GDG - Generation Development Group

[Joe Blow]

Austock Group Limited (ACK) is a diversified investment and financial services company. The company's core businesses are investment management, corporate and securities, and private wealth.

http://www.austock.com.au

 

[stock nub]

Aus stock has been down in the dumps for a while, but i think that this will eventually change. It has 133,928,412 shares giving it a market cap of $20 million at 15 cents and has debt of around $2 million.

In its most recent update they have said they made between $3 - $3.8 million NPAT for the half year ending Dec 2010.

If we dream and extend this and say they make 5 million for the entire year which i think is very conservative, the business is on a pe of 4, making it look very tasty!

I will be looking for it to return to a more normal pe level say 8 giving a target share price of around 30 cents.



THE GOOD


One part of the company which attracts me is the Austock Life division. This division creates their own financial products, targeting people saving for a big life moment eg deposit on a house, start of private school fees, lump sum gift to their children when they turn 18/21 and so on. The product is tax effective if you leave the money to vest over a certain period. This product is distributed all around Aus through a network of financial advisors and Austock have seen funds invested into this product jump 55% to over $150M in the 09/10 FY.

This part of the business should see good growth over the next few years and should become quite valuable.


THE BAD


On the down side, there is a claim by the liquidators of ABC child care for $2.6 million. The liquidators think this money should be recoverable under the preference payments section in the corps act. I cannot tell how this will pan out but even if Austock have to repay back the $2.6m they should still be fine.


The other bad news is Eddie Groves also of ABC is suing the company for 7.4 million. My opinion on this is it seems to be a grab for cash and the company should be fine BUT as we know it is impossible to judge these things without all the facts so we will just have to wait and see how this turns out!

 

[stock nub]

Just a quick update on how Austock is going.

Austock has 3 divisions.

Broking/Corporate Advisory is NOT PROFITABLE
Property Funds Management is PROFITABLE
Insurance Bond Business is BREAK EVEN

Overall Austock is not profitable, NPAT for FY11 of 4.5m is from the one off sale of a subsidiary.

I think that the Broking/Corp Finance division will eventually turn around but this could take 2 - 3 years. Luckily for shareholders we will not have to wait this long as Austock have announced that Intersuisse has signed an exclusivity agreement to purchase the division.

While i will not not speculate on what the purchase price will be i think the company presents decent value at or below 12 cents. Market Cap at 12 cents is 16m.

Net cash on hand is 15 mill + what ever the sale of the broking division brings in. You will be then left with the 2 profitable divisions, meaning they basically come free as the market cap is backed by cash.

Downside risk is the sale doesn't proceed and the broking arm burns through the remaining 14m and any profits made from the other divisions

If the deal goes through, i think the remaining business will be a take over target as it will have assets under management of 800m+ and be profitable.

Overall im a buyer 12 cents and under. The stock is illiquid so it may be hard to build a decent sized position.

 

[skc]

Just a quick update on how Austock is going.

Austock has 3 divisions.

Broking/Corporate Advisory is NOT PROFITABLE
Property Funds Management is PROFITABLE
Insurance Bond Business is BREAK EVEN

Overall Austock is not profitable, NPAT for FY11 of 4.5m is from the one off sale of a subsidiary.

I think that the Broking/Corp Finance division will eventually turn around but this could take 2 - 3 years. Luckily for shareholders we will not have to wait this long as Austock have announced that Intersuisse has signed an exclusivity agreement to purchase the division.

While i will not not speculate on what the purchase price will be i think the company presents decent value at or below 12 cents. Market Cap at 12 cents is 16m.

Net cash on hand is 15 mill + what ever the sale of the broking division brings in. You will be then left with the 2 profitable divisions, meaning they basically come free as the market cap is backed by cash.

Downside risk is the sale doesn't proceed and the broking arm burns through the remaining 14m and any profits made from the other divisions

If the deal goes through, i think the remaining business will be a take over target as it will have assets under management of 800m+ and be profitable.

