I previously wrote about coming across Pacific Current but placed it on the back burner to keep an eye on.
In checking in on it, a couple things stood out:
- They made an acquisition (Banner Oak) with proceeds from the IPO of GQG Partners
- Banner Oak contribution in ’22 should be 25% of ’21 pre-tax profit
- GQG Partners will contribute equal profit after IPO due to higher payout
- Overall profit should be up materially with Banner Oak contribution and potential growth of existing investments
- Optionality exists with respect to (1) taking out a debt facility to fund future investments at a max 2x debt / EBITDA ratio and (2) potentially raising a fund to bring in outside capital
Overall, the valuation of the business is low for the existing core but one gets diluted with a higher multiple GQG public stock stake. I’m still working through it, but hope to get to a more firm view of the business.
Disclosure: I don’t own any shares in PAX.AX but may buy at any time. Not investment advice, do your own work.