Why Treasury Group Limited looks a great buy

Proposed entry into the US markets will trigger a new phase of growth for this asset management company.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What: Treasury Group Limited (ASX: TRG) is a relatively unusual business in that it takes equity positions in talented fund management groups and supplies operational support, distribution capacity and a full range of administration services. This effectively allows the asset managers to get on with what they do best – finding investment opportunities.

Key groups within their portfolio include such names as Investors Mutual, RARE Infrastructure and ROC Partners. At the end of FY2014 funds under management totalled $25.46 billion; and Treasury Group's average equity holding per boutique was 41%.

Debt free Treasury Group enjoyed a reasonable 2014 with net profit up 26% and dividends up 25%; however soon after balance date a 'company transforming' deal was announced with an agreed proposal to merge with US-based Northern Lights Capital Group.

A similar business to Treasury Group with interests in high-performing specialist asset management groups. A secondary listing of the merged group will be sought on a global stock exchange within three years.

So What: The merger is expected to complete by the end of the 2014 calendar year. The combined group will represent 21 boutiques covering a wide range of asset classes. Distribution capability will be greatly enhanced as Northern Lights has representation in the US, UK and France. Cornerstone Northern Lights shareholders BNP Paribas and Laird Norton are supportive and will be joining the combined board.

The merger will be effected by way of an Australian trust with the present Treasury Group holding 61% and the present Northern Lights 39%. Profits / losses will be equity accounted and Treasury Group will remain listed on the ASX. All franking credits will remain with Treasury Group.

Now What: Although the full benefits of the merger are unlikely to be apparent before 2016 there is plenty to like about the proposal. For example both companies have deep experience in identifying and adding value to partners; distribution channels will broaden and investment risk will reduce with a more extensive range of specialised asset managers.

On my estimates Treasury Group ($10.40) sells at a FY2015 price earnings ratio of 17.5 and a fully franked yield of 5% – to my way of thinking, these are good value metrics.

Motley Fool contributor Peter Andersen has shares in Treasury Group Limited

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »