WAM Global Limited

WGB Details

WAM Global Limited (ASX: WGB) is involved in the business of making investments in listed global securities to provide capital growth over the medium-to-long term.

Result Performance – For the First Half Ended 31 December 2020 – (H1FY21)

For the first half ended 31 December 2020, revenue from ordinary activities increased by 72.5% YoY to  $73.97 million, operating profit before tax increased by 80.1% YoY  to $69.95 million and operating profit after tax increased by 79.8% YoY to $48.98 million over the same period last year. The profit for the period was driven by strong investment portfolio performance over the interim period of last year.

Further, the investment portfolio grew 15.5% in H1FY21, outperforming the MSCI World Index (AUD) by 5.8%, while holding an average cash level of 5.2% during the period. Meanwhile, its NTA before tax grew 11.9% for H1FY21, including the 4.0 cents per share (cps) fully franked final dividend paid to shareholders during the period. This rise is after the corporate tax of 6.0 cps or 2.7% during the period.

Key Data (Source: Company Reports)

Recent Updates

WGB and TGG set to Merge: On 29 June 2021, the company, and Templeton Global Growth Fund Ltd.,  (TGG) announced  to have entered into a  Scheme Implementation Agreement to merge the two entities. As per the plan, WGB will acquire 100% of the shares in TGG that it does not currently own through a Scheme of Arrangement.

May 2021 Investment Update: As per the release dated 11 June 2021, in May 2021, the investment portfolio of the company increased, with phenomenal contributors including Carrier Global (NYSE: CARR) and Ferguson (LON: FERG). The investment portfolio of the company has provided a return of 12.1% since its inception in June 2018 in line with MSCI World Index (AUD) of 12.2%.

Key Risks:

The company is exposed to risks that include credit risk, liquidity risk, and market risk consisting of interest rate risk, foreign exchange risk, and other price risks. Other price risk is related to the fluctuation of the value of an instrument because of changes in market prices, whether caused due to factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in the market.

Outlook:

For H1FY21, the total shareholder return for the company was reported at 30.3% reflecting its strong investment portfolio performance and the decrease in the share price discount to NTA. As of 31 December 2020, the share price discount reported to NTA was 4.6% versus a discount of 18.1% in FY20. Despite the disruptions caused by COVID-19, the company, on 3 June 2021, updated the previously announced dividend/distribution related to the financial period ended 31 December 2020. Total dividend/distribution payment amount per security (in primary currency) was reported at AUD 0.050. This indicates the Board is confident that they can provide dividend, based on robust stress testing results and confident to materialize returns for investors. Such confidence emanates from the fact that global equity markets continue to perform well underpinned by a fast recovery that global economies are experiencing on account of increased consumer and investors’ confidence.

Technical Overview

Weekly Chart-

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been on a strong winning streak. However, it seems that the stock is running out of bull steam as it has made the same high of $2.66 thrice but could not breach the same, decisively. The technical indicator RSI with a reading around 70, suggests that the stock has entered into the overbought zone thereby limiting the potential of upside.

Going forward, the stock will have to decisively break the level of $2.66 to move up to the 23.6% Fibonacci projection level of $2.82 where it could have stiff resistance. However, if profit booking occurs, then it could fall to the 23.6% retracement level of $2.34 where it would have strong support.

Stock Recommendation:

The stock has increased by ~28.15% in 9 months. It has made a 52-week low and high of $1.808 and $2.650, respectively.

The rise in cases of new variant of the pandemic has made governments hesitant about whether to go ahead with the fast re-opening of economies or exercise caution as increasing numbers might warrant lockdowns to contain the spread of the pandemic. Given this uncertainty, portfolio managers might become cautious with regard to selecting stocks and making investments thereby impacting the company’s earnings and profitability. Considering the aforesaid facts, we suggest investors to liquidate the stock.

Hence, we give a “Sell” recommendation on the stock at the current market price of $2.650 per share, up by 0.378% on 7^th July 2021.

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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