WAM Microcap Limited 

Understanding Half-Yearly Results: WAM Microcap Limited (ASX: WMI) had earlier released its results for six months ended December 2018. A key personnel had stated that the slowing economic growth in major global markets, quantitative tightening and rising interest rates in the US, trade war between the US and China as well as Brexit drama were some of the primary drivers of the fluctuations in the equity prices during six-month period ended December 2018. The investment operations had posted an operating loss before tax amounting to $12,876,934 in the half year while in the same period of the previous year operating profit before tax stood at $37,214,910. The operating loss after tax stood at $8,445,791 in the six-month ended December 2018 while in the same period of previous year operating profit after tax was $26,475,010. The loss for the period was seen because of increased volatility in the Australian equity market as well as the performance of an investment portfolio. The WMI investment portfolio posted the return of -6.2% in the 6-months to December 2018. But the investment portfolio returns were above the S&P/ASX Small Ordinaries Accumulation Index by +6.5% in the past six months. However, the negative issues such as volatility in equity market, political and macroeconomic issue in the major global market will not have a significant impact on the ability of the fund’s share profit to pay dividends to its shareholders. Hence, the Board of Directors has declared a fully franked interim dividend of 2.25 cents per share, showing a rise of 12.5% on PCP basis. It will be payable on 26 April 2019 with the record date of 11 April 2019 and ex-date of 10 April 2019.

 

Portfolio Returns (Source: Company Reports)

What Might Affect WMI: The performance of WMI investment portfolio is expected to be sensitive to the global macro-economic variables as well as the performance of the investment markets. The disturbing global economic environment impact negatively on the portfolio. However, the settlement of the trade battle between the US and China might support the global investment markets.

Stock Recommendation: On the daily chart of WMI, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was noted that the stock price is moving towards the EMA and soon a crossover might take place. If this crossover occurs, the stock price is expected to witness a rise. 

However, since the company’s investment portfolio is expected to be sensitive to several macro-economic factors, the portfolio might witness some painful impacts. Considering that the WMI’s potentiality to maintain its investment performance over the past six months and paying dividend consistently to its shareholders, we, therefore, reiterate our “Speculative Buy” recommendation on the stock at the current price of $ 1.250 per share (up 0.806% on March 04, 2019).
 

Clime Capital Limited

Release of Interim Portfolio Valuation Update: Clime Capital Limited (ASX: CAM) had recently stated that at the close of business on February 28, 2019, the gross assets value of CAM’s investment portfolio stood at approximately $103.5 million. The gross assets include an accrual for interest payable of around $330k on the convertible notes for 3 months ended February 28, 2019. CAM accrues interest around $110k per month until paid each quarter. Also, the company announced the cancellation of 7,867 shares which involves the consideration of $6,624.03. The company had earlier made an announcement that they have witnessed interim financial loss after tax which amounted to $5.2 million. The result showcases the adverse market price movements of CAM’s listed share portfolio in 6-month period and especially over the quarter ended December. In accordance with the on-market buy-back scheme, during the month, the group bought back 7,867 ordinary shares for the total consideration $6,624 at an average price of $0.842 per share.


Statement of profit or loss and other comprehensive income for HY ended December 2018 (Source: Company Reports)

What to Expect From CAM: In the release for NTA update for January 2019, the company stated that there are expectations that global market volatility would continue for a while longer as asset markets adjust to an incrementally higher cost of money. However, the company added that they are impressed with the range of investment opportunities still available for long-term capital. The company’s view revolves around that the market environment remains supportive of steady but not spectacular growth. The Board of Director has declared a March 2019 quarter (interim) dividend of 1.25 cents per share fully franked. The dividend will be paid on 26 April 2019 with the record date of 4 April 2019.

Stock Recommendation: On the daily chart of CAM, Exponential Moving Average or EMA has been used and default values were used for the purposes. After observation, it was noted that the stock price has crossed the EMA and had trended in the upward direction after the crossover which reflects that the stock price might witness a rise moving forward. However, since there are expectations for global market volatility, the investment in the company’s stock might be at risk. Also, in the span of previous 6 months, the company’s stock had delivered the return of -6.27%. However, valuation-wise CAM looks decent with Net Margin at 244.0% in FY18 compared to 168.0% in FY17. Return to the shareholders has also been good with ROE coming in at 9.7%. Based on the aforesaid facts and current trading level, we maintain our “Speculative Buy” rating on the stock at the current market price of A$0.865 per share (up 1.17% on March 04, 2019).
 

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