Milton Corporation Limited

MLT Details

NTA and Business Update: Milton Corporation Limited (ASX: MLT) is a listed investment firm managing ~$3.7 billion in assets. As of 31 August 2021, MLT’s post-tax net tangible asset value per share stood at $4.77.

• The company will pay 13.75 cents per share of the total dividend for FY21 (including a final dividend of 8 cps), fully franked. MLT has suspended the DRP (Dividend Reinvestment Plan) and will pay the dividend in cash to all shareholders due to the ongoing merger with Washington H Soul Pattinson (WHSP).
• MLT has reported 32.90% of Total Portfolio Returns (TPS) and 72.97% of Total Shareholder Returns (TSR) as of 31 August 2021.

Merger Scheme Update:

• MLT and WHSP have decided on 0.1863 as the Exchange Ratio for the proposed merger scheme, implying a $7.18 per share value of MLT. 
• The Independent Expert has concluded the merger Scheme is in the best interests of the MLT shareholders.
• Under the Scheme, MLT shareholders will receive new WHSP shares to replace MLT shares based on the Exchange Ratio calculation.
• 5 October 2021 has been set as the merger implementation date, and the new WHSP shares will commence trading on ASX from 6 October 2021.

FY21 Highlights:

• Outperformed Index: MLT reported 33.2% of TPR for the 12-months ending on 30 June 2021, outperforming the 30.2% return on the All-Ordinaries Accumulation index.
• PAT Decline: The PAT declined to $92.4 million in FY21, a decline of 21.0% YoY due to a fall in the ordinary dividend income.
• Fall in Underlying EPS: The Underlying EPS fell to 73 cps, down by 19.4% YoY in FY21.

Profit After Tax from FY17-FY21 (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Uncertainties: MLT witnessed a decline in its profits due to firms' cancellation of dividend income during the COVID-19 outbreak.
• Financial Risks: The company faces various financial risks such as interest rate changes, liquidity crunch or surplus, and credit risk.
  

Outlook:

• The MLT Board expects higher dividend income from the company’s investment portfolio (in 75 firms) in FY22 versus FY21.
• MLT expects a more robust dividend stream, especially from its resource sector and financial services investments.
• Concerning the ongoing merger between MLT & WHSP, a virtual scheme meeting will happen on 13 September 2021 (10 AM AEST).
• MLT is undergoing a merger deal with WHSP, and 5 October 2021 has been set as the merger Implementation date.
  

Stock Recommendation: The stock of MLT gave a positive return of 55.64% in the past nine months and a positive return of 82.35% in the past year. The stock is currently trading higher than the 52-weeks’ average price level of $7.470. The stock of MLT has a support level of ~$6.600 and a resistance level of ~$9.050. Considering the high trading levels, decent returns in the past nine months and the past year, and uncertainty surrounding COVID-19 pandemic, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $7.440, 1:02 PM, (GMT+10), Sydney, Eastern Australia, as on 8 September 2021.

MLT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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