2 Financial Sector Penny Stocks Catching Analyst Attention

In the world of investing, small-cap stocks often fly under the radar until they start delivering results too strong to ignore. For investors with an eye for opportunity, these moments can be rewarding—provided the businesses have solid fundamentals and structural tailwinds behind them. Two Australian small-cap names in the broader financial ecosystem have recently caught the attention of analysts: Generation Development Group (ASX: GDG) and Acrow (ASX: ACF).

Though they operate in different parts of the financial services value chain, both are riding strong momentum into FY25. GDG is benefiting from growth in retirement-focused wealth solutions, while ACF has transformed into an industrial access services leader with counter-cyclical resilience. Let’s take a closer look at why these two are making waves right now.

Why These Two Now?

1. Generation Development Group (GDG): The company has just posted double-digit revenue growth and record inflows into its wealth products. Its scale has also been boosted by the expanding managed accounts platform of Lonsec, its subsidiary. Updated FY24 and 1H FY25 numbers show that this momentum is carrying through into the current year.
2. Acrow (ACF): The business confirmed record revenue for FY25, driven by its Industrial Access division. External recaps suggest double-digit top-line growth, along with resilient earnings despite some cost and leverage considerations.

Both companies are tapping into structural growth stories—one driven by long-term savings and retirement needs, the other by essential industrial services

Generation Development Group (ASX: GDG) at a Glance

Generation Development Group runs a diversified wealth management platform. Its portfolio includes:

1. Investment bonds – appealing as tax-effective savings vehicles.
2. Managed accounts – powered by Lonsec, one of Australia’s leading investment research houses.
3. Annuity solutions – targeting retirees with guaranteed income products.

In FY24, GDG saw record inflows across these businesses, which translated into higher Funds Under Management (FUM). The company also signaled its transition into a more conventional listed-company model by ceasing its status as a Pooled Development Fund (PDF) in June 2024.

GDG’s Latest Numbers

1. FY25 revenue: $219.5 million, up 101% year on year.
2. Net profit after tax (NPAT): $38.25 million, up 555% year on year.

This dramatic step-up reflects both organic growth and scaling benefits across the Lonsec platform.

What’s Driving GDG?

1. Structural Tailwinds
   Australia’s superannuation system and retirement-focused tax settings are elevating demand for products like investment bonds and annuities. GDG is well-positioned with both depth and distribution in these segments.
2. Platform Effect
   Lonsec’s rising FUM and strong adviser relationships create a powerful platform effect. As advisers use Lonsec’s managed accounts, GDG captures additional fee revenue and cross-selling opportunities.

Watch Items for GDG

1. Dividends remain modest, as much of the company’s cash is reinvested for growth.
2. Execution risks exist in scaling managed accounts and gaining wider adoption of annuities, especially amid competition.
3. The transition away from PDF status and ongoing acquisitions will require careful capital allocation and adviser engagement.

Acrow (ASX: ACF) in Focus

Acrow provides engineered formwork, scaffolding, and industrial access services—safety-critical solutions essential for industries like resources, energy, and infrastructure. While traditionally tied to formwork cycles, the company’s growth story is now increasingly anchored by its Industrial Access division.

This pivot has underpinned record revenue and improved visibility, giving Acrow a stronger foundation even when construction activity fluctuates.

ACF’s Latest Updates

1. FY25 sales revenue: $241 million, up 25% year on year, with growth primarily from the Industrial Access business.
2. Revenue guidance for FY25: $260–270 million.
3. Management has indicated solid EBITDA delivery, supported by new contracts and diversification.

Earnings Texture at ACF

1. Analysts point to revenue growth in the 23–25% range for FY25.
2. Some earnings per share (EPS) pressure has appeared due to acquisition costs, business mix, and leverage.
3. Despite this, NPAT remained resilient, thanks to contract wins and diversification.
4. Community research also notes ongoing EBITDA growth and dividend capacity, consistent with a maturing services platform.

What’s Powering ACF?

1. Counter-Cyclical Demand
   Industrial access is critical for maintenance, shutdowns, and large project execution. This demand is steady, even when construction slows. Analysts estimate that industrial services now account for around half of revenue.
2. Inorganic Growth
   Acrow has pursued bolt-on acquisitions, expanding its geographic footprint and sector reach. This has given the company greater exposure to defense, energy, and heavy industry, while also adding engineering capability.

Watch Items for ACF

1. Integration costs and higher net debt remain areas to monitor.
2. The traditional formwork market is softer, though the industrial book helps offset this cyclicality.
3. Delivering on EBITDA guidance and maintaining strong cash conversion will be crucial for reducing leverage and sustaining dividends.

Final Thoughts

Both Generation Development Group (ASX: GDG) and Acrow (ASX: ACF) showcase how small-cap financial sector stocks can evolve into bigger players when backed by structural trends.

GDG is leaning into the growing demand for retirement savings and income solutions, with its Lonsec platform creating significant scalability.

ACF is transforming from a formwork-dependent business into a resilient industrial services player with recurring demand.

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