Stocks’ Details

Naos Small Cap Opportunities Company Limited

FY20 Quarterly Dividend and Notice of AGM:Naos Small Cap Opportunities Company Limited (ASX: NSC) invests primarily in a concentrated portfolio of small cap Australian listed equities with the objective of providing investors with exposure to small cap companies. The company recently announced that it has bought back a total of 6,426,387 shares out of 10,473,193 shares, under the on-market buyback program. The company declared a fully franked dividend of 1.00 cent per share for the three-months ended 30 September 2019, which is to be paid on 19 November 2019. 2019 Annual General Meeting of NSC has been scheduled on 14 November 2019 in order to discuss the financial statements and other reports.


Fully Franked Dividend Profile (Source: Company Reports)

What to Expect: The company has identified new long-term opportunities that have been analysed over a number of months, including Experience Co Limited, Class Limited, Eureka Group and Vitalharvest. NSC believes that a number of existing portfolio holdings that have been built up over the past 12-36 months are on the verge of significant growth and maturity. Some of these holdings include Wingara AG, BTC Health, Big River Industries, and Saunders International. The above holdings may lead to substantial share price re-ratings. The company will continue to acquire shares via buy-back programs and will focus on maintaining and growing a stream of fully franked dividends.
Stock Recommendation: As per the ASX, the stock gained 22.13% in the past 6 months and 3.47% in the past one month. For the financial year ended 30 June 2019, the Company reported an after-tax loss of $17.7 million with the second-half performance showing an improvement over the first half of the year. In the month of September, the company’s investment portfolio reported a positive return of 8.10%, outperforming the S&P/ASX Small Ordinaries Accumulation Index which increased by 2.61%. Several mature positions such as BSA Limited, Enero Group and People Infrastructure may continue to re-rate the share price as they increase in scale, becoming more liquid and relevant for larger fund managers, and develop the financial flexibility to potentially expand via acquisition. Considering the above factors, we recommend a “Hold” rating on the stock at the current market price of $0.735, down 1.342% on November 5, 2019.
 

Blue Sky Alternatives Access Fund Limited

Market Valuation of the BAF Investment Portfolio:Blue Sky Alternatives Access Fund Limited (ASX: BAF) invests in the diverse range of alternative assets, including private equity, private real estate, and real assets. The company recently announced that it has bought back a total of 1,746,896 shares out of 5,583,190 shares, under the on-market buyback program. The company announced that its pre-tax net tangible assets as at 30 September 2019 were $224 Mn or $1.1164 per share. This included cash balances of $22.2 million, plus a further $35.6 million of receivables related to the recent sale of the Atira student accommodation portfolio, which occurred at a 17% premium to carrying value. In addition, BAF has an investment portfolio and other balance sheet items estimated on a before tax basis at $166 million. This includes an investment in the Argyle Water Fund for $67.2 million.

Financial Performance: During the year, profit from ordinary activities after income tax went up from $5.04 million in FY18 to $6.71 million in FY19, which further led to an increase in EPS from 2.55 cents per share to 3.27 cents per share in FY19. There was a substantial rise in expenses during the year, propelled by the events impacting the wider Blue Sky group. The company expects additional asset realisations in FY20 as the portfolio continues to mature and expects growth in net tangible assets from distribution income.


BAF discount to pre-tax NTA (Source: Company Reports)

Stock Recommendation: The revenue of the company reported a CAGR of 16.58% over the period covering FY15 to FY19 and a gross profit CAGR of 13.64% during the same period. The gross margin of the company showed an improvement from the previous year and went up to 78.8% from 75.1%, indicating improved efficiency.As per the ASX, the stock moved 12.42% in the past 6 months and 7.5% in the past one month. The stock is currently trading towards the higher band of its 52-week trading range of $0.655-$0.950. The annual general meeting of BAF is to be held on November 13, 2019. Considering the aforesaid facts along with the current trading levels, we have a wait and watch stance on the stock at the current market price of $0.870, up 1.163% on November 5, 2019.
 

WAM Leaders Limited

Dividend Distribution and Notice of AGM: WAM Leaders Limited (ASX: WLE) is a listed investment company, which primarily invests in equities listed on ASX.  The company recently updated that two of its Directors, Kate Thorley and Geoffrey Wilson, acquired 3,204 (direct & indirect) and 214,137 ordinary shares in the company. The company declared a fully franked dividend of 3 cents per share on ordinary fully paid shares, which was paid on October 25, 2019. 2019 Annual General Meeting of WLE is to be held on November 19, 2019 wherein the financial and other reports will be discussed.

