Thorn Group - TGa - 30 c Underlying value - 42 - 49 cMoat is a substantial shareholderToday Thorn announced a fully franked dividend of 7 c or $23.4 mThis leaves $94 m of free cash - 27.6 c. We estimate there a 12 c of franking available There is $25 m of residual equity in the business book which will deliver 7.4 cThe stock is trading at 30 c and there is 42 c of cash in the business I believe Tga will hold onto $50 m cash as they pivot into a new line of business - this is lroughly 7 .4 cI believe Duncan Saville and his team at TGa understand that a capital light business with a point of difference and a large runway for growth is the type of business Thorn Money should become If they can execute then that 7.4 c may well be worth 2 x book value Given we don’t know what direction they are heading this extra 7.4 c is hard to pencil in .Given Duncan has competence in both tech and business finance , I think I’m willing to back the boards judgement . Duncan will ol wn 50 pc of this $130 - $150m businessI have watched with interest how Duncan has started RMC from scratch to create a business making $105 m npat with an amazing cagr and very high Roe It’s an ideal vehicle to back an acquisition or new strategy with a clean slate .I think management and the board have shown themselves to be excellent allocators of capital I look forward to seeing the rest of the story unfold .
TGA Price at posting:
31.5¢ Sentiment: Buy Disclosure: Held