Overall im a buyer 12 cents and under. The stock is illiquid so it may be hard to build a decent sized position.

The division for sale had revenue of $25m. If the transaction is done at 0.5x revenue (like Bell Potter currently trades) then $10-12m isn't out of the question, and that's ~7-9cps. With cash backing (~10cps) and the remaining division (say 4-5cps). The sum-of-parts valuation could be 21-24c.

The cash backing "should" cushion any dramatic falls if the deal doesn't go ahead... frankly the share price hardly moved since the announcement. Definitely illiquid and hard to build a position. I managed to grab some at 13c on the announcement so it's a matter of wait and see to 17 Jan. A decent reward/risk play imho.

 

[System]

On March 22nd, 2018, Austock Group Limited (ACK) changed its name and ASX code to Generation Development Group Limited (GDG).

 

[Dona Ferentes]

not sure what to make of this outfit; seems like a collection of this and that. As a listed company, it operates as a registered Pooled Development Fund (PDF) specialising in providing development capital to financial sector businesses .

Generation Life is a specialist provider of investment bond product solutions; it established Australia’s first truly flexible investment bond product over 15 years ago.
Austock Financial Services provides administration services, including unit pricing, fund valuation, investment and fund accounting, fund administration and business registry services.

Generation Development Group will launch a $35 million equity raising via stockbrokers Morgans and Moelis to fund the acquisition of a stake in Lonsec, and investment research and consulting business. The raising is expected to be structured as an underwritten placement and rights issue, and done at a discount to the group's last close of 84¢.

Group chairman Rob Coombe earlier flagged the company was looking to make acquisitions:

"As previously stated, we are attracted to businesses that we think will benefit from changes in the landscape in financial services or that are good value and need to be restructured to a more future proof business model."

Generation Development Group had $1.2 billion in funds under management as at 30 June, up from $1.07 billion one year earlier. The group recorded $15.3 million revenue in the 2020 financial year and posted a $2.8 million net profit after tax.

 

[Dona Ferentes]

Matthew Kidman (Livewire Markets) : Okay. Wake us up from our boredom. What's one stock that looks a bit boring, but it's actually a ripper?

Chris Stott (1851 Capital) : Generation Development Group, Matthew. GDG is the ticker. It's the best micro-cap opportunity in the market for us right now. So, they're in the investment bond space, which is really good from a tax-effective standpoint, particularly for people rolling out of super. Their funds under management sits at $1.4 billion at the moment and is growing dramatically – very, very quickly. They grew substantially through that pandemic period. Led by Grant Hackett, we think that it's certainly carved out a really good niche and got a really strong balance sheet with $12 million net cash. So, a high propensity to grow. So that's a buy for us

 

[Dona Ferentes]

nope, actually is a bit boring.

apart from 1851 buying it , it's one of WAM Microcap's "successes"

 

[Belli]

Talk about expats from the same country having a chat. Matthew Kidman was a Director of WAM Capital until a few years ago and Chris Stott is the former CIO of WAM. He and Martin Hickson (WAM also) set up 1851.

 

[Dona Ferentes]

Talk about expats from the same country having a chat. Matthew Kidman was a Director of WAM Capital until a few years ago and Chris Stott is the former CIO of WAM. He and Martin Hickson (WAM also) set up 1851.

do you reckon the hotshot Microcap manager (Lead portfolio manager Oscar Oberg) is just doing what he's told?

 

[Belli]

do you reckon the hotshot Microcap manager (Lead portfolio manager Oscar Oberg) is just doing what he's told?

I don't know but I doubt it. I understand Geoff Wilson is taking more of a hands off approach now and leaves the decisions to those who he has brought on board.

 

[Country Lad]

Not normally the type of business that interests me but it appears the consensus is positive. Good momentum and after watching it continually go through breaks, bought this morning.

 

[bk1]

Finance > Investment Managers

Was holding up very well until Friday.
Compare with its larger peers within the sub sector: NWL , PNI