Stocks’ Details

WAM Capital Limited

Decent Portfolio Returns Since Inception: WAM Capital Limited (ASX: WAM) is a small-cap Australia-based investment company with the market capitalisation of circa $1.51 Bn as of 27 May 2019. Recently, WAM has released its decent investment performance of April month wherein WAM Capital Portfolio delivered a 4.5% return in one month (as of 30 April 2019) and was up by 2.0% as compared to S&P/ASX Small Ordinaries Accumulation Index return of 2.5%. The key contributor to its portfolio performance was Bravura Solutions’ acquisition proposal of its listed rival GBST Holdings for $2.50 per GBST share. Its pre-tax net tangible assets were reported at $1.85. Its gross assets were reported at $1,333.6 Mn. Since inception, WAM Capital Investment Portfolio generated 16.8% returns per annum against the S&P/ASX Small Ordinaries Accumulation Index returns of 8.4% p.a. For WAM Capital, the Board of Directors declared a fully franked interim dividend of 7.75 cents per share for the H1FY19.

Investment Portfolio Performance (Source: Company Reports)

What To Expect: At the end of 2018, the market outlook was extremely bearish due to the signs that the US Federal Reserve would raise interest rates in 2019, and quantitative tightening would continue at unprecedented levels. In January, Chinese President Xi Jinping increased China’s stimulus significantly, which will have implications for global economic growth, with particular relevance to Australia. The Company remains focused on these macroeconomic factors, and their impact on markets, and company results.

Stock Recommendation: WAM capital’s share generated negative YTD return of 2.78%. Its current ratio for H1FY19 stands at 136.31x which is better than the prior corresponding period where the same was 95.57x. Its annual dividend yield stands at 7.38%. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $2.070 (down 1.429% on May 27, 2019).
 

Magellan Global Trust

MGG’s Portfolio Outperforms Index By 2.4% Since Inception: Magellan Global Trust (ASX: MGG) recently announced that its net asset value (NAV) per unit as on May 24, 2019 was reported at $1.7595. In its funds update, MGG highlighted that its major exposure is in the sectors such as Information Technology (21%), Internet & e-commerce (15%), and restaurants (12%). Its cash comprises 14% of its portfolio exposure. As per geography, its exposure in the US market stands at 47%, Emerging Markets (17%), and Western European (13%). As per its funds performance, MGG has outperformed the benchmark index by 2.4% since its inception.


Fund Performance (Source: Company Reports)

What To Expect: The results of the Fund’s operations get affected by a number of factors, including the performance of investment markets in which the Fund invests.Therefore, investment performance is difficult to predict, and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns.

Stock Recommendation: Global Equity market experienced volatility in the year 2018, majorly due to the global slowdown due to long started trade war concerns. However, the trade war concerns are expected to slow down in the coming times, indicating good times for equity markets worldwide. Other geopolitical tensions are also softening around the globe, which is expected to boost global growth in the coming times. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $1.780 per share.
 

MFF Capital Investments Limited

Trading at High level: MFF Capital Investments Limited (ASX: MFF) recently announced its weekly net tangible assets (NTA) per share pre-tax and post-tax stand at $3.122 and $2.585, respectively as on May 24, 2019.

In another update, it announced that Ms Annabelle Chaplain, Mr Robert Fraser and Mr Peter Montgomery have been appointed as a new Non-Executive Directors.This is an important step in the Board renewal process as several Non-Executive Directors will be retiring over the next few years.

In its monthly NTA update, MFF highlighted that its approximate monthly NTA per share as at April 30, 2019 was $3.223 pre-tax, and $2.664 after providing for tax.Net debt as a percentage of investment assets was approximately 2.9% as on April 30, 2019.


MFF’s holdings on March 29, 2019 (Source: Company Reports)

What To Expect: Market and economic conditions are favourable, and even mediocre businesses and managers are being supported alongside ‘fresh’ stories. IPO markets and debt markets continued to strengthen with numerous US and Chinese cash negative technology-related companies accelerating their preparations for public markets. Underwriters and other promoters are aiming for sustained ‘melt-up’ in markets and sentiments.

Moreover, the direct and indirect effects of rampant market recoveries, the most impactful event be the late month preliminary announcement that the US administration might have found common ground with the Democrats for a massive (multi-trillion USD) stimulus targeted at infrastructure. All these developments are expected to provide a boost to the Company’s diversified portfolio, and thus create value to its shareholders.

Stock Recommendation: Meanwhile, the share price of the company has risen 14.18% in the past six months as at 24 May 2019 and is trading close to its 52-week high of $3.030. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $3.010 per share (up 1.007% on May 27, 2019).
 

VGI Partners Global Investments Limited

Decent Fund Performance: VGI Partners Global Investments Limited (ASX: VG1) recently announced that its net tangible asset backing per ordinary share for VG1 had increased by 2.1% for the month to date (May 24, 2019), with net tangible asset (NTA), representing $2.39 per share as at that date.

Its entitlement offer (1 for 3.22 pro rata renounceable entitlement offer) opened on May 23, 2019 and is expected to close on June 6, 2019. In its April month NTA statement, VG1 reported portfolio size of $652.3 Mn. Its number of long investments was reported at 19, and short positions was reported at 16. Its top long investments include CME Group Inc. (12%), Amazon.com Inc. (9%), and Colgate Palmolive Co. (9%). Its long portfolio by location has highest exposure in North America (74%), Asia Pacific (16%), and UK & Europe (10%).


Fund Performance (Source: Company Reports)

What To Expect: VG1 aims to deliver superior risk-adjusted returns of 10% to 15% per annum (compound returns), after all fees and expenses, over the long-term (5 to 7 years). It intends to attain this via concentrating capital in a relatively small number of high-quality investments. In case of non-availability of lucrative opportunities, it will hold cash for the suitable time.

Stock Recommendation: Its EBITDA margin and net margin for H1FY19 stand at 60.4% and 44.4% which are better than the previous corresponding period where the same stood at 57.9% and 40.6% respectively, implying decent fundamentals of the company.

Hence, considering the Company’s intention to deliver superior returns over its portfolio, we recommend a “Buy” rating on the stock at the current market price of $2.370 per share (up 0.851% on May 27, 2019).

Comparative Price Chart (Source: Thomson Reuters)     

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