Stocks’ Details
 

WAM Capital Limited   

Decent Performance from Portfolio: WAM Capital Limited (ASX: WAM) is one of the leading investment management companies in Australia, which is managed by Wilson Asset Management. The market capitalisation of the company stood at $1.35 Bn as on 25^th May 2020. At the end of April 2020, the net tangible asset after tax stood at 159.89 cents as compared to 158.45 cents of March 2020. The company has recorded an investment portfolio performance of 15.3% per annum since inception. The company’s portfolio performance of April 2020 was fueled by research-driven holdings like natural skin and hair products company.


Portfolio by Sector (Source: Company Reports)

Focused on Opportunities: WAM Capital Limited is focused on undervalued growth opportunities in the Australian equity market. Over the medium-term, the company is cautious about the equity market.

Stock Recommendation: WAM looks for strong industry position, balance sheet and earnings growth in the companies while adding them in its portfolio. During 1H FY20, the company witnessed a rise of 176.9% in operating profit after tax to $70.4 million, reflecting solid investment portfolio performance over the half-year. Hence, considering the solid investment portfolio performance, focus on undervalued growth opportunities and decent performance in 1H FY20, we give a “Buy” recommendation on the stock at the current market price of $1.870 per share, up by 0.809% on 25^th May 2020.

WAM Microcap Limited

Decent Growth in Dividend: WAM Microcap Limited (ASX: WMI) is a listed investment entity with a market capitalisation of $168.81 Mn as on 25^th May 2020. The investment portfolio of the company has provided a return of 11.1% since inception in June 2017. The portfolio performance during the month of April 2020 was mainly supported by its holdings in consumer retail and services brand Kogan.com (ASX: KGN), telecommunication company Uniti Group (ASX: ASX: UWL), and online marketplace builder Frontier Digital Ventures (ASX: FDV). The company declared fully franked interim dividend of 3.0 cents per share, reflecting growth of 33.3% over pcp. Over the span of two years, the company has provided decent returns to shareholders in the form of a dividend. Since its inception, WMI has paid a dividend of 15.75 cents per share.


Dividend History (Source: Company Reports)

Well-Placed to Weather Recession: The company continues to make investment in the companies, which possess a robust balance sheet and fit its investment process. WMI is well-placed to navigate the coronavirus induced recession.

Stock Recommendation: During 1H FY20, the company experienced strong investment portfolio performance and growth in assets. This helped WMI to deliver growth of 333.1% to $19.7 million in operating profit after tax. Return on equity of the company stood at 10.6% in 1H FY20, reflecting YoY growth of 15.5%. The focus of the company revolves around undervalued growth opportunities in the micro-cap market of Australia. Therefore, considering the growth in operating profit after tax and growth in dividend payment, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.225 per share, up by 2.941% on 25^th May 2020.

WAM Leaders Limited

Investment in Oil Companies Supported Portfolio Performance: WAM Leaders Limited (ASX: WLE) is a listed investment company, which makes investment in high-quality Australian companies. The market capitalisation of the company stood at $818.2 Mn as on 25^th May 2020. At the end of April 2020, the gross assets of the portfolio stood at $873.1 million and reported investment portfolio performance of 8.4% per annum since inception. Its portfolio performance during April 2020 was contributed by the investments in oil companies. The company has paid dividend of 16.9 cents since inception, and during 1H FY20, it paid fully a franked interim dividend of 3.25 cents per share, up 22.6% on pcp. At the current market price dated 25th May 2020, the annual dividend yield of the company stood at ~6.01%.


Dividend History (Source: Company Reports)

Outlook: The company is focused on investment opportunities created by shifting macroeconomic conditions. It is continuously monitoring the COVID-19 containment measures.

Stock Recommendation:During 1H FY20, the investment portfolio increased by 6.6%. This indicates that the portfolio has outperformed the S&P/ASX200 Accumulation index by 3.5%. In the same time period, the company reported total shareholders return of 13.6%, which reflects the solid investment portfolio performance as well as the reduction in the share price discount to NTA. The return on equity of the company stood at 4.5% with a growth of 9.8% on a YoY basis. The stock of WLE has corrected 17.46% and 14.40% during the last three months and six months, respectively. Hence, considering the outperformance of portfolio during 1H FY20, solid investment portfolio performance and corrections during the past months, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.060 per share, up 1.923% on 25^th May 2020.

Contango Income Generator Limited

A Quick Look at April 2020 Performance: Contango Income Generator Limited (ASX: CIE) is an income-focused listed investment company with a market cap of $62.94 Mn as on 25^th May 2020. The company’s objective revolves around to pay quarterly dividends which provide investors with an attractive and sustainable income stream that is franked to the maximum possible extent. While investing in a company, CIE looks for consistent dividend history. The portfolio of the company is characterised by a strong and diverse portfolio of companies that exhibit good cash flows and business models. During April 2020, the investment portfolio of the company reported a return of 11.65% and NTA before tax stood at $0.697 per share. 


Portfolio Performance (Source: Company Reports)

Disruptions in the Upcoming Quarter: The company is likely to experience some of the worst economic data over the next quarter. However, it is focused on maintaining the capacity to pay a final dividend with respect to FY20.
Stock Recommendation:For the quarter ended 31^st March 2020, the company declared a dividend of 0.96 cents per share, which is payable on 9^th June 2020. The company has maintained a dividend yield of 5.14%, or 6.93% including franking credits over the past 12 months. The stock of CIE has corrected 29.82% and 31.43% within the time span of three months and six months, respectively and is currently trading towards its 52-week lower levels of $0.495, offering decent opportunities for accumulation. Thus, in light of company’s objective to pay quarterly dividends, focus on maintaining the capacity to pay a final dividend and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.600 per share on 25^th May 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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