PAC 1.49% $7.27 pacific current group limited

Treasury group looks very promising...

  1. 1,816 Posts.
    For those of you who don't know who TRG are, or what they do, i'll briefly explain...

    TRG are a fund management outfit. They own a 50% interest in Imvestors Mutual (IM). IM is a boutique fund manager (ie. smaller in size than the majors like Colonial, ING, Perpetual, etc)... this is not to say they won't grow into the size of the majors over the coming years.

    IM currently manage approx $900M in funds.

    Recent disclosure by TRG has shown that the trend of inflows into IM has been accelerating in recent months. (TRG have been building up their financial adviser network, and tying up distrubution agreements with independents).

    Growth at the beginning of the year was approx $100M per month. Recent evidence shows that the inflows per month into IM are now approaching $140M per month.

    If this rate were maintained, IM will have inflows of over $1700M over 12 months. Over 18 months we're looking at over $2500M in inflows.

    Add this to the $900M currently at hand, and we're looking at approx $3500M, or $3.5B in funds under management by the end of 2003.

    What's the gaurantee of this happening?

    How can we know if the inflows will continue... what are the risks?

    The reason IM have had such spectacular growth in inflows recently is because of their 5 star Assirt rating.

    IM are a 'value' style manager. My belief is that this style of management will far outperform growth investing over the coming years.

    This means that, if anything, IM's outperformance will grow.

    Additionally, the majority of this inflow is directly due to compulsory super.

    The super money go somewhere, even in a bear market.

    Where else besides property, share, or bonds can it go??

    It seems to me that the inflows are pretty rosck solid, because of this reason.

    The only key risk is if IM underperform the market, and i think the risk of this is very minimal because of their fundamental investing methodology.

    What are the implications of TRG's valuation following these large inflows of funds?

    Most boutique fund managers are valued higher than the majors because of their greater growth potential. The majors trade at approx 1/10 of their funds under management.

    If we were to apply this multiple to what IM is expected to have under management at the end of 2003, we'd get a valuation of $350M for the group.

    TRG's 50% interest is valued at approx $175M under this scenario.

    TRG is currently capped at approx $70M, and trading at $5.00.

    Upside over the next 12/18 months is $13/15 under this scenario.

    But, is this scenario overly bullish or bearish???

    IMHO, my assumptions are rather conservative.

    Firstly, i've assumed that the inflows to IM will not grow further that $140M per months. The current trend is of accelerating inflows, so why sould it stop at $140M??

    Secondly, i've assumed that TRG would only be trading in line with the majors at 1/10th funds under management.

    From such a low base, one could very confidently assume that TRG's growth projector is much larger than Colonial or ING, and thus should trade at perhaps 1/8th of funds under management.

    TRG's share price performance over the last 12 months has been quite spectacular.

    It's risen from 50c to $5.00 over this period. Don't let this massive rise put you off this beauty.

    Have a look at the fundamentals... it will suprise you!

    I hold.

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