Listed Investment Companies: WAM, WGM, WMI & WAX

  • Jul 15, 2019 AEST
  • Team Kalkine
Listed Investment Companies: WAM, WGM, WMI & WAX

The Listed Investment Companies (LICs) are a type of managed funds, which could be actively traded on stock exchanges. Investment objectives of such companies are pre-defined by the manager of the investment company. Besides, these funds provide exposure to various asset classes such as equity, debt or commodity. Usually, these are closed ended in nature and trades at a discount or premium to their Net Tangible Asset (NTA).

LICs have come into existence as closed-ended companies, and as companies, it can pay franked dividends. Closed ended means new shares cannot be issued regularly or the existing shares cannot be cancelled. Nevertheless, the fund size could be increased or decreased through issue or cancellation of shares, occasionally. Besides, the closed-ended structure enables the fund manager for a time-bound investment irrespective of impacts in liquidity through regular subscriptions or redemptions.

Independently owned, Wilson Asset Management is an investment manager based in Sydney, Australia. Founded in 1999 by Geoff Wilson, it manages six listed investment companies and more than $3 billion in shareholder capital on behalf of the investors.

Recently, the investment manager released the Investment Update of the listed investment companies for June 2019. In this article, we would discuss how these four ASX-listed LICs from Wilson Asset Management had performed during the June 2019 period:

WAM Capital Limited (ASX: WAM)

WAM Capital Limited (ASX: WAM) is a listed investment company on ASX, under the management of Wilson Asset Management. It intends to actively manage a diversified portfolio of undervalued securities listed on ASX. The investment company’s objectives are to give capital growth, preserve capital along with providing fully franked dividends.

Portfolio Update

On 12 July 2019, the company reported Investment Update for June 2019 period. Accordingly, the investment portfolio of WAM increased by 0.7% for the month of June. Also, the gross assets of the investment company stood at $1,324.7 million, with a fully franked dividend yield of 7.7% (as on 28 June 2019).

WAM’s Performance (Source: Company’s Announcement)

Reportedly, the investment in Codan Limited (ASX: CDA) returned 6.1%, which is a metal & mining technology company. Also, the company believes sales in the metal detection and radio communication device would continue to rise, and CDA had posted better than expected FY18 results. In addition, CDA had confirmed sales in the second half-year had delivered an optimistic earnings surprise. Admittedly, WAM Capital believes that the company would continue to build momentum in earnings driven by sales, new products and intellectual property.

Dividends Since Inception (Source: Company’s Announcement)

As per the release, the portfolio performance was backed by Ausdrill Limited (ASX: ASL) – the mining services company won five-year underground mining services contract in Botswana for ~$800 million, and an upsurge in gold prices. Besides, WAM believes that the contract by mining services company depicts earnings and revenue potential. Further, WAM had invested in the company in February 2019, and ASL was up by 24.6% in June.

NTA & Price Performance

On 28 June 2019, the after-tax Net Tangible Assets (NTA) of WAM Capital Limited stood at 187.08 cents, while NTA after tax & before tax on unrealised gains stood at 184.84 cents; these include 0.85 cents per share of tax assets from the acquisition of unlisted investment companies. Further, the NTA before tax was at 184.1 cents, which is post the payment of $2.1 million (0.29 cents per share) in tax during the month.

On 15 July 2019, WAM’s stock last traded at A$2.19, down by 1.794% from the previous close. Over the past three months and one month, the price return of the stock has been of +7.21% and +9.85%, respectively.

WAM Global Limited (ASX: WGB)

WAM Global Limited (ASX: WGB) is a listed investment company, which manages an active diversified portfolio of undervalued growth companies from the international markets. It intends to deliver fully franked dividends and provide capital growth in the medium to long term.

Portfolio Update

According to the 12 July 2019 release, the investment portfolio increased by 4% during June; meanwhile, the MSCI World Index (AUD) rose up by 5.2% while the S&P Global Mid Small Index increased by 5% in AUD terms for the month. Also, the investment portfolio increased 7.3% during the quarter, which outperformed the MSCI World Index (AUD) by 2% and the S&P Global Mid Small Cap Index by 6% in AUD terms. Besides, the investment portfolio increased by 17.8% in the period six-months to June 2019.

