GuruFocus -
- WAM Capital Outperformance: Outperformed the All Ordinaries Index by 14% and the Small Ordinaries Index by 17%.
- WAM Research Outperformance: Outperformed the All Ordinaries Index by 18% and the Small Ordinaries Index by 21%.
- WAM Microcap Outperformance: Outperformed by 12%, marking the seventh consecutive year of outperformance since IPO.
- WAM Active Outperformance: Outperformed its benchmark by 26%.
- Dividend Yield: WAM Capital trading at a fully franked dividend yield of around 10%.
- Net Tangible Assets (NTA): Declined by about 5% per year due to high dividend payouts.
- Dividend Coverage: 1.5 years of dividend coverage in profit reserve, up from 0.7 the previous year.
- Premium to NTA: Historically traded at a 16% premium; currently at parity with NTA.
- Small-Cap Performance: Small-cap companies underperformed by 2% in August, compared to a 0.4% increase in the broader market.
- Sector Performance: Healthcare and financial services sectors performed well, with companies like Healius and Judo Bank outperforming.
- New Zealand Market: Experienced a 30% decline in foot traffic in June and July.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WAM Capital Ltd (ASX:WAM) outperformed the market significantly, with WAM Capital outperforming by 14% and WAM Research by 18% against the All Ordinaries Index.
- The company successfully deployed all proceeds from a $90 million capital raise in April, with strong performance from the invested stocks in the June quarter.
- WAM Active outperformed its benchmark by 26%, benefiting from increased capital markets activity and discounted stock lines.
- The company has a strong dividend yield, trading at a fully franked dividend yield of around 10%, compared to the market average of 4%.
- WAM Capital has 1.5 years of dividend coverage in its profit reserve, an improvement from 0.7 years the previous year, indicating better dividend sustainability.
- The share price of WAM Capital has declined over the past 12 months, despite strong performance, attributed to cyclical factors and a reduction in premium to net tangible assets.
- There has been a lack of expected capital markets activity, with only one initial public offering invested in since the April capital raise.
- Small-cap companies have underperformed larger companies, with a 2.4% headwind in the small-cap sector during the reporting season.
- The company faces challenges with the underperformance of small caps, which is seen as cyclical but has persisted into the 2025 financial year.
- The dividend payout is high, requiring the portfolio to increase by over 16% annually just to maintain the current dividend level, which has led to a decline in net tangible assets.
A: Tobias Yao, Portfolio Manager, responded that they managed to exit around 60% to 70% of the holding at around $12 to $13. They still had a small position going into the results, which was detractive, but they did sell a significant portion at a higher price.
Q: Given the significant decline in Celsion's share price, is the market concerned about its future?
A: Oscar Oberg, Lead Portfolio Manager, stated that Celsion was one of their holdings and was probably the most disappointing result over the reporting season. He mentioned that the management and Board misread the market's desire for capital discipline, leading to a share price drop. However, he believes the company is viable and dependable, and a private equity takeover bid could be possible.
Q: If you had Tabcorp Holdings, would you continue to hold it or sell it at a loss?
A: Oscar Oberg mentioned that while he can't give specific advice, he noted that Gillon McLachlan, the new CEO, is capable of fixing the company. He acknowledged that the balance sheet needs fixing but sees value in the business if run properly. They have a very small holding and would participate in a capital raise if it occurs.
Q: Are you still positive on EML Payments?
A: Tobias Yao explained that the original investment thesis was based on new management and strategic changes. While the Board has executed well, the new CEO is reassessing long-term targets. They believe the company is turning a corner, but it has taken longer than expected.
Q: What's your view on the dividend and franking for WAM Capital and WAX?
A: Oscar Oberg clarified that the dividend decision is made by the Board. He explained the impact of past market conditions on net tangible assets and the dividend. He noted that while the dividend yield is high, increasing it is unlikely due to the need to balance capital growth and dividend payouts.
Q: Do you have a view on Tyro?
A: Tobias Yao expressed a bullish view on Tyro, noting that management has done a good job during the reporting season. They see growth potential in specific verticals like health and believe the valuation is undemanding.
Q: What's your view on the data center industry after recent market news?
A: Tobias Yao stated they are very bullish on the data center space, highlighting SDC as a key player. He noted the strategic importance of Australia for AI and data center growth, with demand outstripping supply.
Q: What has been your worst stock investment?
A: Tobias Yao mentioned Bub's as his worst investment due to management execution issues despite initial market opportunities. Oscar Oberg cited Nextstead, noting the impact of government regulatory changes and the importance of cash flow matching earnings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.