WAM Capital Limited

WAM Details

Extension of Offer for CLF: WAM Capital Limited (ASX: WAM) is a leading investment company, managed by Wilson Asset Management. The market capitalisation of the company as on 19 February 2021 stood at ~$1.66 billion. As per a recent update, WAM capital Ltd has extended an unconditional offer to CLF for a takeover bid. WAM has varied its offer reflecting an offer price increase from 2 WAM shares for every 3.7 CLF shares to 2 WAM shares for every 3.5 CLF shares. The offer period stands valid till 26 March 2021.

H1FY21 Results Update: Revenue in 1HFY21, stood at $258.8 million, up 117.8% yea rover year.  The company has reported an increase of 136.6% in operating profit after tax to $166.5 million in H1FY21, reflecting the decent investment portfolio performance for the given period. It has declared a fully franked interim dividend of 7.75 cents per share. There was an improvement of 22.8% in the investment portfolio performance in H1FY21.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company’s focus remains on identifying undervalued growth companies and increase its exposure to companies within cyclical sectors like automotive, housing and financial services.

Stock Recommendation: On 11 February 2021, WAM has received acceptance of the offer for 51.52% of the shares of amaysim Australia Limited. As per ASX, the stock of WAM is trading below its average 52-weeks’ levels of $1.465-$2.37. The stock of WAM gave a positive return of ~2.45% in the past six months and a positive return of ~12.66% in the past nine months. On a technical analysis front, the stock of WAM has a support level of ~$2.062 and a resistance level of ~$2.106.  Considering the current trading levels, decent financial performance and improved performance in the investment portfolio, we recommend a ‘Buy’ rating on the stock at the current market price of $2.09, up by 1.456% as on 19 February 2021.

WAM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Contango Income Generator Limited

CIE Details

H1FY21 Financial Performance: Contango Income Generator Limited (ASX: CIE) is engaged in investment in companies listed on the ASX. The market capitalisation of the company as on 19 February 2021, stood at ~$75.31 million. As per a recent update, the company has reported its H1FY21 results. It reported a decent increase in net operating profit before tax to $2.97 million in H1FY21, compared to $1.94 million during the previous corresponding period. The growth can be attributed to improvement in the value of CIE’s investment portfolio. The pre-tax net tangible asset (NTA) per share increased from $0.740 on 30 June 2020 to $0.742 on 31 December 2020. The figure stood at $0.748 as on 15 February 2021.

Net Tangible Assets as on 15 February 2021 (Source: Company Reports)

Discussions for a Buy-Back of Shares from WAM: CIE and its investment manager CGA is in the middle of discussions with WAM Capital Limited in relation to a buy-back of WAM’s holding of ordinary shares in CIE. On 15 January 2021, CIE has entered into a conditional binding term sheet with WAM, where CIE will buy back the entire WAM shareholding of 87,378,103 CIE shares.

Outlook: The company will continue to focus on improving the performance of the portfolio. It looks optimistic for the near-term future with the new shareholder-approved investment mandate being implemented. CIE believes the appointment of WCM is a positive outcome for the company.

Stock Recommendation: The company has appointed WCM Investment Management, LLC as its Investment Advisor with respect to its investment in the WCM Focused Global Growth Long-Short Offshore Fund Limited. As per ASX, the stock of CIE is trading below its average 52-weeks’ levels of $0.495-$0.890. The stock of CIE gave a positive return of ~0.83% in the past nine months and a positive return of ~0.83% in the past one week. On a technical analysis front, the stock of CIE has a support level of ~$0.58 and a resistance level of ~$0.621.  Considering the current trading levels, decent increase in profitability, expected buy-back of shares and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $.605, up by 0.833% as on 19 February 2021.

 CIE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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