my only non-miner

Decided to dabble in an industrial, albeit in a company i know quite a bit about (and held for a while last year before they announced a shares consolidation last year).

DKN looks like its got a good future ahead of it. Having worked with adviser dealer groups for the last 5 years, i think they have a good model, particularly with the TKO of Austchoice, a superannuation and investment mastertrust.

A similar company would be Count Financial which has had a good performance since Jan 04. ITs recent business report released indicated the sector is strong. Hopefully DKNs half yearly to be releaed in Feb or March will also reflect this.

Cdchi1

From latest Shares mag:

DKN Financial Group

The deregulation of superannuation and the firming of equity markets fed a surge in demand for financial planning services that, in turn, led to a process of corporatisation and amalgamation. DKN Financial Group, listed since 1989 (originally as Deakin Financial Services), very much exemplifies those trends.

Last fiscal year, the core business moved from loss to

profit. It was also a year in which the company made by far its largest acquisition to date, gaining AustChoice in a transaction in January 2004 that increased the amount of ordinary shares and converting preference shares, some of which are not yet issued, from 215 million to 460 million. Since then, there has been a 5:1 consolidation, and DKN is now poised to deliver significant integration benefits from AustChoice.
The acquisition also made DKN the nation's largest non-bank financial products distribution network, with more than 450 advisers across three dozen dealer groups and funds under administration approaching $2 billion.

A proliferation of new investment funds, coupled with changes in distribution fee structures, means that organisations such as DKN are now earning more income on a trailing, or annuity, basis, and that brings a reduction in risk profile.

Trail commissions on funds management products are now a significant source of income, along with upfront fund distribution fees, fees for distribution of administration platforms and fee sharing with the member planners. Funds under administration tend to be quite adhesive, which further reduces the corporate risk profile. That is especially the case with the AustChoice acquisition, in which advisers will be rewarded with deferred scrip entitlements in return for maintaining historically average levels of funds under administration.

Because DKN's core clients, the advisers, are shareholders, the structure enjoys an obvious cohesion. The Partner Solutions programme provides direct incentives for advisers to boost uptake of the company's platforms, products and services.

Platform solutions are the largest single contributor to earnings, and the continued popularity and proliferation of wrap accounts and master trusts is likely to deliver at least 10-15% annual increase in activity levels for several years to come.

DKN has potential to become more active in the development of new differentiated products. In November last year, for example, it launched a wrap platform administered by BT Financial Group's Portfolio Services to complement its existing range of platform options. The company has also been active in assisting the development of innovative products, such as the Avanteos Smartplan wrap product that features straight-through processing via the internet.

Because AustChoice was entirely scrip-funded, DKN is in a strong net cash position. Indeed, cash reserves are likely to equate to almost 20% of the current equity capitalisation by next balance date (June 2005). The company is likely to make acquisitions of regionalised dealer groups to further increase its scale and distribution potency.

Economies of scale should be readily exploited, and DKN's EBITDA margin, which was less than 5% last year, should nudge 20% on integration of AustChoice, and could conceivably reach 30% with further growth in network scale and product breadth. In turn, that should allow higher levels of dividend payout.

Given the inevitable ageing of the population over coming decades, the likelihood is the Federal Government will introduce further incentives over time to increase superannuation participation and supplement demand for DKN's services. Another trend likely to continue is the fragmentation and increasing sophistication of investment products, which will mean more throughput to the network and increased demand for advice.