2 Financial Sector Penny Stocks Catching Analyst Attention

Pocket-Sized Finance, Big-Cap Ambition

The Australian financial sector has no shortage of big names dominating the headlines. But every so often, smaller players begin to quietly put the pieces together, scaling up in their niche and catching the eye of analysts who see the potential before the wider market does. Right now, two such names are on the radar: Generation Development Group (ASX: GDG) and Humm Group (ASX: HUM).

Both companies have recently reported their FY25 results, showing a combination of structural growth, disciplined execution, and a willingness to reinvest for the future. For investors who like spotting tomorrow’s leaders while they’re still trading at “penny stock” levels, GDG and HUM are worth a closer look.

Generation Development Group (GDG): Retirement Income Meets Platform Scale

Generation Development Group has carved out its niche by targeting structurally growing markets—retirement income, investment bonds, and financial advice platforms. Its strategy is simple yet powerful: own the products and control the distribution. FY25’s results proved that this playbook is starting to work at scale.

1. FY25 snapshot: GDG’s total revenue surged to $219.52 million, almost doubling year-on-year. Underlying NPAT also rose significantly, boosted by the first full year of the Lonsec acquisition and continued momentum in managed accounts. The company declared a fully franked dividend of 1.0 cent per share, consistent with its interim payout.
2. Distribution and FUM momentum: Lonsec’s platform is expanding rapidly, with funds under management (FUM) growing strongly by late FY25. This scale creates operating leverage across GDG’s research, ratings, and investment solutions businesses.
3. Policy and structure updates: In June 2024, GDG formally ceased being a Pooled Development Fund, simplifying its tax and capital structure. This move clears the path for larger ambitions in investment bonds and annuities. While the forward yield remains modest (0.3%–0.4%), the group is prioritising reinvestment over immediate shareholder returns.

Why analysts care: Retirement income is a structural growth theme as Australia’s population ages, and platform businesses are highly scalable once FUM gains momentum. GDG combines both at a micro/small-cap scale, which is rare. As profits compound, the potential for dividend growth without sacrificing reinvestment is significant.

Humm Group (HUM): Profitability Back, Offshore Engines Turning

Humm Group, once best known for its consumer lending and buy-now-pay-later experiments, has shifted focus toward being a leaner, more profitable lender with offshore reach. FY25 marked a turning point, with profitability restored and dividends reinstated.

• FY25 scorecard: Humm posted a statutory profit of $39.6 million and cash earnings per share of 10.2 cents. Its return on cash equity hit 10%, while the cost-to-income ratio improved sharply to 51.7% (down 11.2 percentage points year-on-year). A fully franked dividend of 2.0 cents per share capped the year.
• Credit quality and operating leverage: Net loss to average net receivables held steady at a low 1.7%, showcasing disciplined credit management.
• Offshore traction: Humm’s international operations are now real growth drivers. In Ireland, the business achieved an impressive 29.7% ROCE with net interest margins expanding by 240 basis points. In the UK, Humm reached its first breakeven month in June 2025, while its Canadian operations delivered a reset with expected $4.4 million in annual cost savings from FY26. Overall, global volumes and receivables both grew by 46%, with a healthy product yield of 20.2%.

Why analysts care: HUM has re-emerged as a disciplined, profitable lender with real offshore momentum. Its ability to grow internationally while keeping credit losses low adds credibility to its turnaround. The reinstated dividend is a positive signal for shareholders and suggests confidence in sustained profitability.

What Could Move the Shares Next?

For GDG: Further momentum in managed account FUM and progress on investment-linked lifetime annuities. A higher dividend payout could follow as NPAT compounds.

For HUM: Continued low loss rates, stronger operating leverage in Australia, and sustained profitability in Ireland and the UK. Execution of Canada’s cost savings plan will also be closely watched.

Key Risks to Watch

GDG Risks: Exposure to market-level FUM swings, regulatory changes around advice platforms and annuities, and execution risks in integrating acquired businesses.

HUM Risks: Sensitivity to credit cycles and consumer lending regulations, FX risks given offshore earnings, and challenges in executing technology upgrades and cost programs.

Bottom Line

At first glance, GDG and HUM might look like just two more small-cap financial names. But dig deeper and a clear theme emerges: execution at scale in niches that matter.

GDG is positioning itself to ride Australia’s retirement-income wave while leveraging the economics of a growing advice and investment platform. Its dividends are still modest but have room to grow as profits scale.

HUM has restored profitability, strengthened its balance sheet, and demonstrated that its offshore businesses can drive real growth. With dividends reinstated, it has regained investor confidence while showing it can manage costs and credit risk.

They may be penny stocks by market size, but their ambitions—and increasingly, their execution—are anything but small. For investors seeking hidden gems in the financial sector, GDG and HUM are two names analysts are watching closely.

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