DomaCom (ASX:DCL) 1H19 results & outlook

Interviews

by Jessica Amir

DomaCom Limited (ASX:DCL) CEO Arthur Naoumidis talks about 1H19 results, including regulatory approval for the company's senior equity release product, B2C distribution and opportunities in residential.

Jessica Amir:
Thanks for tuning into the Finance News Network, I’m Jessica Amir. Today with DomaCom (ASX:DCL) CEO, Arthur Naoumidis. Arthur great to see you, welcome back.

Arthur Naoumidis: Great to see you again Jessica, great to be here.

Jessica Amir: For those who aren’t familiar, DomaCom is a fractional property ownership company. Can you just give us a quick introduction?

Arthur Naoumidis: DomaCom allows investors to pull together to syndicate the purchase of an investment property. So it really enables people to do to property what they’ve been doing for equities all along which is buy a bit of something. So that’s really the key part of DomaCom is to syndicate an asset - not just property, but mainly properties at the moment. And then also we have a secondary market capability. We have got market maker licence and so people can then trade their interest to other investors. So that is really what DomaCom does.

Jessica Amir: Speaking about that, we have actually seen public sentiment improve. What do you think has been the catalyst for this?

Arthur Naoumidis: To me, three clear things have happened in the last few months. And started off with us winning the Federal Court Appeal, particularly on the self managed superfund (SMSF) product not being a breach of the sole purpose test. We have not seen really that play out yet and will in 2019. That’s one of the big milestones. The other milestone clearly was after six and a half years; we finally got the ASIC approval for the instrument that will enable our senior equity release product. We have been working on this for nearly seven years and so we are nearly there and that will be launching shortly.

And then finally, in January we announced a pilot with a big four bank. Now that is clearly quite a big part of our distribution strategy and we will see what happens. But those three alone, or any one of those three I think are major milestones but three together is a very good outcome for us.

Jessica Amir: Thanks Arthur. Now to the business in a little more detail. Just give us an update on your transactions?

Arthur Naoumidis: I am pleased to say we have got quite a few transactions going on and we are just starting to get some traction. Our funds under management, it is just nudging $44 million at the end of February. So that iss almost a ten per cent uplift in the month. So it is a first really sign of life, as I would call it. We have got another $20 million worth of transactions going on, not all property; we are now syndicating debt. We are also syndicating a debenture for a wind farm up in New England part of New South Wales. So we are starting to broaden our base. Not just property, but property is still a very large part. I’m pleased to say we’ve got 55 active properties that we own. I’m pleased to say also, they’re all fully let. They have got 100 per cent occupancy so zero per cent vacancy.

Jessica Amir: Can you give us an update on your distribution?

Arthur Naoumidis: One of the things that people and I think some investors aren’t clear [about], is that DomaCom is an intermediated business. In other words it is not really our business model to market direct to consumers. We want to be the intel inside. So our strategy up to this point has been supporting financial planning businesses and being the tool that they use for fractional ownership. For quite a long time, we have been looking for a partner to do the B to C arm of our business. And I’m pleased to say we’ve got one, or we think we have one. We are in the pilot stage with a big four bank. I don't think anyone has really factored in any element of success and if that eventuates that will be the big B to C channel of the DomaCom business.

Jessica Amir: Well done. Now can you tell us about your DomaCom platform, just give us an update on that?

Arthur Naoumidis: We have been syndicating properties initially, just residential. We have got developments in progress and also being structured as we speak. We are doing land banking; we’ve bought two land banking parcels of land in the Badgerys Creek area. We have got more land banking coming. So our property side is expanding but we’re also as I indicated we are syndicating Pooled Mortgage fund with DFS, as we delivered our second transaction this week. So that is really pleasing. And we have got debentures for wind farms and solar farms and the like. So it’s really pleasing to see that a larger cohort of Australia is starting to look at the fractional platform as a way to get access to assets they otherwise wouldn’t be able to get.

Jessica Amir: What’s your outlook for 2019?

Arthur Naoumidis: This is the real transformational year for DomaCom. It has been a bit of a rough road but the light is there at the end of the tunnel. I am very pleased that we are partway through our recapitalisation structure with the most recent $1.3 million equity raising, half of which was done by an institutional investor. The first time we have got an institutional investor in DomaCom. Clearly we will need to bolster our balance sheet later this year and that is looking promising for us.

The real focus now is on delivering debt and then funds under management. What will drive that is having a debt facility. And then some of the transactions that we have will simply, as our fund increases, our prospects increase. So yes, this year is about balance sheet and then also leveraging off the SMSF ruling, for example. Leveraging off the fact that the residential property market is hard to access for most people. Some of the drivers for the property weakness are actually very positive for DomaCom. So for example, if people are finding it harder and harder to get debt, as soon as we get out of debt within DomaCom which we’re very, very close to doing, we have got three organisations close to giving us a debt facility.

As soon as we get that, then you can come to DomaCom, click a button, that’s it! No application fees or forms and also no serviceability checks, because it’s the fund that’s the borrower. So that will be a great drive for DomaCom. So I think for example, if Labor comes in and bans limited recourse borrowing, well how will a superfund be able to buy leveraged property? DomaCom will be one of the few ways left. So 2019 is looking good for us.

As well as the senior equity release product. That is really close to launch. So hopefully end of March, early April we will have our product live to market. And we have already got advisers that are very very keen on the product. So we believe that will be a flagship product for the company.

Jessica Amir: Very insightful. Arthur Naoumidis, thank you so much.

Arthur Naoumidis: Thank you Jessica. Good to see you again.


Ends

Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter.