Hi All After recent post by JCoure, I thought I would have a...

Hi All
After recent post by JCoure, I thought I would have a look at one of the Funds Pacific Current has part ownership, Investors Mutual (IML) and extrapolate this out against other Aurora Trust funds to try and get a rough valuation for PAC shares.
IML grew FUM at approximately 14% to 2015 from 2014. IML has a track record of compounding growth of 11.5% (from recent news article in AFR).
Wanted to compare the value of IML to Platinum (PTM) and the sale of RARE Infrastructure. PTM is one of a few comparable investment companies listed on the ASX and the sale of RARE to Legg Mason is an assumed benchmark minimum for the sale price versus FUM for the other funds. Did not want to compare to PPT or IFL as they own Trustee/Registry services and are not comparable to IML in a true sense.
Note, this is an extrapolation based on ratios and does not necessarily represent what others may pay for other funds, however this should give a good indication of underlying value and how much Pacific Current is currently undervalued by the market.
Rough Valuation Figures….
Based on PTM FUM of $24+ Billion and the Market Capitalisation of $3.2 Billion, for every dollar PTM has in FUM, the company is valued at $1 for every $7.50 of FUM. Alternatively, $0.133 of value for every dollar of FUM.
Applying this value to Investors Mutual, this company could possibly be floated at $853.3 Million, based on PTM’s valuation. This assumes IML has $6.4 Billion of FUM.
There is an alternative based on a recent sale of RARE Infrastructure. PAC announced at the time of sale that for 50% of the company, they were selling stake for up to $200 Million. This valued the total company at $400 Million.
Applying the same ratio of FUM versus value as above, RARE had $9.32 Billion of FUM at the time of sale with incentive payments when certain performance goals were achieved. Given the falloff in FUM to $8.24 Billion this has lowered the valuation and ensured PAC receive limited trailing payment. The upfront payment of $112 Million has been banked and has paid of debt. If we assume this is for 40% of the company, the total company was sold for $280 Million. Leaving the current holding valued at $28 Million.
The ratio calculation for every dollar RARE has in FUM, the company is valued at $1 for every $29.43 of FUM. Alternatively, $0.034 of value for every dollar of FUM.
Applying this ratio value to Investors Mutual with FUM of $6.4 Billion, this company could possibly be floated at $217.5 Million.
Using the valuation figures above, Aurora Trusts ownership of 40% values stake as follows:
PTM – $853.3 M *40%= $341.32M
RARE –$217.5 M *40%=$87M
Taking into account PAC’s ownership of Aurora Trust at 64.03%, this values the stake as follows:
PTM - $341.32M *64.03%=$218.55M
RARE - $87M *64.03%=$55.701M
From the above, based on market valuation of a similar performing investment company with slightly lower compounded returns than IML over ten years, versus a similar fund assuming a conservative valuation, IML could be valued at between $55.701M to $218.55M.
Remembering that IML is 13% of FUM, PAC valuation is between $428.47M and $1.681B.
PAC has shares on issue of 28,125,955. Based on the valuation, PAC share price would be $15.23 and $59.76.
Note, this is mere extrapolation based on ratios of what we know today in the markets. I believe the two levels of calculation required (Aurora Trust structure at 64.03% and then the variable ownership of each fund) will confuse a lot of people. If you take the time to calculate out value based on previous fund sales or other comparable listed entities, the price can be worked out. It required a complex spreadsheet but can be done. Also the extrapolation doesn’t necessarily apply as IML is growing and has a superior track record in good times and bad, just like PTM. We all know the Northern Lights business hasn’t performed as well as the old Treasury Group businesses and this would decrease valuations accordingly. This however could be used to justify a higher valuation of funds like BlackCrane and IML, versus a lower valuation for Seizert, Aether, etc based on RARE’s ratios. This would mean the valuation of PAC is between $15.23 and about $37 (half of the difference between the top valuation method and the lower).
What do you guys think? I don’t believe we will get $59.76 this side of 2025, but can always hope. I believe there are large differences between this company and PTM, but I believe the RARE sale set a good benchmark for a conservative and an upper end valuation (that is including and excluding trailing performance payments). This would value PAC and its trust/funds at a conservative $15.23, with the possibility of adding an extra $5 on top, valuing at $20.
Best of Luck
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