7 LIC stocks with decent yields – CIE, WAM, WAX, MIR, MLT, URB and PIC

Stocks’ Details
 

Contango Income Generator Limited

Maintaining momentum: Contango Income Generator Limited (ASX: CIE) is a high yielding Listed investment company with principal activity of investing in high yielding ASX listed securities that are outside of the largest 30 securities in the S&P ASX300 Index. CIE reported a revenue growth of 9.7% YoY to $7,342,524 in the half year ended at December 2017 against the revenue of $6,690,721 in the prior corresponding period. Accordingly, the group’ profit before income tax reached $6,272,234 during the period from $5,797,804 in half year ended at December 2016. The company’s net operating profit after tax reached $4,896,790 as of half year ended at December 2017 as compared to $4,490,768 in December 2016. The group also reported for cash and cash equivalentsto $14,906,953 as of December 2017, up from $11,203,919 as of June 2017. For the month of February 2018, the underlying portfolio posted a negative return of 2.1% versus a 0.2% return generated by the All Ordinaries Index. Long term performance remains solid with the 12 months return at 10.2% since inception. Net Tangible Assets (NTA) after tax reached $0.989 in February 2018 as compared to $1.003 in January 2018. Given that the group’s yield is based on stocks that have increased their reported dividends, CIE has the potential for maintaining the returns. We give a “Speculative Buy” recommendation on the stock at the current price of $ 0.960.
 

Portfolio Performance (Source: Company Reports)
 

WAM Capital Limited

Decent Portfolio Performance: WAM Capital Limited’s (ASX: WAM) stock price edged up by 0.8% on April 05, 2018 as the group announced the appointment of Dr Philippa Ryan as a New Director. On financial front, the company recorded operating profit before tax growth of 49.8% to $119.4 Mn in 1HFY18 against $79.7 Mn in 1HFY17. Operating profit after tax amounted to $87.4 Mn in 1HFY18 from $59.1 Mn in 1HFY17, marking a growth of 48% YoY. In the past six months, WAM’s gross asset grew by 8.8% to $1.3 Bn. The profit for the period is reflective of the strong performance of the investment portfolio over the six months to 31 December 2017, as well as the growth in assets in comparison to the prior period. Besides this, the Board of Director declared a fully franked interim dividend of 7.75 cents which is a 3.3% increase on the prior corresponding period. Total return on shareholders for the period 31 December 2017 was 3.6% and it was primarily driven by WAM Capital’s investment portfolio performance but was offset by the reduction in the share premium to NTA during the period. As on 31 December 2017, the share premium to NTA was 20.6% (June 2017: 24.8%). The group became a substantial holder of Mantra Group Limited and Scottish Pacific Group Limited. Theshare price dipped by 1.2% in the past six months but was up by 1.63% in past one month as on April 04, 2018. While the group has a low reserve cover, the dividends are expected to be maintained given the portfolio performance. We maintain a “Hold” recommendation on the stock at the current price of $2.520.

Portfolio Performance (Source: Company Reports)
 

WAM Research Limited

Solid Investment Portfolio Performance: WAM Research Limited (ASX: WAX) is a listed investment company incorporated in Australia and the Fund aims to preserve capital and deliver tax-effective returns. The group has enhanced its interim dividend while reported a revenue decline of 9.4% YoY to $22,226,015 in 1HFY18. Investment operations during the half year resulted in an operating profit before tax of $20,435,957 as against of $22,256,155 in the prior corresponding period. The group’s operating profit after tax amounted to $15,065,047 during the period against $16,366,330 in 1HFY17. The 9.8% investment portfolio return for the six months to 31 December 2017 was delivered with less volatility than the index while holding an average 71.8% exposure to equities. The Group remains cautious about the direction of the equity market and have recently increased cash weighting to 43.9%. Given that the group has a healthy dividend reserve cover at 3.8 years at the back of flexible and proven investment approach, we give a “Speculative Buy” recommendation on the stock at the current price of $ 1.565.

