Stocks’ Details

MFF Capital Investments Limited

Decent Amount of Dividend Paid to Shareholders: MFF Capital Investments Limited (ASX: MFF) invests in exchange-listed international and Australian companies with attractive business characteristics. The market capitalisation of the company stood at $1.51 billion as on 23^rd December 2020. The company reported weekly pre-tax Net Tangible Assets (‘NTA’) at around $2.810 per share, and post-tax NTA at $2.477 per share as on 18th December 2020. For the year ended 30^th June 2020, the company reported a total net investment income of $45.09 million as compared to $321.40 million in FY19. Net profit for the year amounted to $25.1 million against $218.6 million in FY19. On 6^th November 2020, the company has paid a fully franked final dividend of 3.0 cents per ordinary share. This comprised of Interim Dividend of 2.5 cps and a special dividend of 20 cps.

Key Financials (Source: Company Reports)

Outlook: Looking forward, the company would continue to focus on increasing the per ordinary share net asset value of the company. In addition, the company is optimistic about modest future returns.

Stock Recommendation: The company closed FY20 with a healthy balance sheet supported by cash and cash equivalents of around $680 million, after payment for a tax of circa. $129 million and dividends (net of reinvestment) of approximately $107 million. The stock of MFF has corrected 1.81% and 1.16% in the last one month and six months, respectively. As a result, the stock is trading towards its 52-week low level of $2.150, offering decent opportunity for accumulation. On a technical front, the stock has a support level of $2.506 and a resistance level of $2.856. Therefore, considering the healthy balance sheet, decent outlook, dividend payment and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.670 per share down by 1.112% on 23^rd December 2020.

Navigator Global Investments Limited

Positive Performance in Calendar Year Funds and Portfolios: Navigator Global Investments Limited (ASX: NGI) is engaged in the provisioning of investment management products and services to investors globally via wholly-owned subsidiary Lighthouse Investment Partners, LLC. The market capitalisation of the company stood at $271.59 million as on 23^rd December 2020. As on 30^th September 2020, the Asset Under Management (AUM) of the company stood at US$11.99 billion as compared to US$11.77 billion as on 30^th June 2020. Net outflows for September 2020 quarter amounted to US$210 million, mainly due to the commencement of two new platform services and funding of around US$400 million. During FY20, the company recorded management fee revenue amounting to US$87.5 million as compared to US$105.4 million in FY20. The fall in revenue was primarily because of a decline of 15% in average total AUM, net outflows of US$1.9 billion from Mesirow Advanced Strategies (MAS) assets and fall in average management fee rate to 0.66%. The company experienced positive investment performance in the December 2019 quarter, which resulted in positive performance achieved for certain calendar year funds and portfolios in spite of the economic impacts of COVID-19 pandemic.

Key Financial (Source: Company Reports)

Outlook: For FY21, the company expects a fall of 20% total revenue to US$82.5 million after considering the lower starting point of AUM for FY21 of US$11.8 billion and expected net outflows over the upcoming year. EBITDA margin for FY21 is likely to be in the ambit of 26.5% to 29.0%.

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 has maintained the trend of dividend payment and paid a final dividend of US$5.5 cents per share, which took the total FY20 dividend to US$14 cents per share. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). On a technical analysis front, the stock has a support level of ~$1.377 and a resistance level of ~$1.945. Therefore, considering the growth in certain calendar year funds, consistent dividend payment, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.700 per share, up by 1.492% on 23^rd December 2020. 

Contango Income Generator Limited

Takeover Offer by WAM Capital Limited: Contango Income Generator Limited (ASX: CIE) makes Investment in ASX listed securities within the ASX 300. The market capitalisation of the company stood at ~$84.73 million as on 23^rd December 2020. Recently, the company updated the market with unaudited Net Tangible Asset backing (NTA) per share as on 15 December 2020, which stood at $0.737 (Pre-Tax) and $0.745 (Post-Tax). On 28^th September 2020, the company received an off-market takeover bid for its 100% shares at $0.787 per share by WAM Capital Limited, which reflects a premium of 23.9% to the CIE’ share price before announcement of the offer and a premium of 7.9% to the company’s pre-tax NTA as on 30^th September 2020. However, the offer has been closed on 13^th November 2020 and received acceptance of over 50% ordinary shares and now holding 52.03% holdings of CIE. For the year ended 30^th June 2020, the company recorded loss amounting to $14.2 million as compared to a profit of $3.3 million in FY19. The company paid a total dividend of 2.96 cents per share with franking of 100%, which implied a dividend yield of 5.6%.

Financial Summary (Source: Company Reports)

Outlook: In order to take business for future growth, the company has now moved to a Global Long Short Equity Strategy managed by WCM Investment Management. 

Stock Recommendation: During FY20, the company has prioritized investing in those companies, which possesses attractive dividend yields with high franking, solid balance sheets and strong cash flows. The stock of CIE has corrected 4.31% in the last one month, and as a result, the stock is trading towards its 52-week low level of $0.495, offering decent opportunity for accumulation. On a technical analysis front, the stock has a support level of ~$0.613 and a resistance level of ~$0.750. Therefore, in light of the nil debt to equity, outlook and investment strategy, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.670 per share, down by 0.741% on 23^rd December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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