WAM Capital Limited

A Quick Look at Investment Update: WAM Capital Limited (ASX: WAM) is a leading investment company, which is providing the investors’ exposure to an actively managed diversified portfolio of undervalued growth companies. The market capitalisation of the company stood at A$1.45Bn on 20^th June 2019.
 
Recently, the company has released its decent investment performance of May month wherein WAM investment portfolio delivered a marginal return of 0.1% in one month (as of 31 May 2019) and was up by 1.4% as compared to S&P/ASX Small Ordinaries Accumulation Index return of -1.3%. The key contributor in the portfolio is Nine Entertainment Co. Holdings. The gross assets of the portfolio stood at $1,318.1 Mn at the end of 31^st May 2019 and the pre-tax net tangible asset stood at $1.83 and fully franked dividend yield was 7.4%.
 
The WAM capital portfolio provided a return of 16.7% since August 1999. It had paid fully franked interim dividend of 7.75 cents on 26^th April 2019. WAM Capital had paid a fully franked dividend of $2.31 per share since inception to shareholders. The company is making a difference by investing more than $3Bn on behalf of over 80,000 investors throughout six listed investment companies. The company has a proven investment approach that delivered solid returns for over 20 years. Wilson Asset Management Group has increased its voting power from 6.69% to 7.76% on 24^th May 2019 in Myer Holdings Limited.
 

Portfolio Performance (Source: Company Reports)
 
Future Aspects: As per the annual report, the company had entered FY19 with a high cash weighting, conservative balance sheet, no debt and proven investment approach along with the expertise of an experienced investment team. It would continue to seek opportunities irrespective of the market conditions, having achieved outperformance via various market cycles.
 
Stock Recommendation: The company is cautious in its investment outlook and focused on capital preservation. The current ratio of the company stood at 136.31x in 1H FY19, reflecting a growth of 42.6% on YoY basis. This represents that WAM is improving its capability to address its short-term obligations. The stock is trading close to its 52-weeks lower levels. Based on the foregoing and looking at the current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$2.020 per share.
 

Plato Income Maximiser Limited

May 2019 Investment update: Plato Income Maximiser Limited (ASX: PL8) is involved in providing shareholders an opportunity to take advantage from an investment in an actively managed, well diversified portfolio of Australian listed equities. The market capitalisation of the company stood at ~A$331.36 Mn on 20^th June 2019. The company in its investment update as at 31st May 2019, stated that it had witnessed a return of 14.3% as well as it had also distributed a yield of 12.3% in the last twelve months in comparison to the S&P/ASX 200 Franking Credit Adjusted Daily Total Return Index return of 12.9% and a yield of 6.0%. PL8 is having a goal to pay regular monthly dividends. For the month of April, May and June 2019, the company had declared three fully frankeddividends of $0.005 per share, which represents 8.0% annualised gross yield based on the company’s share price on May 31, 2019.
 

Portfolio Performance (Source: Company Reports)
 
The largest contributors in the company’s investments during the May month were overweight positions in CSR and Aristocrat Leisure which had announced a strong result and underweight positions in Treasury Wines and BlueScope Steel which is suffering as steel margins contract. The estimated Net Tangible Asset backing per share as at 7^th June 2019 has been reported as $1.080 for pre-tax NTA and $1.089 for post-tax NTA.
 
Future Aspects: The manger’s investment process involves extensive research, which is focusing on relative market values, business momentum, quality of potential investee entity and the prospects for the dividend.
 
Stock Recommendation: The gross margin of the company stood at 94.3% in 1H FY19, reflecting the growth of 3.2% on YoY basis. The net margin witnessed a growth of 8.3% on YoY basis and stood at 96.2%, which demonstrates that it is improving its capability to convert its topline into the bottom line. The return on equity stood at 6.9% in 1H FY19. Coming to stock’s past performance, it had witnessed return of 12.44% and 18.23% in the time span of three months and six months, respectively. As per ASX, the stock is trading at a 52-weeks higher levels of $1.130. Hence, considering the above-stated facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$1.130 per share (up 1.345% on 20^th June 2019).  

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