WAM Capital Limited (ASX: WAM) announced a whopping rise of 85.7% in operating profit before tax to $132.3 million for the financial year ending June 30, 2016.The company’s operating profit after tax rose 81.5% to $98 million. The total shareholder return jumped 24.5% for the year for 20,000 retail shareholders, wherein the major chunk is of self-managed superannuation funds. WAM’s full year fully franked dividend comes to 14.5 cents per share. The result comes at the back of the following factors:
Overall increase in Investment Portfolio: The company witnessed a 21.6% rise in investment portfolio in the year to June 30, 2016 that contributed immensely to the overall rise in operating profit. WAM’s investment portfolio’s outperformance in FY16 indicated the strength of its investment process that has provided risk-adjusted returns since inception in 1999 to the shareholders.
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Investment Performance (Source: Company Reports)
Diversification of portfolio stocks while market witnessed subdued conditions: WAM reported that the company’s stock selection helped the portfolio outperforming the S&P/ASX All Ordinaries Accumulation Index by 19.6%. This was particularly at the back of growth companies in the vehicle leasing, retail and health product sectors. As per WAM, salary packaging company, Smartgroup Corporation; the infant formula maker, a2 Milk Company; intellectual property services company, IPH Limited; biotech company, Mayne Pharma Group; and vitamin company, Blackmores Limited were among the top performing stocks in the portfolio.
Boost from two key sectors: As per WAM, the fleet management/ car leasing sector outperformed others. The stocks such as Smartgroup Corporation and SG Fleet did well while the industry got a lift from the no change in policy for fringe benefit tax rules in May 2016, which otherwise support vehicle leasing. The other sector included the food, beverage and vitamin areas with the a2 Milk Company and Blackmores Ltd getting a lift from the rise in Chinese demand for respective products, though WAM sold out of the stocks in early 2016 with the belief that the stocks have higher valuations.
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Top Holdings (Source: Company Reports)
Retail the new target: WAM’s chief investment officer has recently highlighted that the retail sector has the prospect of emerging as a solid performer in the near future at the back of the sector’s gloomy outlook getting clear post the impact of the political situation in Australia coupled with the unfavourable weather.
The company has also announced for a Share Purchase Plan (for $15,000 worth of ordinary shares at a fixed price of $2.14 per share) and Placement (expected for August 2016).
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