RESEARCH: Domacom Recapitalised For Growth

This story features DOMACOM LIMITED. For more info SHARE ANALYSIS: DCL

Pitt Street Research suggests growth should pick up for Domacom after the arrival of cornerstone investor HALO Technologies.

By Pitt Street Research

The last four months have seen DomaCom Limited ((DCL)) steadily strengthening its balance sheet. The company not only secured a cornerstone investor, HALO Technologies, but also completed a rights issue, resulting in a combined cash inflow of $6m.

In our view, this increase in cash balance should help revive the growth in FuM (Funds under Management), which has remained subdued in the past few months.

New market channel to drive adoption rate

Coupled with the capital infusion of $3m from the rights issue, the agreement with HALO Technologies provided DCL with a new B2C strategy to reach the market.

HALO operates an investment research platform and has over $2bn in funds under advisory. This translates into a large addressable market for DCL.

We believe this should help drive the adoption of DCL’s fractional investment product, since most of HALO’s customers are well-informed and sophisticated investors.

Recalibrating valuation to $0.29–0.38 per share

Keeping in mind the recent restrained growth in the company’s FuM and share dilution due to recapitalisation, we have recalibrated our valuation to $0.29–0.38 from $0.35–0.46 previously.

While our basic assumptions for the DCF calculation remain the same, we have reconsidered our growth assumptions around FuM.

However, we believe that armed with the recent capital infusion, as well as a new B2C strategy, DCL’s FuM should witness substantial growth in the medium term, and thus drive a re-rating of the stock.

Download the full report

Earlier today the report above was released by Pitt Street Research for which FNArena is a partner in distribution. The full report can be accessed here: https://www.fnarena.com/index.php/pitt-street-research/DCL/

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