Portfolio Composition (Source: Company’s Announcement)

Reportedly, the performance of the portfolio was contributed by HCA Healthcare (NYSE: HCA), Thermo Fisher Scientific (NYSE: TMO) and Haemonetics (NYSE: HAE). Also, HCA Healthcare is one of the largest hospital operators in the USA, and WAM Global believes HCA Healthcare is placed to perform in the upcoming years due to significant scale, effective management, diversified portfolio and strong balance sheet. Besides, Thermo Fisher Scientific is a global medical technology company, that generates ~USD 25 billion in revenues in a USD 160 billion market, which is growing between 3% to 5% per annum. In addition, Haemonetics provides innovative haematology products, which addresses the market for blood and plasma collection; the ongoing roll-out of NexSys machine in the plasma collection space could be the key driver for business expansion.

The announcement noted that the 2019 financial year has been volatile in terms of global growth weakened by geopolitical tensions. Besides, it was also mentioned that the market is expecting a rate cut in July in the US, and the upcoming quarterly earnings season would provide insights on economic health. WAM Global is continually re-assessing the valuations of businesses it holds, and it sees some segment of the market as overvalued.

NTA & Price Performance

As on 28 June 2019, the gross assets in the fund stood at $486.4 million. Also, the Net Tangible Assets (NTA) before tax stood at 231.42 cents, while the Net Tangible Assets (NTA) after tax was 227.98 cents. Besides, the NTA after tax & before tax on unrealised gains stood at 234.75 cents.

On 15 July 2019, WGB’s stock closed at A$2.06, up by 1.478% from the previous close. Over the past three months and one month, the price return of WAM has been +5.45% and +2.78%, respectively

WAM Microcap Limited (ASX: WMI)

WAM Microcap Limited provides investors with an access to undervalued growth companies with a market capitalisation of less than $300 million at the time of acquisition.

Portfolio Update

As per the 12 July 2019 update, the investment portfolio of the WAM Microcap Limited increased by 1% in June, with Rhipe Limited (ASX: RHP) and People Infrastructure Limited (ASX: PPE) contributing to the performance of the portfolio.

WMI’s Performance (Source: Company’s Announcement)

Reportedly, RHP provides cloud-based subscription software licenses, and in June 2019, it announced the passing of 500,000 Office 365 customers and its client accounts increased by 65% in FY19. Subsequently, RHP revised the FY19 operating profit guidance to over $12.5 million from $11.5 million to $12 million, and the stock of Rhipe Limited was up 24.3% in June.

Besides, PPE is a workforce management company. In June 2019, the company acquired a few companies to tap the broader market. In addition, WMI had invested in the company through the IPO initially and participated in the capital raising at a discounted price of $2.70 per share. Lastly, PPE was up by 20.6% in the month.

NTA & Price Performance

Reportedly, the gross assets in the fund stood at $188.2 million. Also, the Net Tangible Assets (NTA) before tax stood at 131.92 cents while the Net Tangible Assets (NTA) after tax was 127.16 cents. Besides, the NTA after tax & before tax on unrealised gains stood at 131.22 cents.

On 15 July 2019, WMI’s stock was at A$1.26, up by 1.613% from the prior close. Over the past three months and one month, the price return of WAM has been +2.9% and -1.59%, respectively.

WAM Research Limited (ASX: WAX)

WAM Research Limited (ASX: WAX) is a listed investment company, focused on small to medium sized industrial companies listed on ASX. It intends to generate income of fully franked dividends while achieving a high real rate of return.

WAX Performance (Source: Company’s Announcement)

Portfolio Update

According to a release on 12 July 2019, the investment portfolio of WAX decreased by 0.5% in June 2019d. Reportedly, the performance had been dragged down by Vocus Group Limited (ASX: VOC), and WAX invested in the company due to optimism surrounded by the appointment of new CEO Mr Kevin Russell. Also, VOC was down by 28.8% in June 2019.

Besides, Codan Limited (ASX: CDA), a metal & mining technology company, increased by 6.1% in June. Also, the company believes sales in the metal detection and radio communication device would continue to rise, and CDA had posted better than expected FY18 results. In addition, CDA had confirmed sales in second half year which had delivered earnings surprise. Admittedly, WAM Research believes that the company would continue to build momentum in earnings driven by sales, new products and intellectual property.

NTA & Price Performance

Reportedly, on 28 June 2019, the gross assets in the WAX fund stood at $226.2 million. Also, the Net Tangible Assets (NTA) before tax stood at 118.12 cents while the Net Tangible Assets (NTA) after tax was 116.11 cents. Besides, the NTA after tax & before tax on unrealised gains stood at 118.91 cents.

On 15 July 2019, WAX stock closed at A$1.38, down by 1.492% from the previous close. Over the past three months and one month, the price return of WAM has been +6.46% and +1.82%, respectively.


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