Australasian Wealth Investments Limited ("AWK")

[steve fleming]

AWK (m/c $50m) now owns two of the largest online self-directed financial services portals in Australia with combined FUA of c$1.6 billion over 40,000 invested clients and more than 300,000 subscribers to its website, plus an undiluted 49.6% share of van Eyk Research, which has c$1.2 billion in FUM.

Their approach is a portfolio based growth strategy (distinct from a ‘cost focused’ aggregation or roll-up strategy ) with the key piece in the puzzle being the digital distribution network (ie 300,000 website subscribers) that AWK has now today well and truly secured.

Acquisitions to date:

· Investsmart (ex Fairfax): EBIT of $1.5m
· Van Eyk (ex Pyne Gould): EBIT of $2.66m
· Your Share: EBIT of $1.3m

(annualised, pre synergies and corporate costs)

So starting to put together a reasonably chunky level of earnings….interesting play in the very fast growing, self-directed investor financial services space.

From a strategy perspective, will at least be interesting to follow, as there are some real opportunities to reposition and develop existing investments, extract synergies and participate in industry consolidation given their base of market leading products

Two very successful and experienced couple of guys leading the company

[steve fleming]

Todays presentation is interesting:

From page 5 : "Independent but complementary investments driving compounding revenue growth"

310,000 unique individuals access our digital properties*; seeking to build to 500,000 through acquisition & organic growth

40,000 paying customers* (12.9% sell through); seeking to increase take-up towards 20% through product/website enhancement

$205 annual revenue per customer* (largely from rebate / trail commissions); growth through new research & funds management streams; medium term goal to double annual revenue per customer [InvestSmart currently averages $133 per customer / YourShare averages $300 per customer ]

Assume 7% pa market growth (with ‘self directed’ & SMSF assets - growing at 12% pa)

Now, do the math:

Currently: 310,000 x 12.9% x $205 = $8.2 mil revenue

Target: 500,000 x 20% x $400 = $40 million revenue (before market growth)

Now that is some target growth, which, given the coherent and structured strategy in place, does not look unreasonable as a medium term target

[steve fleming]

share price is getting smashed, but this company is in a fast growing space with some innovative ideas ....execution risk exists though

-------------


Trustee sector needs digital innovation: AWI
PUBLISHED: 20 Jan 2014 05:13:10 | UPDATED: 20 Jan 2014 05:13:10PUBLISHED: 20 Jan 2014 PRINT EDITION: 20 Jan 2014


Australasian Wealth Investments is eyeing companies in the trustee *services sector as new boss Ben Heap ramps up the listed investment fund’s *acquisition strategy.

AWI, which counts QIC, Macquarie Group and Contango Asset Management among its biggest shareholders, is looking to buy or seed the development of a digital trustee business as the Australian population continues to age.

“It [the trustee sector] has become a very hot space of late. We think the trustee space desperately needs digital innovation. It’s currently just not there,” Mr Heap said, pointing to the three-way bidding war for The Trust Company, which was snapped up by Perpetual last year. Trustee services companies provide estate planning and wealth management to clients.

“The transfer of wealth is a key point in the decision process. An investment in a trustee business, [can be] an *effective way to be involved in that transfer of wealth,” he said.

Mr Heap’s comments come after AWI forked out $10.5 million for *financial services site YourShare in December. The fund also snapped up finance portal InvestSMART for *$7 million last year from The *Australian Financial Review publisher *Fairfax Media.

The company, previously known as Fat Prophets Australia Fund and *Merricks Capital Special Opportunity Fund, is banking on the boom of *self-directed investors and soaring demand for good financial services technology to drive its growth.

AWI is also looking to launch an investment “accelerator” at the end of February, which will be aimed at providing early-stage funding for entrepreneurs operating in the financial services technology space.

“We believe that we can create an environment and support up to 10 ventures in the next 12 to 18 months,” Mr Heap said. The company is looking to dispense $100,000 investments in each of these ventures to get the businesses going and seek more venture capital.

AWI is hoping some of these ventures would yield viable businesses to complement the group’s current suite of acquisitions. “We’ll have the option to participate as a minority shareholder,” Mr Heap said.

“For us, it’s about backing individuals with good business ideas. Australia should certainly be a serious financial services hub in the world.

“Key to that is to recognise the need to be at the leading edge of innovation in financial services. Technology is just the facilitator.”

The Australian Financial Review

[Lizard]

Thanks for the info on AWI, Steve.

I see the Van Eyck position is now diluted to 36.2% via PGC conversion of convertible note. The value of the PGC note was $A5.6m (for 27.1% share) according to their annual report, so I guess it is not surprising they converted given AWI hold their share at $13.3m.

Where do you see annualised EBIT? Maybe $3.5-$4.0m for 2014?

Chart is not too cheerful right now and depth very weak, so will be interesting to see if it can hold above the 35cps rights issue price from earlier last year.

[Joshuatree]

Be great if they can pull it off Steve. Do you know anything re calibre of management; on the ground over there?. Looks like Mac bank and Contango have sold down /out as well. And more dilution ahead as they do yet another cap raise maybe. Cheers JT

[Lizard]

I see the Van Eyk position is now diluted to 36.2% via PGC conversion of convertible note. The value of the PGC note was $A5.6m (for 27.1% share) according to their annual report, so I guess it is not surprising they converted given AWI hold their share at $13.3m.

So PGC sold their converted van Eyk shares at book value of $5.6m. Did AWI over pay for their share or are PGC "giving them away"? Can't find any clues as to who took the PGC stake.

[steve fleming]

So PGC sold their converted van Eyk shares at book value of $5.6m. Did AWI over pay for their share or are PGC "giving them away"? Can't find any clues as to who took the PGC stake.

Well looks like AWI overpaid unfortunately.....took the hit on the NTA with the write down.

EV of $26m now (after adjusting for cash and surplus investments including VE)

annualised EBITDA of around $2.3m for FY14 so not particularly cheap at over 10x, but a good Fintech business should command premium multiples given sector fundamentals (i.e. RFL)

looks like a small maiden dividend as well....hopefully not an embarrassingly token one like EPD

Good forecast operational EBITDA growth of 36% into FY15, and 37% into FY16, but obviously execution risk is high

I'm a bit on a fence on this one now - good story, good strategy, good sector - but it may take a bit longer for all this to come together and impact the bottom line

[percy]

Van Eyk appears to be a can of worms,as does George Kerr's ,PGC [nz] Torchlight,and Thames Water.