WAM Research Limited

WAX Details

Improvement in Investment Portfolio Return: WAM Research Limited (ASX: WAX) has recently released its investment update for June 2018. According to the release, the investment portfolio increased by 1.1% in June month from the prior month and delivered returns with low volatility as it kept an average cash balance of 25.6% and increased investment in listed companies i.e., 74.4% of the total gross asset as compared to 64.1 % in May 2018. Further, the company delivered a decent return of 18.1% per annum since inception. The group makes investments in listed companies and has $ 242.1 Mn of gross assets. The NTA after tax as on 30 June 2018 was recorded at 124.55 cents and while on 31 May 2018, the same was recorded at 123.45 cents. Besides this, the company stated that the resources sector performed better than the banks because of the slowdown in the economy and the Royal Commission during the same period. Moreover, the company has an ability to generate franking credits which is relied on the receipt of franked dividends from investments and the payment of tax. It was noted that the group has paid 89.9 cps in fully franked dividends to shareholders since inception. The Company has a dividend yield of 6 per cent as of June 30, 2018.


 
Fully franked dividends since inception (Source: Company Reports)

In the meanwhile, the Group informed the market that its Directors, Chris Stott and Matthew Kidman have resigned from the Group. Despite the apex management changes, the management states that the composition of the Board of Directors is balanced between independent and non-independent Directors. Moreover, Wilson Asset Management Group became the substantial holder of PSC Insurance Group Limited by holding 12,883,591 securities and 5.27 per cent of the voting power. Meanwhile, the stock climbed up 1.32 per cent in the past three months as at June 18, 2018 and currently trading near its 52-week high level ($1.635). Looking at the current trading level and considering its robust strategy to generate a higher return from the undervalued growth companies, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $ 1.555.

 
WAX Daily Chart (Source: Thomson Reuters)
 

Contango Income Generator Limited

CIE Details

Potentiality to Maintain its Return: Contango Income Generator Limited (ASX: CIE) is an Australia- based investment company that has delivered Performance return of 8.56% p.a. since inception. The NTA after tax as on 30 June 2018 was recorded at $0.957 and while on 31 May 2018, the same was recorded at $0.966. In the month as at June 30, 2018, the group underperformed the S&P/ASX All Ordinaries Accumulation Index by -1.88% as the Global equity market was somewhat weaker because of trade-war. As of now, the portfolio is being affected by several issues such as geopolitical tension over trade war, political instability across the globe. However, these negative issues will not have a significant impact on the ability of the fund’s share portfolio to pay dividends to its shareholders. Moreover, the portfolio favours franked dividend policy and high yield stocks strategy which support high exposure in the Australia market. On the positive side, Australian growth remains strong and interest rate is expected to remain low till next year. Based on improving macroeconomic scenario, the fundamentals look solid and provide capital growth opportunity over the medium-to-long term.


Portfolio Characteristics (Source: Company Reports)

On the valuation front, the company has a price-to-earnings ratio of 16.2x as of June 30, 2018. The company has net dividend yield of 5.2%, up by ASX all Ordinary Index. Considering that the CIE’s yield is based on stocks that have increased their reported dividends and it has the potentiality to maintaining its returns.  Hence, we maintain our “Speculative Buy” recommendation on the stock at the current price of $ 0.890.
 

CIE Daily Chart (Source: Thomson Reuters)
 

NAOS Emerging Opportunities Company Limited

NCC Details

Performance Update as at June Month: NAOS Emerging Opportunities Company Limited (ASX: NCC) is an award-winning Investment firm that has delivered Performance return of 16.09% p.a. since inception. As per the June 2018 report, post-tax NTA stood at $1.97 and it was same at May 2018, despite the share price movement from $1.205 to $1.255 during the same period. The investment portfolio returns were below the S&P/ASX Small Ordinaries Accumulation Index (XSOAI) by -17.12% in the last one year. However, the group outperformed the index by 9.08% p.a. since its inception as on June 2018. Therefore, we expect that the group will continue to strive towards better performance during the upcoming periods despite short-term headwinds. As of 30 June 2018, the portfolio’s net equity exposure was around 99.88% with a subsequent cash weighting of +0.12%. The core holdings in the portfolio did not change over the course of the month. At the end of the month, the portfolio was comprised of 9 long positions with no short positions. There were also no income instruments in the portfolio. The company has a dividend yield of 5.78% as of June 2018.


Historically Fully Franked Dividends Trend (Source: Company Reports)

On the other hand, Managed Accounts Holdings Limited and its wholly-owned subsidiary, a substantial holder of the group changed its holding on 3 April 2018 from 7.24 per cent of the voting power to 6.23 per cent of the voting power. Meanwhile, the share price tumbled 14.86 per cent in the past six months but up by 3.70 per cent in the past one week (as at July 18, 2018). The stock is currently trading close to 52-week low level. Looking at current trading volatility, we give an “Expensive” recommendation on the stock at the current market price of $ 1.250, and will review it at a later date.
 

NCC Daily Chart (Source: Thomson Reuters)

 
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