Contango Global Growth Limited (ASX: CQG)

CQG Details

Improvement in Portfolio Performance - Contango Global Growth Limited is a Company that aims to provide investors with exposure to a high conviction, actively managed portfolio of globally listed high growth companies (20-40). The Company released an amended Investment Update and NTA Statement for the period ended 31 May 2018. The Company’s portfolio outperformed the broader market during May 2018 with a return of 1.99 per cent versus the -0.10 per cent return of its benchmark MSCI All Country World Index (ex-Australia). Moreover, the portfolio delivered returns in excess of the benchmark over the previous three and six months. The Group performed consistently which was in line with its long-term track record of delivering strong relative returns during times of market volatility. It was noted that NTA after tax and before tax on unrealised gains for April 2018 was recorded at $1.163; and for May 2018, it was $1.183. The Group focuses on companies with growing competitive advantages with aligned corporate cultures that leads to investments so that they can deliver strong long-term returns irrespective of the macroeconomic or political environment. The Company’s portfolio is managed by WCM, which is a California based asset management firm, specialising in active global and emerging market equities.


NTA as at May 2018 and April 2018 (Source: Company Reports)
 
A key thing to note is that the company’s portfolio is constructed in accordance to a “Quality Global Growth” strategy, which requires each equity to maintain a durable competitive advantage or economic moat. In the last three months, the stock price climbed up by 1.99 per cent but slipped by 1.91 per cent in last five days. We give a “Speculative Buy” recommendation on CQG at the current market price of $1.04 (up 1.5% on June 18, 2018), which trades at a discount to NTA.
 

CQG Daily Chart (Source: Thomson Reuters)
 

Diversified United Investment Limited (ASX: DUI)

DUI Details

Improvement in Net Asset Backing with a fall in profit - Diversified United Investment Limited is a listed investment company which invests in Australian equities and international equities.  The Company's primary objective is to deliver continuous dividends and capital appreciation to its shareholders over the long-term within acceptable levels of risk. The Company announced its unaudited net tangible asset backing for the Company’s ordinary shares at 31 May 2018 which was recorded at $4.31 per share (30 April 2018: $4.22 per share). The Group has no intention of disposing of its total portfolio. The Company is required to provide an estimated tax figure on any net gains that would arise on such a theoretical disposal and the Company expects that after deducting this provision, the figure would be $3.69 (30 April 2018: $3.62).


25 largest shareholdings as on 31 May 2018 (Source: Company Reports)
 
The Company had declared an interim dividend of 6.5¢ per share fully franked. The Company reported a fall of 4.4 per cent in its half-yearly profits ending on 31 December 2017 and amounted to $15,647,000 as compared to prior corresponding period.  Moreover, the Group recorded the net realised losses of $4,227,000 on the investment portfolio after tax for the half year (prior corresponding period: $2,395,000). Meanwhile, DUI stock has risen over 10.54 per cent in the last one year and is trading close to its 52-week high price. We believe that the stock is “Expensive” at the current price of $4.12.


DUI Daily Chart (Source: Thomson Reuters)
 

Glennon Small Companies Limited (ASX: GC1)

GC1 Details

A significant improvement in monthly returns - Glennon Small Companies Limited is an investing company. The Company is engaged in making investments in and deriving revenue and investment income from listed companies that are outside the Standard & Poor's/Australian Securities Exchange 100 (S&P/ASX 100). Meanwhile, one of its director Michael Glennon acquired 50,000 shares for a consideration of $49,843.50. Glennon sold out Tox Holding completely and reduced positions in a number of stocks and as a result, built up its cash position. The Group recovered from an underwhelming April performance and generated a strong 8.65 per cent of absolute return in May 2018 which was 4.95 per cent ahead of the ASX Small Ordinaries Accumulation Index which jumped 3.7 per cent. The Group recorded an NTA (pre-tax) of $1.19 and most of the portfolio’s stocks that underperformed during April recovered the lost ground in May, but one stock stood out. Emeco, the fund’s largest position, gained 26.5 per cent following a positive presentation at the Macquarie Conference and the completion of its retail entitlement issue. Over the time, the Group is reducing its stake in A2 Milk post its graduation into the ASX100. The market’s strength through April and May was somewhat unexpected and some valuations were getting overheated.


GC1 NTA and Dividend Performance (Source: Company Reports)

The stock price was up by 2.6 per cent since the start of the year and climbed up by 1.52 per cent as on 18 June 2018. We give a “Speculative Buy” recommendation at the current market price of $1.00 by looking at the momentum and recovery which the stock has witnessed in the last month.
 

GC1 Daily Chart (Source: Thomson Reuters)
 

Milton Corporation Limited (ASX: MLT)

MLT Details

Long track record of paying fully franked dividends - Milton Corporation Limited (ASX: MLT) is an investment company and has long term track record of paying fully franked dividends which are predominantly funded by the dividends received from its equity investments portfolio. Its composition of the equity portfolio is not aligned with any stock exchange index. Milton has always focused on investing in well managed companies that have a profitable history and are expected to grow dividends over time. The Group’s s efficient internal management structure aligns interests with shareholders and results in a MER (annualised management expense ratio) of 13 basis points.  Milton’s portfolio performance is likely to differ from that of any stock exchange index. It reported $4.05 of an NTA per share after tax for May 2018 and whereas NTA per share after tax for April 2018 was $4.01.
 

Performance of TPR against Accumulation Return of All Ordinaries Index (Source: Company Reports)

Besides this, TPR (Total Portfolio Return), an indicator of LIC performance of MLT stood at 8.98 per cent and it was close to the Accumulated Return of the All Ordinaries Index return (XAOAI) of 9.46 per cent over 15 years. As of now, we continue to maintain our “Hold” recommendation on the stock at the current market price of $ 4.55.
 

MLT Daily Chart (Source: Thomson Reuters)
 

WAM Leaders Limited (ASX: WLE)

WLE Details

Yet to set its performance track record - WAM Leaders Limited is a company whose objectives are to deliver a stream of fully franked dividends, provide capital growth over the medium-to-long term and preserve capital. Meanwhile, one of its directors, Geoffrey Wilson acquired 20,871 Ordinary Shares for a consideration of $23,897.58 from the market. WAM Global focuses on undervalued international growth companies with a bias to small-to medium sized entities, utilises an index that is unaware of investment methodology and preserves shareholders’ capital. WLE is considered to be the only Wilson Asset Management Fund that trades at a discount to pre-tax NTA while it is yet to witness a decent track record of performance. The Parent Group recently authorised the allotment of shares following the Company’s oversubscription of $466 million of initial public offering (IPO) which was the Company’s largest capital raising undertaken till now and it was driven by the strong demand from existing investors that led the offer exceeding the $330 million target.


Portfolio Performance for April 2018 and May 2018 (Source: Company Reports)
 
The stock price for WLE has been falling since the start of the year, but a slight recovery was seen in last one month. The stock seems to be “Expensive” at the current market price of $1.14 given the fundamentals that are yet to find support.
 

WLE Daily Chart (Source: Thomson Reuters)

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