The S&P/ASX 200 Index (ASX: XJO) stock Pinnacle Investment Management Group Ltd (ASX: PNI) has had an incredible year, rising by 125% since the start of 2024. Despite that amazing rise, one investment team believes the company can rise further from here.
Pinnacle is an Australian investment business that invests in other fund managers and provides a range of asset management services. Some of its services include distribution and client services, seed funds under management (FUM) and working capital, middle office and fund administration, compliance, finance, legal, technology and other infrastructure, and an interface for outsourced services.
The investment team at Wilson Asset Management (WAM) have identified Pinnacle as an ASX 200 stock worth owning inside one of its listed investment companies (LICs), WAM Research Ltd (ASX: WAX). This LIC is targeting "the most compelling undervalued growth opportunities in the Australian market."
Why does WAM like the business? An important part of the thesis relates to recent acquisitions by Pinnacle.
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Compelling acquisitions
WAM pointed out that in November, Pinnacle announced the acquisition of strategic interests in VSS Capital, a New York-headquartered private markets investment business, and Pacific Asset Management (PAM), a London-based asset management platform.
The ASX 200 stock also recently completed a $400 million institutional capital raising, the proceeds of which will be used to fund those strategic investments.
Pinnacle announced it will pay US$60.5 million for a 22.5% equity stake in VSS and £25.75 million for a 25% stake in Pacific Asset Management.
WAM noted that the capital raised would also help seed new strategies for its existing affiliate businesses and support new investments in its growth initiatives.
The company said that it continues to see strong momentum into FY25, with ongoing growth in private markets and other alternative strategies. It's seeking to further diversify across high-growth asset classes and expand internationally.
Both VSS and PAM are examples of Pinnacle's focus on international acquisitions with "substantial growth potential" where it thinks it can add value to accelerate growth.
Pinnacle is also continuing to support the growth of current affiliates, including through increased investment in distribution channels domestically and internationally.
At the time of the acquisition, Pinnacle Managing Director Ian Macoun said:
We have made great progress in exporting our unique multi-affiliate model globally. These transactions not only accelerate and enhance our international growth ambitions, but they also provide additional asset class diversification and support further growth of our platform.
WAM concluded its positive thoughts on the ASX 200 stock with the following:
We believe the capital raising will continue to support the business' future growth and are excited to see further investments in new affiliates.
ASX 200 stock valuation
According to the forecast on Commsec, the Pinnacle share price is valued at 42x FY25's estimated earnings.
