Milton Corporation Limited

Higher margins with improving fundamentals: Milton Corporation Limited (ASX: MLT), based in New South Wales, Australia, is an investment company. MLT’s strategy is to invest in companies listed on ASX for a long-term horizon, while the composition of equity portfolio comprising of companies having a profitable history and growing dividends does not replicate any stock exchange index. Recently, the company published its December update for monthly Net Tangible Asset (NTA) and the portfolio report. The company reported a before-tax NTA per share of $4.42 in December 2018 and an after-tax NTA per share of $3.94 in December 2018. The company improved its internal management structure and reported an improvement in management expense ratio(MER) ratio by 1 basis point as reported at 0.13%.

The Total Portfolio Return (TPR) which is the change in the value of NTA per share with the dividends paid, was reported as 3.67% for 3-year in December 2018. Similarly, the Total Shareholder Return (TSR), combining the change in share price with the dividends paid, was reported as 2.22% for 3-year in December 2018. MLT has a sound track record of paying dividends consistently. The company paid a dividend of 19 cents in FY18 and is expected to announce FY19 interim dividend on 24 January 2019.


Dividend History (Source: Company Reports)

The profit margins of the company have been high but consistent over the past 5 years. In 2018, the company reported an EBITDA margin of 97.0%, the Operating margin of 97.2%, the Net margin of 94.1%, and ROE of 4.9%.
The company has ~664.93 million shares outstanding with the market cap of $2.95 billion, an annual dividend yield of 4.29%, and a beta of 0.56x. During the past one month, the stock has generated a positive yield of 2.78%. Today, there was no movement in the stock’s price and is currently trading at the price of level $4.430. With higher margins, sound track record of dividends along with cost efficiency achieved by the company, we maintain our “Hold” position on the stock at the current market price of $4.430.
 

WAM Research Limited

Bearish signal while fundamentals look decent: WAM Research Limited (ASX: WAX), based in New South Wales, Australia, is an investment company. Its portfolio consists of undervalued growth companies, which are generally small-to-medium sized industrial companies. As per its November 2018 report, the company had $218.3 million of gross assets with 58% of equity exposure. The before-tax NTA per share was reported at $1.148 and the after-tax NTA per share was reported at $1.1445. The WAX investment portfolio has generated a return of 9.6% for 3-years which outperformed the S&P/ASX All Ordinaries Accumulation Index by 1.9%. WAX has a sound track record of paying dividends consistently. The company paid a dividend of 9.5 cents in FY18.


WAM Research vs the Index (Source: Company Reports)

The profit margins of the company have been high but consistent over the past 5 years. In 2018, the company reported an EBITDA margin of 88.7%, the Operating margin of 88.7%, the Net margin of 66.6%, and ROE of 9.9%.
WAX has ~189.56 million shares outstanding with the market cap of $277.14 million, an annual dividend yield of 6.5%, and a beta of 0.20x. During the past one month, the stock has generated a positive yield of 4.09%. Today, stock was down by 0.821% and is currently trading at the price of level $1.450. The Relative Strength Index along with the Bollinger bands indicates slightly bearish signal. With higher margins, sound track record of dividends but the bearish signal indicated by the charts, we recommend a “Speculative buy” on the stock at the current market price of $1.450.
 

NAOS Emerging Opportunities Company Limited

Mix of performance:NAOS Emerging Opportunities Company Limited (ASX: NCC) based in New South Wales, Australia, is an investment company. Its portfolio consists of undervalued listed industrial companies with a market cap of less than $250 million. As per its November 2018 report, a pre-tax and post-tax NTA of $1.12 each was reported. The NCC investment portfolio has generated a return of 10.68% for 3-years which outperformed the S&P/ASX All Ordinaries Accumulation Index by 0.29%. During November 2018, NCC generated a negative return of 6.12% as compared to the S&P/ASX All Ordinaries Accumulation Index negative return of 0.37%. the weighted average market cap of the investments was reported at $86 million. The company had paid a dividend of 7.25 cents during FY18. The management fee was reported at 1.25% (excluding GST) per annum.


Dividend History (Source: Company Reports)

The profit margins of the company have been high but consistent over the past 5 years. In 2018, the company reported an EBITDA margin of 76.1%, the Operating margin of 76.1%, the Net margin of 63.8%. ROE has declined over the past 5 years falling from 16.3% in FY14 to 5.6% in FY18.

The company has ~59.91 million shares outstanding with the market cap of $65.6 million, an annual dividend yield of 6.62%, and a beta of 0.62x. During the past one month, the stock has generated a negative yield of 5.60%. Today also, the stock was down by 0.457% and is currently trading at the price of level $1.090. The Relative Strength Index along with the Bollinger bands indicates a neutral signal. With higher margins, track record of dividends but the underperformance of the fund in November 2018 coupled with the falling ROE, we recommend a “Speculative buy” on the stock at the current market price of $1.090.
 

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