Stocks’ Details

MFF Capital Investments Limited

Improvement in Cash Inflows: MFF Capital Investments Limited (ASX: MFF) invests in a portfolio of exchange-listed international and Australian companies with attractive business characteristics. As on 17 September 2020, the market capitalization of the company stood at ~$1.45 billion.

Monthly NTA Update: MFF stated that its monthly NTA per share as of 31 August 2020 stood at ~$2.831 per share (pre-tax) and $2.495 after providing for tax. At the end of the month, balance sheet cash was ~37.9% of assets, which was about double the size of the next largest position. The company remained cautious with respect to the addition of new heavily cyclical positions, despite reasonable pricing in some spaces.

FY20 Financial Highlights (For the Period ended 30 June 2020): During FY20, the company reported a healthy balance sheet with a cash balance of $680.1 million. During FY20, MFF’s sales of securities outweighed purchases. In cash terms, proceeds from sales were ~$1,107.4 million and purchases ~$93.6 million. Despite the uncertainty in markets, the company declared a fully franked final dividend of 3.0 cents per share, which will be paid in November 2020. During FY20, total net investment income went down to $45.08 million from $321.40 million, and net profit saw a decline from $218.57 million to $25.09 million.

FY20 Financial Highlights (Source: Company Reports)

Stock Recommendation: MFF remains engaged and price sensitive, despite the zero bounds in interest rates on cash and the modest future return expectations for equity markets. As per ASX, the stock of MFF is inclined towards its 52-weeks’ low level of $2.128, proffering a decent opportunity for accumulation. On the technical analysis front, the stock of MFF has a support level of ~$2.28 and a resistance level of ~$3.27. Considering the current trading levels, decent NTA position during August 2020 and sufficient liquidity, we recommend a ‘Buy’ rating on the stock at the current market price of ~$2.670, up by 1.136% on 17 September 2020.

Antipodes Global Investment Company Ltd

Stable Expenses and Additional Yield: Antipodes Global Investment Company Ltd (ASX: APL) provides shareholders with a high conviction portfolio of global investments, predominantly categorized as long and short positions in the international listed securities. As on 17 September 2020, the market capitalisation of the company stood at ~$451.2 million.

FY20 Financial Highlights (For the Period ended 30 June 2020): Since the inception of APL, the global equity index returned 49.4%, and the company’s portfolio returned 25.8%, due to a pragmatic approach to value. During FY20, the company reported an operating loss of $11.9 million. The spread of the pandemic and associated shutdowns impacted the NTA per share, which went down to $1.078 in June 2020, from $1.144 in July 2019. 

FY20 Financial Highlights (Source: Company Reports)

Stock Recommendation: Although FY20 was a challenging year, the investment process of the company seems to be well-positioned to endure the current market volatility. As per ASX, the stock of APL gave a return of 3.91% in the past six months but a negative return of 0.53% in the last one month. On the technical analysis front, the stock of APL has a support level of ~$0.832 and a resistance level of ~$1.02. On a TTM basis, the stock of APL is trading at a price to cash flow multiple of 4.9x, lower than the industry average (Financials) of 18.5x, and thus seems undervalued. Considering the enduring position of the company despite the market volatility and additional yield offered to investors, we recommend a ‘Buy’ rating on the stock at the current market price of $0.935, up by 0.538% on 17 September 2020.

Navigator Global Investments Limited

Healthy Balance Sheet: Navigator Global Investments Limited (ASX: NGI) provides investment management products and services to investors globally through wholly-owned subsidiary Lighthouse Investment Partners, LLC. As on 17 September 2020, the market capitalisation of the company stood at ~$257.82 million.

Financial Highlights (For the Period ended 30 June 2020): During the year ended 30 June 2020, the company reported a fall in AUM to US$11.8 billion from US$14.2 billion. In the same time span, management fee revenue of the company was US$87.5 million, and EBITDA stood at US$30.5 million. Despite the economic impacts of COVID-19 pandemic during the second half of FY20, positive investment performance in the December 2019 quarter resulted in positive performance achieved for calendar year funds and portfolios. During the year, the company retained a solid balance sheet with a cash balance of US$27 million and zero balance of loans and borrowings. However, the company retains a $15 million line of undrawn credit arrangement.

FY20 Financial Highlights (Source: Company Reports)

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

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

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company seems to be well-positioned to capitalize on future growth opportunities. It retains attractive valuation which is expected to support its future earnings and dividend profile. As per ASX, the stock of NGI gave a return of 20.45% in the past three months and is trading close to its 52-weeks’ low level of $1.130, proffering a decent opportunity for accumulation. On a technical front, the stock of APL has a support level of ~$1.137 and a resistance level of ~$2.34. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target upside of lower double-digit (in percentage terms). Considering the aforesaid facts, valuation and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $1.570, down by 1.258% on 17 September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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