WAM Capital Limited

Final Dividend is to be paid on 25 October 2019: WAM Capital Limited (ASX: WAM) is one of Australia’s leading Listed Investment Companies which is managed by Wilson Asset Management. It provides investors with exposure to an actively managed diversified portfolio of undervalued growth companies. The market capitalisation of the company stood at ~A$1.56 billion as on 9^th September 2019. The company has announced that it will hold an Investor Conference call on 10^th of September 2019 to discuss about their six listed investment companies’ full-year results, current investment themes and the trends across Australian and global equity markets and outlook for the coming months.

The company reported an operating profit before tax of $6.0 million and an operating profit after tax of $14.5 million in FY19. The after-tax figure was increased due to $8.5 million income tax benefit delivered through franking credits received on franked dividend income from investee companies.  The following picture provides an idea of WAM Capital’s investment portfolio:


WAM Capital’s Investment Portfolio (Source: Company Reports)

Dividends:The Board of Directors declared a fully franked full-year dividend of 15.5 cents per share, with the final dividend of 7.75 cents per share. The company has paid 230.75 cents per share since inception to its shareholders. Final dividend will be paid on 25 October 2019 with record date of 18 October 2019 and ex-dividend date of 17 October 2019.

FY20 Outlook: WAM Capital Limited has entered FY20 with a conservative balance sheet, high cash weighting, no debt and a flexible and proven investment approach.It was mentioned that the company remains cautious about the direction of the Australian market.The investment portfolio’s cash level ended the year at 25.3%. Additionally, it can be said that the company’s performance would be sensitive to the performance of its portfolio companies and to the overall health of the global economy. The permanent settlement of the trade war might positively impact the global economy.

Stock Recommendation:The company has a decent annual dividend yield of 7.11% as per ASX at the price of A$2.200 per share. On the stock performance front, it produced returns of 4.31% and 5.83% in one month and three months, respectively.  Therefore, considering the above-stated facts and decent dividend-related parameters, we give a “Buy” rating on the stock at the current market price of A$2.200 per share (up 0.917% on September 9, 2019).  
 

JB HI-FI Limited

 
FY19 Results Highlights: JB HI-FI Limited (ASX: JBH) is engaged in the retailing of home consumer products. As per ASX, the market capitalisation of the company stood at ~A$3.81 billion as on 9^th September 2019. The group reported a decent set of numbers for FY19 with total sales of $7,095.3 million, up 3.5% on a YoY basis. Group’s EBIT also increased by 6.4% to $372.8 million on the YoY basis. The following picture provides a broader idea of the company’s key numbers for FY 2019 and is important for the investors:


FY 2019 Highlights (Source: Company Reports)

Dividend:The company has declared a final dividend of 51 cents per share (or cps) bringing the total dividend up 10 cps to 142 cps, representing approximately 65%.

Guidance for FY20: In FY20, the company expects total group sales to be around $7.25 billion, which is divided into three business segments of the company.The company expects the total sales of $4.84 billion for JB HI-FI Australia, (NZD)$0.24 billion for JB HI-FI New Zealand and $2.18 billion for The Good Guys in FY20.

Stock Recommendation:At CMP of $33.730, the annual dividend yield of the stock stood at 4.28%. In the company’s report, it was mentioned that the 65% dividend payout ratio appropriately balances the distribution of profit to the shareholders, repayment of the debt as well as reinvestment of the earnings for future growth.JBH’s share generated a decent YTD return of 53.43% and is presently trading at close to its 52 weeks high level of $33.810 and, thus, it can be said that the price might witness some correction moving forward. Currently, the stock is trading at a P/E multiple of 15.240x. As per the Australian Securities and Investments Commission (ASIC) report, the short position for JBH’s share was reported at ~12.84% as on September 03, 2019. Hence, considering the aforesaid facts coupled with decent returns in the recent past, and current trading levels, we have a watch stance on the stock at the current market price of A$33.730 per share (up 1.78% on September 09, 2019), and suggest that investors should wait for better entry levels.

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