Resimac Group Limited

Delivered Strong Results in 1H19: Resimac Group Limited (ASX: RMC) is a residential mortgage lender, engaged with multi-channel distribution business specialising in Prime and Specialist lending. The Group operates in targeted market segments and asset classes in Australia and New Zealand.

Merger with Homeloans Limited:RMC, as on 13 October 2016 was acquired by Homeloans Limited in exchange for shares in Homeloans Limited. It was a reverse acquisition, RESIMAC being considered the parent for accounting purposes, therefore, the consolidated financial statements reflected a continuation of the financial statements of RESIMAC.

As mentioned in the summary table, the consolidated financial statements for FY18 include the combined results of both RESIMAC and Homeloans for twelve months. FY17 numbers include the results of RESIMAC for 12 months and Homeloans for the period from 13 October 2016 to 30 June 2017. Taking the acquisition into account, the company has achieved a successful journey over FY14-FY18 with net profit after tax reaching to ~$25.3 million in FY18 from ~$6.2 million in FY14.


Key Parameters Performance (Source: Company Reports)

The company, recently, announced that it has acquired a 15% stake in Adelaide-based fintech Positive Group for the consideration of $3 million. RMC holds an option to acquire a further 10% in the company. The development will support RMC on its strategic priorities to focus on the diversification of asset classes, and to improve the customer experience using digital technologies.

The company also updated that it has sold off the entire equity stake in its wholly owned subsidiary Paywise Pty Ltd for cash consideration of $14 million in a management buyout arrangement. Pre-tax gain for RMC was c$7.5 million and the economic effective date of this transaction was 30 April 2019.  

1HFY19 Result Highlights: Total revenues and other income stood at $236.97 million, up 28% on pcp with net interest income posting a pcp growth of 8% to $55.07 million.

Total mortgage settlement flows across the distribution channels at $2.2 billion posted a growth of 3%. Non-principally funded lending recorded a de-growth of 17% due to the shift in focus towards the principally funded.


1H19 Financial Snapshot (Source: Company Reports)

Outlook and Recommendation: Despite the volatility witnessed by the housing markets, the company has been able to maintain a robust credit risk management regime and bottom-line. At the current market price of $0.630, the stock is available at the price to earnings multiple of 7.790x. At CMP, annual dividend yield for the stock stands at 3.02% with a market capitalization of ~$255.65 million. The stock has gained ~34% on YTD basis. With expertise in residential mortgages, strong relationship with global funding partners, decent 1H19 results and growth prospects, going forward, we recommend a “Speculative Buy” on the stock at the current market price of $0.630 per share as on 04 July 2019.
 

Pacific Current Group Limited

FUM Growth at ~13%:Pacific Current Group Limited (ASX: PAC) invests in global asset managers, private placement and private equity firms.

The company recently announced that it has increased its stake in Roc (Roc Partners Pty Limited) from 18% to 30% with investing $6.8 million.PAC also updated recently, about the completion of its investment in Carlisle (Carlisle Management Company). PAC invested US$34.25 million for 16% of Carlisle’s gross revenues and 40% of the value of the firm in the event of liquidation.

Like for like total FUM (Funds under Management) saw a growth of 13.1% during the quarter ended 31 March 2019.


Funds Under Management as on 31 March 2019 (Source: Company Reports)

1H19 Result Highlights: Underlying profit before tax stood at A$8.8 million in the period posting a growth of 1.1% on pcp. Statutory profit after tax came in at A$47.8 million against the profit of A$107.2 million in 1HFY18, largely impacted by the sale of significant assets. Underlying profit after tax at A$7.9 million during the period was down 15.8% on pcp.

The company had announced an ordinary dividend of AUD 0.1000 on fully paid shares which were paid on 27 March 2019.

During 1H19, the company sold off its 10% residual interest in RARE Infrastructure to Legg Mason for the consideration of A$21.5 million as well its 27.5% stake in Celeste to management for A$1.6 million. The Company had also mentioned in the results for 1H19 that it sold off 23.4% interest in Aperio for ~US$72 million or A$97.7 million.

Outlook and recommendation: At the current market price of $4.800, the stock is available at the price to earnings multiple of 4.350x, representing a decent opportunity for accumulation. Annual dividend yield for the stock stands at 6.88% with market capitalization of ~$221.54 million. Considering the management’s prudent approach towards deploying capital into unique, diversifying investment managers, strong growth in FUM, we recommend a “Speculative Buy” rating on the stock at the current market price of $4.800 per share (up 3.226% on 04 July 2019).  

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