Stocks’ Details

Navigator Global Investments Limited

Ended FY20 with Decent Balance Sheet: Navigator Global Investments Limited (ASX: NGI) is engaged in the provisioning of investment management products as well as services to investors globally via wholly owned subsidiary Lighthouse Investment Partners, LLC. The market capitalisation of the company stood at $245.65 Mn as on 2^nd October 2020. For the year ended 30 June 2020, the company witnessed a fall in AUM to US$11.8 billion from US$14.2 billion. Management fee revenue and EBITDA for the period amounted to US$87.5 million, and US$30.5 million, respectively. In addition, the company also managed to retain a healthy balance sheet with a cash balance of US$27 million and zero balance of loans and borrowings. NGI possesses $15 million line of the undrawn credit arrangement.

Key Financials (Source: Company Reports)

Outlook: The company seems to be well-placed to capitalise on future growth opportunities. In addition, NGI possesses an attractive valuation, which will support its future earnings and dividend profile. The company has scheduled to conduct its 2020 Annual General Meeting on 18^th November 2020. 

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: Debt to equity multiple of the company stood at 0.12x in FY20 against the industry median of 0.56x. The stock of NGI has corrected by 8.18% and 36.08% in the past one and six months, respectively. As a result, the stock is inclined towards its 52-week low level of $1.130. On a technical analysis front, the stock price of NGI has a support level of ~$1.12 and a resistance level of ~$1.839. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Therefore, considering the solid valuation, decent position to tap future opportunities and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $1.490 per share, down by 1.65% on 2^nd October 2020.

WAM Research Limited

Decent Performance in August 2020: WAM Research Limited (ASX: WAX) is an investment management company, which is managed by Wilson Asset Management Group. The market capitalisation of the company stood at $295.14 Mn as on 2^nd October 2020. In the month of August 2020, the investment portfolio of the company delivered a strong performance, which was underpinned by its investment in Codan (ASX: CDA) and BWX (ASX: BWX).  Since its inception, the investment portfolio provided returns of 15.1% per annum. During the volatile year FY20, the investment portfolio provided a return of 2.1% to shareholders. During the year, the portfolio outperformed the S&P/ASX All Ordinaires Accumulation Index by 6%. The company has resolved to pay a full franked final dividend of 4.9 cents per share on 23^rd October 2020.

Dividend History (Source: Company Reports)

Dividend Commitment: The Board of the company is committed to pay a stream of fully franked dividend to shareholders. However, this is subject to enough profit reserves and franking credits.

Stock Recommendation: The company is primarily focused on undervalued growth opportunities in Australia. The stock of WAX has provided returns of 3.74% and 15.97% in the last one and three months, respectively. In addition, the stock is trading at a price to book value multiple of 1.5x as compared to the industry average (investment Banking & Investment Services) of 3.1x on TTM basis. On a technical analysis front, the stock price of WAX has a support level of ~$1.386 and a resistance level of ~$1.571.  Therefore, in light of the outperformance of portfolio, sound dividend history and decent returns in recent months, we give a  “Hold” recommendation on the stock at the current market price of $1.525 per share, with no change on 2^nd October 2020.

WAM Microcap Limited

Outperformance by Investment Portfolio: WAM Microcap Limited (ASX: WMI) is a listed investment management entity with a market capitalisation of $331.16 Mn as on 2^nd October 2020. In the month of August 2020, the company finished an equity raising of $88 million via an oversubscribed Share purchase plan and placement. During the month, the investment portfolio reported strong performance, which was led by its investment in the workforce management company People Infrastructure (ASX: PPE) and share trading platform provider SelfWealth (ASX: SWF). During FY20, the investment portfolio outperformed the Small Ordinaries Accumulation Index by 17.8% with an average cash weighting of 21.9%.  In addition, the portfolio witnessed a rise of 11.8% in FY20 as a result of the sound stock selection from the investment team. During FY20, the company reported revenue amounting to $21,874,217, reflecting a rise of 68.4% and net profit for the period amounted to $11,327,784.

Portfolio by Sector (Source: Company Reports)

Outlook: The focus of the company revolves around undervalued growth opportunities in the micro-cap sector of Australia.

Stock Recommendation: For FY20, the company declared a final dividend of 6.0 cents per share, which comprises of a final dividend of 3 cents and a special dividend of 3 cents. The stock of WMI has provided a return of 10.65% and 31.43% in the past one and three months, respectively. In addition, the stock is trading at a price to book value multiple of 1.8x as compared to the industry average (investment Banking & Investment Services) of 3.1x on TTM basis. On a technical analysis front, the stock price of WAX has a support level of ~$1.503 and a resistance level of ~$1.62.  Therefore, considering the recent equity raising, decent portfolio performance and dividend payment, we give a “Hold” recommendation on the stock at the current market price of $1.600 per share, down by 0.621% on 2^nd October 2020.

Comparative Price Chart (Refinitiv, Thomson Reuters)

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