Raiz deepens pocket with another $1m investment

An enduring principle of the stock market – still relevant today – is to follow the money … especially the “smart” money when making investment decisions.

And so it is, that fresh from reporting a strong turnaround in full-year results and $4 million in new capital – half of it from United States investment giant, State Street Global Advisors – micro-investor platform Raiz Invest has received a further $1 million in fresh equity from Tiga Trading and Thorney Technologies, which are both run by prominent Australian businessman Alex Waislitz as part of the Thorney Investment Group he founded and where he remains chairman.

An additional $1million worth of funding in Raiz Invest by Thorney Investment Group could be an early sign of green shoots appearing in the small-cap industrial and technology sector.

Raised from a placement on the same terms as State Street at 41c a share, Tiga, which is Waislitz’s family investment company, and Thorney Technologies, an arm of the Thorney Investment Group, have been issued 2.4 million shares. It suggests the market stalwart has spotted an opportunity to make money with his increased exposure in the company.

Raiz, which this week reported a full-year turnaround from a $2.4 million loss into a $1.3 million EBITDA, is now showing all the signs of rapid business improvement. A 19 per cent jump in revenue for the year, coupled with a double-digit reduction in employee and corporate expenses, while growing funds under management by 23 per cent, may well have set the company up for strong 2025.

By all metric standards, Raiz has done exactly what its shareholders want to see in a small, but growing company. And now with $15 million in the bank and a strong operating cash flow of $3.6 million, the war chest is bulging at a time when management has put a spotlight on its plans for organic growth, including potential merger and acquisition opportunities.

Waislitz is no dummy when it comes to investments in the share market, having successfully built his career around managing the Thorney Investment Group and overseeing some of the investments for the well-known Visy Industries’ Pratt family for more than 30 years.

The canny investor has had a long association with Raiz, subscribing to shares in the company’s initial public offering (IPO) after been introduced to the story by renowned Melbourne stockbroker, Hugh Robertson.

Robertson, regarded as one of the best Australian market small-cap pickers, cut his cloth by advising his clients to invest in early-stage small industrial and technology companies. After the enormous success of stock tips such as buying Monadephous at $5 in 2008 before it eventually reached $28 and structuring the IPO for Afterpay at $1 a share in 2016 before it ran to $198 and was then eventually bought out by Nasdaq-listed Square in 2021, the veteran broker has understandably amassed a considerable following.

In an interview in 2022, Robertson had become more sanguine about the performance of the smaller end of town, excluding the resource sector, assessing the market conditions as some of the worst he had encountered in his business career. And it is hard to argue otherwise.

The ASX Small Ordinaries Index fell 30 per cent from the beginning of 2022 and didn’t start to find its feet again until eight months ago, recovering a modest 17 per cent since then and still trading below pre-COVID highs. Had it not been for a handful of outperforming resource-related components, the already shabby-looking index would have been much worse.

The performance is all the more profound when measured against the much-used ASX-200 market indicator, which has risen 76 per cent since the COVID lows and 6 per cent since the start of 2022.

Part of the reason behind the big disparity between the two indexes can be put down to the steep rise in global inflation since the end of the global coronavirus pandemic, which forced investors to switch tack from high-growth companies with no dividends into high-yielding blue chips and bank deposits – leaving the smaller end largely starved of investors.

Additionally, the phenomenal growth in the use of Exchange Traded Funds (ETFs) – vehicles aligned with index performance – by financial advisors keen to reduce risk exposure for clients and possibly their own risk of running foul of authorities through negligent advice, has literally sucked the life out of small stocks.

However, it is only now that investors, who are typically forward-looking, have started to spot the hint of an interest rate drop on the horizon and are beginning to pick through the ashes looking for the next run in growth stocks.

Who knows whether their timing is right or not? After all, a drop in the inflation rate is still proving frustratingly slow, an American election is just months away and geopolitical risk is showing no interest in subsiding.

But, to coin a much-used idiom, these are all known knowns and the risks are therefore almost certainly already priced into the market.

One thing is for sure, though, well managed companies in a growth sector will always shine through, eventually. As investors slowly return to the growth sector looking for a return, a strong set of financial year numbers and millions of dollars in fresh equity are likely to have Raiz on a few ASX watchlists.

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