FYI | Jan 14 2021
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Pitt Street Research has reinstated its valuation for DomaCom, with the company continuing to make steady progress on new product releases
By Pitt Street Research
DomaCom Ltd ((DCL)) continues to make steady progress on new product releases.
The company is partnering with BlueCHP, a community housing provider, on an $250m essential workers affordable housing pilot programme, based on DCL’s Rental Property Accelerator product.
The product uses developer discounts to accelerate property investment for both investor and tenants. Additionally, DCL has also advanced on the new Shariah-compliant Islamic home finance product by entering into a partnership with Crescent Group.
Retirement Income Review provides validation for senior equity release offering
In November 2020, the Australian Treasurer released its Retirement Income Review report, which highlights the need for focus on post-retirement income stream.
The report also emphasises the government's downsizer contributions scheme which retirees can use to access their housing wealth.
We believe that any tangible expansion in retirement income will in parallel increases attention on alternative investment strategies such as DCL's senior equity release.
Reiterating valuation of $0.30–0.40 per share
Given the steady progress on the essential worker program and the Shariah-compliant finance solution, as well as the opportunity provided by the senior equity release offering, we reinstate our previous valuation of $0.30–0.40 per share based on the DCF approach.
We believe that successful product launches and resultant growth in FuM should drive a re-rating of DCL. Key risks we see include: 1) slow increase in FuM; and 2) cyclical risk.
Disclosure: Pitt Street Research directors own shares in Domacom Ltd.
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