Hidden Gems That Fly Under The Radar
River Capital first bought into Generation Development Group (GDG) in early 2023 after identifying the growth opportunity in GDG’s Investment Bonds business and Lonsec Investment Solution (LIS), which the market was under appreciating at that time.
After several meetings with Grant Hackett (CEO) and Terence Wong (CFO), we grew confident that GDG had the right management to execute on their growth strategy.
Our analysis also indicated that our investment was well protected by the annuity nature of cash flows, and that future growth was underpinned by structural tailwinds in both businesses.
GDG’s investment bond (IB) business is a market leader with a dominant market share, benefiting from growing financial adviser awareness and acceptance of investment bonds as a long-term, tax effective product within client portfolios. GDG has c2k active advisers on its books with new advisers continuing to be added. The Federal government’s proposed changes to taxation on super balances over $3 million has provided a further catalyst in increasing awareness of Investment Bonds as an efficient alternative to superannuation. Lonsec is now 100% owned by GDG. It also has 2 annuity like businesses, Research and Lonsec Investment Services (LIS). Both businesses are benefitting from structural industry and regulatory tailwinds. IB and LIS are both growing market share within a backdrop of ongoing industry growth, which we see as a powerful combination to drive shareholder value.
Over the last 12 months the market has come to recognise the growth potential and strong outlook of the combined business which has led to the re-rating of the stock.
We are constantly on the hunt for hidden gems such as GDG that tend to fly under the radar of many mid and large cap investors. No investment is without risk, but as with our investment in GDG, we will back our insights where we see a superior risk/return trade-off, a great management team, and a business that we know well.
