Magellan Global Trust

Decent Outlook: Magellan Global Trust (ASX: MGG) is a listed investment trust, who makes an investment in the global equities. The market capitalisation of MGG stood at ~A$2.23Bn on 24 June 2019.  The net asset value per unit of the Magellan Global Trust stood at $1.8126 as at 14^th June 2019. Recently, MGG had provided an update to the market about fund performance as on 31 May 2019. As per the release, the fund size stood at A$2,142.4 million / $1.7303 with Management & Administration Fee of 1.35% p.a. The sector exposure by the source of revenue towards information technology stood at 21% and internet & e-commerce stood at 15%. The geographical exposure by the source of revenue towards the US is 47% and with Western Europe is 13% as depicted by below picture:
 

Sector Exposure (Source: Company Reports)

As per the fund update dated May 31, 2019, the fund had provided a return of 3.4%, 6.1% and 11.4% in the time period of three months, six months and one year, respectively.However, from the day of inception, the fund generated a return of 13.1%.


Fund Performance (Source: Company Reports)

The portfolio for the Fund as at 31 March 2019 comprised the listed securities like Facebook Inc-A of 7.1%, Microsoft Corp of 7.1%, and Starbucks Corp of 6.2%. The cash held by MGG is predominantly in USD and comprised of 17.1% cash assets less 0.2% net unrealised loss on foreign currency hedging. In addition, the fund had no net credit exposure to foreign currency hedging counterparties as at 31 March 2019.

MGG after raising $1,575 Mn at $1.50 per unit through an initial public offering commenced its trading on ASX on 18 October 2017. MGG further added that its net assets stood at $1,650 Mn with a net asset value of $1.5663 per unit. It also paid a distribution of 3 cents per unit for the six months ended 31 December 2018. The fund would continue to invest in companies and businesses in line with its investment strategy. MGG stated that it is not expecting to change the method of operating the fund in the future. It also added that, however, the results of the fund’s operations might be affected by several factors, which include the performance of investment markets.

Future Aspects: MGG invests in a portfolio of between 15 and 35 high-quality global equity stocks. The results of the fund’s operations would be affected by several factors, which include the performance of investment markets in which the fund invests. MGG added that the investment performance is not guaranteed, and future returns might differ from the past returns.

Stock Recommendation: MGG also aims to deliver the investors a Target Cash Distribution yield of 4% per annum, which is being paid semi-annually. On the stock’s performance front, it had generated a return of 8.43% and 12.15% in the time span of three months and six months, respectively. Also, there are expectations that MGG’s performance would be sensitive to the performance of the technology sector. If the technology sector experiences strong performance, MGG’s performance might also be positively impacted. Hence, considering the above-stated facts and decent outlook, we maintain our “Hold” rating on the stock at the current market price of A$1.795 per share (down 0.278% on 24 June 2019).

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