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RESEARCH: DomaCom, Ready For Take Off

FYI | Aug 26 2019

By Pitt Street Research

Ready for take off

In June 2019, DomaCom Limited ((DCL)) launched its much-awaited Senior Equity Release (SER) product, marking the conclusion of a 7-year development process of receiving the required regulatory approvals.

The unique value proposition of this product, allowing homeowners to release equity in their homes without the hassle of relocation, places it at an advantage over alternatives such as downsizing.

We believe SER can be a very strong growth driver for DCL and is likely to reward DCL’s investors for the long wait.

Investment case

On the back of an ageing Australian population, coupled with rising cost of living, DCL is poised to benefit from the launch of its SER offering. Moreover, the company’s FuM from its Fractional Investment platform has also witnessed substantial growth, increasing 25% in 75 days to reach the $59m mark in July 2019.

In our view, the launch of SER, together with the La Trobe facility can significantly contribute towards further expansion in FuM.

Valuation range of $0.35-0.46 per share

We value DomaCom at 35 cents per share base case and 46 cents per share optimistic case using a DCF approach.

Our valuation is sensitive to growth in the FuM in line with management’s expectations, and hence depends on the successful utilisation of the La Trobe facility and the conversion of the pilot program with the Big-4 bank.

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