investors.

Valuation Methodology: EV/EBITDA Based Valuation

EV/EBITDA Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:Current ratio of the company stood at 2.70x in FY19, as compared to 1.05x in FY18. This reflects that the company has improved its position to address its short-term obligations. We have valued the stock using EV/EBITDA based relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). There, considering the decent liquidity position, and performance in Q2 FY20, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.320 on 7^th February 2020. 

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