Teaminvest Private (ASX:TIP): The ASX’s most unique investment company!

Teaminvest Private (ASX:TIP) may not be as prominent an investment company as Magellan or Wilson, but perhaps it has not been getting the attention it deserves. Originating roughly 2 decades ago as an informal club of business owners for investment education and stock-picking purposes, it has evolved into a company with $1.6bn in funds in its education and advice business and a further $244m in Funds Under Management (ASX:FUM). Let’s take a look at how it got to this point, what the future holds and what it could become.

TeamInvest: 3 in one and one in 3!

TeamInvest has 3 divisions. The first is its wealth/funds management where it manages investors’ money directly. The second is its investor education business. And the third is its Private Equity/Active Investments division.

These divisions are complementary to each other. TIP uses its Insights to generate revenue through its education service and uses it to help improve business that its private equity and funds management businesses own. These lead to better returns for the companies and for TIP. This is summarised in the company’s ‘Noble Purpose’ in compound[ing] knowledge and wealth.

Teaminvest Private is very much a Graham-and-Dodd style investor and investment teacher. Graham-and-Dodd is a value investing approach originally developed by the American investors Benjamin Graham and David Dodd that focuses on buying undervalued companies with strong fundamentals at a price lower than their intrinsic value. Moreover, TeamInvest engages with its investments. With investee companies on the Private side, it works alongside management so that all parties can realise returns.

Its investee companies include truck manufacturer GLT Trailers, East Coast Traffic Control (ECT), Icon Metal (which makes architectural metalwork and structural steel) and Automation Group (which provides radio telemetry products and services as well as industrial automation).

The opportunity

Teaminvest sees two key issues facing Australian business today where it can help. The first is that it is difficult to obtain finance. Even though Australian SMEs are the vast majority of Australian businesses, big banks have shunned away from them in recent years. Between 2000 and 2017, the amount big banks lent to SMEs as opposed to mortgages fell from nearly $1 for every dollar to a mere 13 cents.

The second is the need for strategic advice as Baby Boomers transition their businesses to the next generation. Up to 1 million will retire in the next 10 years. The two biggest issues facing these new owners will be managing those companies (when they may not have the experience in their company’s industry, or even managing companies generally) as well as access to capital. They may not have a family home to ‘re-mortgage’ or be unwilling to take on the risk. They will almost certainly not have all skills necessary to be the CEO of a company and may not have mentors and/or colleagues at an executive level who can make up for missing strengths.

A good FY24 and a great start to FY25

Teaminvest had a good FY24 and a good start to FY25. In FY24, (the 12 months ended 30 June 2024) revenues were $158m, its preferred bottom-line operating metric, Look-Through EBITDA, rose 21% to $15.8m, and the company paid a dividend of 3c per share (a record for the company).

The company is undervalued

Our friends at Pitt Street Research released a report on Teaminvest earlier today. It observed the company is trading at just 64% of its book value. If the company was trading at its book value, it could be trading at $3.09 – 50% higher than its share price right now. It is also worth noting that the book value of the holding on its balance sheet may be an underestimation because Teaminvest does not revalue its holdings each year for balance sheet purposes. A realistic book value could be twice as high.

Using metrics other than Price-to-Book could also derive higher including:

• The average trailing P/E multiple for the ASX All Ordinaries Index which is 33x. With diluted EPS of 22.7c in FY24, this derives a share price of $7.49 per share.
• The average EV/EBITDA for the ASX All Ordinaries Index – 10.7x for CY24. Considering TIP made $15.7m in EBITDA, this would yield an Enterprise Value of $166.4m, equating to a market cap of $172.4m and a consequential share price of $5.57 per share.

Teaminvest has a bright future ahead

Teaminvest plans to continue growing its revenue and earnings by:

• Increasing Funds Under Management and Funds Under Advice in its Funds management business
• New investments, particularly those that bolt-on to existing businesses, or new businesses whose management aligns with the company’s philosophy,
• Working with management of existing investments to sustainable grow profits.

While this investment house obviously has some way to go before reaching the heights Washington H. Soul Pattinson (ASX:SOL), we think it has the firm foundations to grow into something special.

Teaminvest is a research client of Pitt Street Research

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