Portfolio Update and Financial Highlights: During the month of September, the investment portfolio of WAM Leaders went up by 2.6%, outperforming the S&P 200 Accumulation Index by 0.8%. The company has increased the weighting in Ramsay Healthcare (ASX: RHC) as the profits from developments began to show up and also expects the improved operating trends to emerge in Australia in the upcoming years.


Performance at 30 September 2019 (Source: Company Reports)

The company reported net profit from ordinary activities after tax amounting to $71.5 million, reflecting the performance of investment portfolio and growth in assets over the period.  The performance was a result of 89.7% investments in equities with less volatility than the market. The return on the equity portion of the portfolio was 12%, whereas the return on the cash portion was 1.8%.

Stock Recommendation: The revenue witnessed a CAGR growth of 46.40% over the period covering FY17 to FY19 and encountered a CAGR of 50.85% in the gross profit over the same period. The stock generated returns of 3.06% in the past 3 months and is currently trading close to its 52-week high level of $1.205. Gross margin and EBITDA margin are in-line with the previous year, but net profit margin showed an improvement and went up from 64.8% in FY18 to 69.2% in FY19. Considering the above factors, we give a “Hold” recommendation on the stock at the current market price of $1.180 on 05 November 2019.
 

L1 Long Short Fund Limited

Quarterly Update: L1 Long Short Fund Limited (ASX: LSF) predominately invests in Australian securities with exposure to global securities. As per a recent update, Mark Landau, one of the Directors, acquired 75,000 shares for a consideration of $1.5843 per share on November 4, 2019. Net Tangible Assets of the company as at 31 October 2019, stood at $1.7980 per share before tax and $1.8667 per share after tax. During the year, the Fund has delivered a net return of 18.4%. The company is certain that its strong industry position, operating trend, management team, and balance sheet will help deliver appealing returns over the years ahead.

 
Net Performance (Source: Company Reports)

Financial Performance: During the year ended 30 June 2019, an improvement in total investment loss from the prior year was observed. Investment loss in FY18 and FY19 stood at $88.49 million and $5.37 million, respectively. Total operating expenses for the year went up from $19.58 million to $70.42 million.

Stock Recommendation:The stock of the company generated a YTD return of 19.55%. 52-week trading range for the stock stood at $1.270 - $1.620 and currently, the stock is trading close to the upper end of the range. Going forward, the Company will continue to pursue its investment objectives for the long-term benefit of the members. Considering the above-mentioned parameters, we recommend an “Expensive” rating on the stock at the current market price of $1.610, up 1.258% on November 5, 2019.
 

Monash Absolute Investment Company Limited

MA1 Releases Month End Update: Monash Absolute Investment Company Limited (ASX: MA1) invests in Australian and international listed equity securities, pre-IPO securities, exchange traded and OTC derivatives and cash. For the month of October, Pre-Tax NTA went down by -1.25%, in contrast to S&P/ASX200, which was down by -0.35% and the Small Ords, which was down by -0.50%. For the four months since 30 June, Pre-Tax NTA was up 9.06% as compared to the S&P/ASX200, which went up by 2.00% and the Small Ords, which was up by 2.59%.


Portfolio Structure (Source: Company Reports)

Portfolio Outlook: The company expects the sales of Lovisa to grow by over 20% over the next 3-5 years, owing to like for like growth and Store rollout in the UK, France, USA. The company is also expecting additional opportunities to acquire multiple sites from distressed retailers and expects its price to earnings multiple to be 23x in the FY21. For Kogan.com, the sales growth of over 20% is expected in the next 2-3 years, mainly due to organic growth in private label and third party, increase in mobile active customers and significant uplift in Kogan Marketplace active customers.

Stock Recommendation: The stock of the company went up by 20.62% in the past 6 months. Gross margin of the company stood at 67.8% and net profit margin came in at 44.2% for FY19. The stock is currently trading close to its 52-week high of $1.00. Considering the above factors, current trading levels and long-term outlook for the portfolio, we have a watch view on the stock at the current market price of $0.980, up 1.554% on November 5, 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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