My thoughts are that at this point, they are probably worth about 85% of their net shareholders equity value ($27m). I say this on the basis that their asset base/product sales are not yet really of a scale to generate ongoing cashflow beyond expenses, so they are basically the sum of their financial resources with a discount for implementation risk. Works out at around 13cps.
Some more random comments:
- Where are the financial resources going to come from to increase lending? I am not clear on this point.
- If they are simply transferring cash from discontinued operations (RAM's, Senate) to lending, then how will they increase earnings sufficiently to achieve the 3 yr target of $4m profit?
- The size of funds under management (shown on their web-site) is tiny and difficult to see where they could offer an advantage at this point.
- Likewise, the life insurance business. In fact, all their businesses are currently so "niche" that it is difficult to see what they can do better than larger players.
- They have a three year horizon to repay the 5% notes ($17m), so would presumably need some other significant source of funds by then (e.g. bank facility). Although it's probably manageable, it is still a potentially costly hurdle to leap at some point.
- Although their half year result is ahead of budget, it was indicated at the agm that this was more due to lower costs than to higher sales.
Overall, I think they may well be a good investment at some point, but I am just going to leave on watch for now as think they could need another 2-3 years of consolidation and groundwork before they are ready for real growth. A break-even forecast for next year suggests there is probably a bit of time before they are going to look obviously "cheap".