Investment Portfolio Performance (Source: Company Reports)
 

Mirrabooka Investments Limited

Diversified Investment Portfolio: Mirrabooka Investments Limited (ASX: MIR) is engaged in investing in small and medium sized companies located within Australia and New Zealand. MIR recently reported profit of $5.5 Mn for the six months to 31 December 2017 compared with $3.9 Mn last year. This growth was primarily due to the contribution of the trading and options portfolios which delivered a profit of $2.2 Mn during the period versus a small loss in the previous corresponding period. As a result of this, the company declared interim dividend at 3.5 cents per share fully franked. On the other hand, Net Tangible Assets (NTA) of investments before tax were recorded at $2.16 in March 2018 as compared to $2.17 in February 2018. Moreover, the Group has diversified investments in 69 companies and trusts as at 28 February 2018. This diversification has helped the group maintain the earnings and offset pressure from some sectors which have suffered significant earning reductions. The total size of portfolio reached at $381.3 Mn as on March 31, 2018. Further, we expect that MIR will continue to focus on long term investments in quality companies with defendable competitive advantage. We give a “Buy” recommendation on the stock at the current price of $ 2.610.
 

Milton Corporation Limited

Decent Portfolio Performance: Milton Corporation Limited’s (ASX: MLT) stock edged up by 0.667% on April 05, 2018 after the company released NTA and portfolio monthly update. MLT posted Net Tangible Assets (NTA) per share before tax of $4.44 as on March 2018 while NTA per share after tax was recorded at $3.94. Milton has a long-term track record of paying fully franked dividends which are predominantly funded by the dividends received from its equity investments portfolio. It was reported that TPR (Total Portfolio Return), an indicator of LIC performance of MLT was 9.25% and it was close to the Accumulated Return of the All Ordinaries Index return of 9.46% over 15 years.The group’s final dividend is also expected to be at least maintained at 10 cents per share in the case of unforeseen circumstances. We maintain our “Hold” recommendation on the stock at the current price of $ 4.530.
 

Decent Portfolio Performance Since Inception (Source: Company Reports)
 

URB Investments Limited

Healthy Financials with No Debt: URB Investments Limited (ASX: URB) is an investment company with the objective of maximizing total shareholder return through a combination of capital and income growth; and is the first LIC to target on urban renewal theme. In the March month, URB posted Net Tangible Assets (NTA) after tax at $1.03. Despite increased domestic and international market over the past month, URB’s Net Portfolio return (after all operating expenses, provision and payment of both income and capital gains tax and the reinvestment of dividends) was recorded as negative 0.2% for the month of March as compared to the S&P/ASX 300 Accumulation Index which has a negative return of 3.7% over the same period. In February 2018, URB declared its maiden dividend and is expected to benefit from re-organisation of its Kingsgrove property. URB’ ordinary income from operating activity for half year ended 31 December 2017 was $1,304,531. Distribution of $337,141 was collected during the period from the seed assets in the Direct Property Portfolio, while interest received from bank deposits was $70,726. In addition, the company earned $355,628 in special investment revenue as a part consideration of VINCI Construction International Network’s acquisition of Seymour Whyte. This resulted in total revenue from ordinary operation of $1,660,159. Moreover, URB has no debt and remains in strong financial position with cash and cash equivalents representing approximately 11.3% of the portfolio. On the other hand, the stock has fallen 6.44% in past six months as on April 04, 2018. We still believe that there is potential in the stock in the long-run and give a “Speculative Buy” recommendation on the stock at the current price of $ 0.940.
 

Perpetual Equity Investment Company Limited

Strategic Investment Allocation: Perpetual Equity Investment Company Limited (ASX: PIC) is an investment company, which is established to invest predominantly in the Australian listed securities with typically a mid-cap bias and cash, deposits products and senior debts, together with allocations to global listed securities. PIC reported profit before tax (PBT) de-growth of 9.9% to $28,425 thousand in 1HFY18 from $31,538 thousand in 1HFY17; and profit after tax was registered at $20,662 thousand in 1HFY18 against $22,733 thousand in 1HFY17, i.e., down by 9.1% on YoY basis. As at April 04, 2018, PIC posted Net Tangible Assets (NTA) backing per share before tax at $1.086 while NTA per share after tax was recorded at $1.088 in February 2018. Since inception, PIC has delivered a return of 10.1%, and its share price also increased by 4.23% in last six months, as at April 04, 2018. We give a “Hold” on PIC at the current price of $1.115, given its growing income stream.

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