Are these 4 LIC Stocks in Buy Zone - CYA, NSC, ALI and MLT?

Century Australia Investments Limited

CYA Details

Robust Investment Portfolio Performance: Century Australia Investments Limited (ASX: CYA) is an investment company with the objective of providing long-term capital growth by investing in quality stock, usually an undervalued Australian company. During the half year ending December 2017, CYA reported a significant profit before tax (PBT) growth and registered profit after tax (PAT) at $4.4 million as compared to $1.2 million in half year ending December 2016. Total comprehensive income for the period increased by 8.6% to $6.4 million, that reflected a solid investment portfolio performance of 10.3%. The investment portfolio increased by 10.3%, outperforming the S&P/ASX 300 Accumulation Index by 1.7%. The Board of Directors declared an interim dividend of 2.09 cents per share to be paid on 28 March 2018. The investment portfolio has outperformed the Index by 3.6% in the period which was due to the Wilson Asset Management’s appointment on 19 April 2017 to 31 December 2017 and delivered an increase of 11% against the Index return of 7.4%. The company’s pre-tax net tangible assets increased from 94.1 cents per share at 30 June 2017 to 102.6 cents per share at 31 December 2017.
 

Investment Performance (Source: Company Reports)
 
Further, in February 2018, the Century Australia Investment portfolio’s return was 1.2%, and it outperformed the S&P/ASX 300 Accumulation Index by 0.9%. As per latest investment update, the results were broadly in line with expectations wherein the revenue was reported at a flat rate and margins contracted due to input price headwinds, by the energy interest costs and from the rising wages. The management also experienced the trend towards cost-out and buy-back initiative during the period. Based on volatility across the Market Index, we give an “Expensive” recommendation on this stock at the current price of $0.95
 

CYA Daily Chart (Source: Thomson Reuters)
 

NAOS Small Cap Opportunities Company Ltd

NSC Details

Decent Investment Performance in half year: NAOS Small Cap Opportunities Company Ltd (ASX: NSC), formerly known as Contango Microcap Ltd., is a listed investment company. The main objective of the company is investing in undervalued small cap companies and to generate a good return in long run. Recently, the company announced interest payment of AUD 2.75 with interest rate of 5.50% per annum for CONVERTED BOND 5.50% 31-03-20 SEMI SUB CUM RED. The company announced its first half year result for period ending December 2018 with the profit before tax (PBT) growth that amounted to $13.5 mn from $2.3 mn in prior corresponding period (pcp). Profit after tax (PAT) accounted to $9.3 mn, up from $2.2 mn of pcp and reflected a solid growth. The Board of Directors declared an interim dividend of 2.50 cents per share fully franked and this will be paid on 29 March 2018. Moreover, the number of listed positions within the portfolio has been reduced to 20 positions with a cash balance of around 40.21% as on 31 December 2017. The primary focus of the NAOS investment team is to hold deep understanding and high opinion of the companies in the portfolio and to generate return and protect investor’s capital.


Returns since 1 December 2017 (Source: Company Reports)
 
As per the latest portfolio performance as at February 28, 2018, the portfolio generated negative monthly return of 0.57% as compared to the Benchmark Small Ordinaries Accumulation Index return of +0.03%. However, the results were in line with the management expectations.

Furthermore, the total investment portfolio of net equity exposure came at 78.02% with a subsequent cash weighting of 21.98% as on 28 February 2018. As at month end, the portfolio comprised of 15 long positions and no short position. We expect that the company will generate shareholder return on the back of investing in quality stocks not on quantity basis. Meanwhile, the stock has fallen by 6.28% in last six months and was down by 2.72% in last five days as on March 15, 2018. We give a “Hold” recommendation on the stock at the current price of $0.895 and would keep a watch for any catalyst for future momentum in stock market.
 

NSC Daily Chart (Source: Thomson Reuters)
 

Argo Global Listed Infrastructure Limited

ALI Details

Diversified Investment Portfolio in Infrastructure sector: Argo Global Listed Infrastructure Limited (ASX: ALI) is an investment company that invests in infrastructure sector of global listed securities, with the objective of providing both long term capital growth and dividend income for shareholders. ALI registered a profit after tax of $7.2 million for the six-months’ period to 31 December 2017 as compared to a loss of $4.2 million in pcp (i.e., growth of 271%). Income from investments amounted to $13.06 million whereas it suffered losses of $2.78 million from Investments made in prior year. The company generates operating income from dividends that were received from the investments in its portfolio. EPS stood at 5 cents per share on the back of decent portfolio growth. Net tangible asset (NTA) came at $2.10 up from $1.96 of pcp. The Board of Directors declaredan interim unfranked dividend of 1.25 cents per share to be paid on 23 March 2018.
 

Diversified Investment Portfolio in Infrastructure sector (Source: Company Reports)
 
In the recent monthly NTA and Portfolio report, ALI’s NTA has fallen in A$ terms over the last three months, although the portfolio manager continues to outperform its benchmark infrastructure index. Most of the subsectors within Infrastructure sector were negative, whilst ALI’s largest gas distributor company, namely Sempra Energy outperformed after announcing for 9% increase in its dividend. Rising interest rates acted as headwinds to the listed infrastructure companies and due to this the stock prices fell in February month. Meanwhile, ALI stock has fallen 11.14% in three months; and looking at the challenging scenario globally, we give an “Expensive” recommendation on the stock at the current price of $1.73
 

ALI Daily Chart (Source: Thomson Reuters)
 

Milton Corporation Ltd

MLT Details

Well Diversified Portfolio:Milton Corporation (ASX: MLT) is an investment company with an objective to invest in a diversified portfolio of assets in Australian market. In its recent monthly NTA and portfolio report as at February 28, 2018, NTA (after provision for tax on unrealised capital gains) amounted to $4.05 per share. The company has long term track record for paying fully franked dividends which are predominantly funded by the dividends received from its investments in equities listed on ASX.
 

Total Portfolio Return (Source: Company Reports)
 
It paid fully franked ordinary dividends of 8.8 cents per share for Interim FY18 period and reported TPR (Total Portfolio Return), an indicator of LIC performance, of 9.75% for 15 years per annum. This was slightly below the Accumulated Return of the All Ordinaries Index which was 9.96% over the 15 years. Milton’s internal management structure keeps costs down and aligns its interests with shareholders. The company recorded an underlying operating profit after tax of $66.6 million in 1HFY18, up by 9.5% (including special investment revenue and acquisition cost) as compared to previous year. Currently, the market as a whole appears to be fully valued for long term investor such as Milton. The portfolio management of the company will continue to hunt for new opportunity to further diversify the existing portfolio by adding companies who pay higher dividend. On the other hand, some pressure creeps in from the latest news revolving around Labor party’s crackdown on franking credits, on election. In the past six months, the stock price increased by 2.68% (as at March 15, 2018) and is inching towards a high level while we give a “Hold” at the current price of $4.65
 

MLT Daily Chart (Source: Thomson Reuters)

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