WAM Leaders Limited
Stock trading close to 52-week high: WAM Leaders Limited (ASX: WLE) primarily invests in equities, listed on Australian Securities exchange and provides investors with diversified exposure to a portfolio of undervalued growth companies within the S&P/ASX 200 Index and exposure to market mispricing opportunities in large-cap companies. The Company’s investment objectives are to deliver a stream of fully franked dividends, provide capital growth over the medium-to-long term and preserve capital.
Recent Announcements: WAM Leaders Limited will pay a fully franked final dividend of 3 cents per share on 25 October 2019, bringing a record full-year dividend of 5.65 cents per share, an increase of 13% on the previous year. As at 31 July 2019, the company had 15 cents per share available in its profit reserve, before the payment of the record fully franked final dividend of 3.0 cents per share. Recently, the company notified that Geoffrey Wilson acquired 20,000 ordinary shares for a consideration of $23,600.
Dividend Per Share (Source: Company Reports)
Portfolio Update of August 2019:The investment portfolio of WAM leaders outperformed the S&P/ASX 200 by 0.8% in the last one month. Contributors for the portfolio outperformance included Downer EDI, Western areas, Newcrest mining and Treasury Wine Estates. Net Tangible Assets (NTA) after tax payment of $2.6 Mn was $122.88 cents and the dividend paid since inception was $10.65 cents per share. NTA before tax of the company came in at 124.85 cents for FY19.
Results Highlights for FY19 (for the period ended as at 30 June 2019): WLE investment portfolio outperformed S&P/ASX 200 Accumulation Index by 2% in 2 years and by over 1.1% since inception.
Financial Summary (Source: Company Reports)
Operating profit after tax for FY19 stood at$71.5 Mn from $74.56 Mn in FY18. Results for FY19 reflected the growth in assets for the period and performance of the investment portfolio. The performance was achieved with an average of 89.8% invested in equities with less volatility than the market. The return on the equity portion of the portfolio was 12%, whereas the return on cash portion of the portfolio was 1.8% for the year. The net asset value of the company at the end of the year stood at $960.26 million as compared with $836.46 million in FY18.
Outlook:In FY20, the company intends to continue with a conservative balance sheet, no debt, a flexible and proven investment approach. The company will also continue seeking new opportunities, irrespective of market conditions.
Stock Recommendation:Whilst the profitability remains constant, net margin increased from 64.8% in FY18 to 69.2% in FY19. The investment portfolio outperformed the S&P/ASX 200 by 0.8% in the month of August 2019. The stock has gained 13.33% on YTD basis. The stock made a high of $1.205 as on 08 October 2019 and is currently trading close to it. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of A$1.190 on 8 October 2019.
WAM Microcap Limited
Decent Investment Performance: WAM Microcap Limited (ASX: WMI) is a listed investment and reporting entity. The company is primarily an investor in equities listed on the Australian stock exchange.
Recent Announcements: WMI investment portfoliowitnessed a fall of 0.2% while the S&P/ASX Small Ordinaries Accumulation Index fell by 3.9% in the month of August 2019. The NTA after the tax came in at 132.52 cents at the end of August 2019. The company has recently disclosed to ASX that one of its Director, Geoffrey James Wilson, who had a direct and indirect interest in the Company, acquired 40,000 Ordinary shares as a result of becoming a trustee and beneficiary of the Awe Superfund for a consideration of $55,800 as on 19 September 2019.
Highlights of FY19 Results (for the period ended as at 30 June 2019): Investment portfolio showed a strong investment performance of 7.3%, outperforming the S&P/ASX small ordinaries accumulation index by 5.4% in the last 1-year.This outperformance was achieved with an average cash weighing of 24.7% and with less volatility as measured by the standard deviation of 12.8% against the index’s 15.2%. The Company declared a fully franked dividend of 2.25c per share, bringing the fully franked full-year dividend to 4.5 cents per share, an increase of 12.5% on FY18.
Portfolio Performance Summary in FY19 (Source: Company Reports)
The company earned $8.6 Mn of operating profit before tax in FY19, a reflection of the strong investment performance during the period. The return on equity portion was 9.1% and the return on cash portion was 1.8%. Since the inception, WAM investment portfolio was increased by 17.8%, outperforming the index by 5.8%. The company’s NTA before tax went up by 2.2% for the year ended 30 June 2019. This increase was after considering the corporate tax payment of 3.6 cents per share.
NTA before tax (Source: Company Reports)
Outlook:The Company entered the FY20 with a conservative balance sheet and a proven investment approach with an expert investment team. The preservation of shareholders’ capital will be a key focus area of the focus in the investment process.
Stock Recommendation:At the current market price of A$1.400, market capitalisation for the stock stands at ~$192.28 Mn. The stock gained 10.07% on YTD basis and is currently trading towards the higher band of 52-week trading range. The current ratio of the company increased to 21.20x in FY19 from 19.82x in FY18. In FY19, the investment portfolio outperformed the S&P/ASX small ordinaries accumulation index by 5.8% since the inception and declared a dividend of 2.25c per share. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of A$1.400, up 2.564% as on 8 October 2019.
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