Micro investing biz refocuses on Australia, gains fundie approval

Roughly a year ago the micro-investing movement in Australia hit a milestone when the number of Aussie’s using micro-investing apps doubled annually to 1.8 million, possibly heralding a ‘new generation of investors’. At the time, RAIZ Invest Limited (ASX: RZI) was the undisputed leader in the space with its near 30% market share.

In 2019, the business expanded into Southeast Asia, starting with Indonesia and Malaysia in March and May respectively – a move that fundie Graeme Carson from Cyan Investment Management thinks hasn’t paid off for the company.

“This is something that we’ve held for quite a while. It hasn’t worked for us since. We are still there because we genuinely believe in it,” Mr Carson said on Reach Markets’ The Insider: Meet the Fund Manager in February 2023, when he backed Raiz Invest as one of his favourite stocks in Cyan’s portfolio. Raiz sits within the ‘Emerging Businesses’ component of Cyan’s wholesale C3G Fund, which comprises 35% of the fund’s total allocations and focuses on newer business models.

“They have got over $1 billion in funds under management (FUM) predominantly in the Australian market,” Mr Carson said, also highlighting that Raiz’s FUM grew from $450 million in June 2020 to ~$1 billion in June 2022 and how, consequently, revenues had (nearly) doubled from $10.28 million to $19.33 million.

Acknowledging the elephant in the room, Mr Carson commented on the company’s share price which had plummeted 74% over the previous 16 months from its September (2021) highs: “Why is it down? Well, obviously it’s the baby and bathwater of the micro end of the market. 

Speaking on Raiz’s foray into the Southeast Asian market and the accompanying CAPEX, he added: “All that spend (had) brought customers on but it hasn’t really brought much FUM on. In fact all the FUM is basically in the Australian business.” Recognising a potential way back into operational efficiency, the company refreshed its board and some of its management and redirected its efforts towards the Australian side of the business.

“We think that is the key to (Raiz) because it was cash being burnt in Asia,” Mr Carson said. “The catalysts are going to be the fact that they’ve already pulled out $2-3 million of costs a year; they’re going to clarify their Asian strategy; then they’re going to reinvest capital in the Australian business which we see growing strongly from here.”

As at 28th February 2023, Raiz Invest’s global FUM stood at $1.103 billion (up 9.8% on the previous 12 months) with 683,762 active customers. Australia alone contributed $1.089 billion despite the fact that the country had only 292,369 customers, 42.9% of its global customer base.

In summary, Mr Carson believed Raiz’s story of the business selling down 40%, its doubled revenue and FUM, and the refocusing of its operations had the potential to generate ‘a lot of interest’ – including from the corporate side of the market. “We value that at $1.25 on a conservative basis which actually represents about 140% upside from here.”

Click here to view more videos from Graeme Carson’s The Insider: Meet the Fund Manager session.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position. Any advice contained within this presentation is general advice and does not consider your personal circumstances, you should consider whether it is appropriate for you. 

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

Past performance is not a reliable indicator of future performance.