DomaCom Limited (ASX:DCL) CEO Arthur Naoumidis provides an update on the company's fractional investing platform, key business drivers for 2020/21, financing and outlook. Rachael Jones:
Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me from DomaCom (ASX:DCL) is CEO Arthur Naoumidis. Arthur, welcome back to FNN.
Arthur Naoumidis: Hey, it's good to be back, Rachael.
Now, DomaCom operates a fractional investing platform. How has this evolved?Arthur Naoumidis:
So, we started off syndicating properties, so fractional investing means effectively another form of syndication. We've now extended that to syndicating loans, and syndicating debentures, wind farms, etc. So, we've now got about 67 transactions, about $75 million worth of funds under management. And then we've just recently extended our product into what's called senior equity release, so that retirees can sell a fraction of their house.Rachael Jones:
Now product development has been at the core of DomaCom since the beginning. Would you give us an update on what's available and what's planned?Arthur Naoumidis:
The core product, the fractional investing, is quite advanced, and some of the new initiatives on that are some of the land banking that's occurred, syndication of solar farms, etc. But also, in terms of other fractional investing solutions, would be what we were calling rent to own, but we're now calling property accelerator. And that's where we're using developer discounts to provide equity for the tenant, and also a discount for the investors. And the reason why we're doing that is that, clearly, with the high unemployment forecast the next few years, vacancy risk is one of the key issues.
So, that's one of the product developments. The other one is these Islamic products, and that's going to be a really big growth engine for DomaCom, we believe, in the next few years, simply because there is no other leveraged product that's compatible with the Islamic faith. And we believe we have a globally unique solution. Hopefully in the next week or two, we'll be able to announce a partnership with a very prominent Islamic finance group, and we'll have exciting growth potential in the market there.
So, finally, it's the equity release. We've been working really hard for the last seven years to get that product approved [sic: "authorised"] by ASIC and getting advisors accredited. And pleased to say, we're received a major milestone recently with the ATO ruling on a downsizer.Rachael Jones:
And now to your proposed AustAgri acquisition, can you tell us about that business and the rationale behind the transaction?Arthur Naoumidis:
AustAgri itself is what's called a paddock to plate roll-up company. So, it's a company set up to acquire everything from farms -- dairy farms, cattle farms -- to meat processing, to food processing, distribution centres, etc. And it's creating a vertical food delivery into an export market. They were looking to IPO, AustAgri, but it's much quicker to do a transaction through DomaCom. And so what we've agreed is that the DomaCom fund will acquire all the shares of AustAgri. And we'll give them units in a DomaCom fund. Now, clearly, once the assets are in the DomaCom fund, they'll pay us a management fee. And the management fee is 0.88 per cent. Now, the key thing of interest to us is that AustAgri is going to be round about a $300 million worth transaction, which will add $2.6 million worth of revenue to DomaCom. And so, for this transaction, we've also negotiated a five-year minimum fee. Now, why we do that, is that they're going to guarantee a minimum $13 million fee to DomaCom. And for that, we're going to issue one hundred million shares, which is 13 cents a share, which is a lot better than our current share price of 6.8. So, hopefully in the next few weeks, we'll be able to announce that due diligence has formally begun. And before the end of the year, we should hopefully be able to execute this transaction.Rachael Jones:
Excellent. And to the last question now, Arthur, is there anything else you would like to add?Arthur Naoumidis:
There's a number of transformational things happening for DomaCom at the moment. So, AustAgri will be the catalyst for rerouting of the company this financial year. But then the other transactions are more mid- to long-term. Obviously the Islamic transaction has a very, very large upside in terms of funds under management. And then, similarly, the recent ATO ruling that we were obtained in August which allows the DomaCom equity release product to be used in what’s called the downsizer legislation. So, retirees can top up their own super using the proceeds of selling a bit of their house also is a very large market. So we have three transformational transactions that are all highly probable. In fact, two of them are very close to happening. And then the third, the AustAgri, we'll know in the next few weeks. So, it's an exciting outlook for DomaCom shareholders.Rachael Jones:
Arthur Naoumidis, nice to see you again, and thanks for the update.Arthur Naoumidis:
Great to be here, Rachael, and talk to you next time.Ends