NAOS Emerging Opportunities Company Limited

Current Dividend Yield at 8.15%:NAOS Emerging Opportunities Company Limited (ASX: NCC) is a public company, registered and domiciled in Australia. NAOS Asset Management Limited is the investment manager for the company. The company was constituted on 06 November 2012 to invest primarily in a concentrated portfolio of listed entities that are not included in the S&P/ASX 100 Accumulation Index with the objective of providing investors with genuine exposure to emerging industrial companies, with a long-term value focus.

Monthly Investment Report and NTA Update as at 30 April 2019:As per the report released by NCC for the month of April 2019, the portfolio generated a negative return of 3.54%, underperforming the benchmark S&P/ASX Small Ordinaries Accumulation Index (XSOAI) which was up 4.11%. In the last 1-year, the portfolio fell 12.71%. However, the portfolio generated returns of 4.97%, 6.50% and 10.67% in the last 3-years, 5-years and 6-years, respectively. The inception returns over the past 6 years and 2 months came in at 11.57% p.a. or 96.49% in nominal terms, outperforming the XSOAI which posted a rise of 6.43% p.a. or 46.87% over the same period.

The portfolio underperformed in the period due to the exposure to micro-cap sized companies which operated in the industrial sector. Looking at the price performance of the companies in the portfolio, top 5 monthly performers were Kogan (ASX: KGN), Eclipx (ASX: ECX) Megaport (ASX: MP1), Pro Medicus (ASX: PME) and PolyNovo (ASX: PNV). Four companies, out of these five, are comprised of high growth technology businesses whereas Eclipx belongs to the financial sector and has faced various execution problems.


Investment Portfolio Performance (Source: Company Reports)

Stock Contribution Analysis: The below mentioned table shows the list of top 5 stocks which contributed positively to the portfolio since inception.BSA Limited backed the investment portfolio the most with contributing 20.85% of the total return, followed by Calliden Group Limited which contributed 13.79%.


Top 5 positive stock contributors (Source: Company Reports)

Net Tangible Asset (NTA) Value Breakdown:Pre-tax NTA per share at the end of April 2019 stood at $1.03 whereas Post tax NTA per share at $1.05 was above its share price (at the end of April 2019) of $1.02 per share.


NTA Update (Source: Company Reports)

Dividend Profile:NCC aims to deliver shareholders a sustainable growing stream of fully franked dividends. Since inception, NCC has now distributed 39.25 cents in fully franked dividends or 55.89 cents in gross terms.


Dividend History (Source: Company Reports)

Stock Recommendation:At the current market price of $0.860 per share, the annual dividend yield for the stock stands at 8.15%. The stock currently stands at 52-week low of A$0.860. The company aims to generate wealth for its clients by concentrating on undervalued micro-cap listed companies. Additionally, NCC provides a stable stream of growing dividends to its shareholders. The company remains focussed on capital preservation over the longer term. Given the backdrop of aforesaid facts, we recommend a “Buy” rating on the stock at the current market price of $0.860 per share (down 3.371% on 12 June 2019).
 

Clime Capital Limited

Quarterly Dividend Maintained:Clime Capital Limited (ASX: CAM) is primarily engaged in investing in securities listed on domestic and international stock exchanges and selected unlisted unit trusts. On 03 June 2019, the company made an announcement to the exchange on the interim portfolio update.  On the close of business on 31 May 2019, the gross assets of the company’s investment portfolio were valued close to $109.50 million. The value was inclusive of accrual of interest payable of approximately $340k on Convertible Notes for three months ended 31 May 2019. Pursuant to the on-market buy-back scheme, the Company bought back 78,826 ordinary shares at an average price of $0.875 per share totalling to $69,003. In another announcement, the company declared an ordinary dividend of A$ 0.0125 to be paid on 26 July 2019.

NTA for April 2019: In the Net Tangible Assets report for March 2019, the company reported NTA before tax amounting to $0.92 per share. The company’s portfolio delivered a return of 2.3% for the month of March. Clime’s total portfolio including cash was valued at $105.3 million. The returns during the month largely attributed to mid-caps and small caps.

1HFY19 Key Financial Highlights:For the first half of the financial year 2019, the company reported an interim financial loss after tax of $5.2 million as compared to a profit of $5.6 million in the prior corresponding period. This was a result of the adverse market price movements of the Company’s listed share portfolio over the period. The portfolio performed remarkably in the first quarter but depicted a weak position in the second quarter. The company had fully diluted Net Tangible Assets of $0.83 per share as at 31 December 2018. The company paid a quarterly dividend of 1.25 cents per share (April to June 2018 and July to September 2018). On January 24, 2019, it paid a quarterly dividend of the same amount (October to December 2018).


Statement of Profit & Loss for 1HFY19 (Source: Company Reports)
 
Stock Performance and Recommendation: The share of the company yielded returns of 3.43% and 4.02% over a period of 1 month and 3 months, respectively. As mentioned above, the company has been consistent in the payment of dividends and continued to reshape its portfolio to capture the best opportunities for growth and sustainable income. During the third quarter of FY19, its portfolio saw a remarkable recovery which is likely to impact the earnings positively in the same period.  Though, the portfolio was adversely impacted during the first half of FY19, and the company is continuously progressing towards determining ways to moulding it for favourable returns in the near future. Hence, we give a “Buy” recommendation on the stock at the current market price of $0.905 per share.

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