Australian Listed Investment Company Report – August 2021

Weekly Reports | Aug 03 2021

This story features PENGANA INTERNATIONAL EQUITIES LIMITED REGISTERED, and other companies. For more info SHARE ANALYSIS: PIA

Download related file: Monthly-LMI-Update_31-July-2021

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market. Also known as Listed Investment Trusts or Listed Managed Investments.

LMI Market News

IIR Reaffirms Recommended Rating for Pengana International Equities Limited ((PIA))

IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website.

On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked. This compares to the total dividends of 5 cents per share in FY20.

The Board has confirmed that, in the absence of unforeseen circumstances, it expects to reset the target quarterly dividend to 1.35 cents per share, franked to the maximum extent possible. This represents an annual dividend of 5.4 cents per share.

PIA has profit reserves to sustain an annual dividend of 5.4 cents per share for 11 years and sufficient franking credits to fully frank the dividend through to FY24, even if no further tax is paid.

IIR Initiates Coverage on WAM Alternative Assets Limited ((WMA))

WAM Alternative Assets Limited, formerly Blue Sky Alternative Access Fund Limited, is a Listed Investment Company (LIC) that provides exposure to a portfolio of alternative assets including real assets, private equity and real estate. The Company has expanded into infrastructure since taking over the management of the portfolio and will be seeking to expand into private debt. The Company will gain exposure to these asset classes through an investment in a portfolio of funds and co-investments where opportunities arise.

The Company seeks to deliver absolute returns through a combination of income and capital growth, while providing the diversification benefits of alternative assets. Wilson Asset Management (International) Pty Ltd (WAMI) was appointed the Manager of the portfolio in September 2020 after shareholders approved the appointment. The Manager has taken over the management of the portfolio (“legacy portfolio”) and will seek to deploy the available capital and redeploy the invested capital when the underlying investments are realised/exited over the next four years. The Manager will seek to invest the portfolio to be able to achieve the investment objectives which include generating an income stream for shareholders.

IIR has initiated coverage on WMA with an Investment Grade rating. The full report can be found on the IIR website.

AFI Announces FY21 Results and Maintains Final Dividend

During the month, Australian Foundation Investment Company ((AFI)) released its FY21 results. The Company reported a decline in total revenue of 0.6% to $262.8m. Divi­dends and distributions generated by the portfolio were largely unchanged from the pcp, with the decline in revenue driven primarily by a decline in interest income from deposits.

Before allowing for the final dividend, the pre-tax NTA per share of the Company increased to $7.45 per share at 30 June 2021. This is a 25% increase on the pre-tax NTA as at 30 June 2020.

The Company declared a final fully franked dividend of 14 cents per share, in line with the FY20 final dividend. This takes the full year dividend to 24 cents per share, fully franked, the same as the FY20 full year dividend.

The Company has a DRP and a DSSP available, the price of which will be set at a 3.5% discount to the VWAP of the Company’s share price over the five-trading days after the shares trade ex-dividend.

During the period, the Company dipped its toe into international equities, investing a small amount of capital (~0.5% of the portfolio) into a portfolio of international equities. The international portfolio consists of companies that the investment team views to be high-quality with a strong competitive advantage, good growth potential and across a broad range of industries. The rationale for the invest­ment in international equities is a precursor to potentially establish­ing a low-cost international LIC in future.

WLE Entitlement Offer

On 13 July 2021, WAM Leaders Ltd ((WLE)) announced a pro-rata non-renounceable enti­tlement offer to raise up to $241.2m. Shareholders who participate in the offer will receive 1 new share for every 5 shares owned on the record date of 19 July 2021. Shares will be issued at a price of $1.44, equal to the pre-tax NTA as at 30 June 2021 and an 8% discount to the share price as at 12 July 2021. New shares issued will receive the fully franked final dividend of 3.5 cents per share. If there is any shortfall regarding the offer, the shares will be offered through a placement to professional and sophisticated investors.

MIR Maintains Final Dividend and Declares Special Dividend

Mirrabooka Investments Ltd ((MIR)) announced the payment of a final dividend for FY21 of 6.5 cents per share, fully franked, in line with the previous final dividend. The Company also announced the payment of a special dividend of 2 cents per share, fully franked, in addition to the final dividend, taking the total dividends for FY21 to 12 cents per share.

The entire dividend (final and special) will be sourced from capital gains, on which the Company has or will pay tax. The amount of the pre-tax attributable gain (“LIC capital gain”) attached to the dividend is 12.14 cents. The dividend will trade ex-dividend from 28 July 2021 and be paid on 17 August 2021.

CIE Changes Name to WCM Global Long Short Limited

Contango Income Generator Limited (CIE) announced that shareholders voted in favour of changing the name of the company to WCM Global Long Short Limited ((WLS)). Shareholders have also voted in favour of a buy-back of the 69.6% of shares owned by WAM at a price equal to the pre-tax NTA as at the close of 30 June 2021, less agreed transaction costs. The purchase price is subject to a possible adjustment based on the prevailing pre-tax NTA at the close of trade on 14 July 2021.

MHH to Restructure as an EMTF

Magellan High Conviction Trust ((MHH)) has announced its intention to transition from a closed-ended LIT to an Exchange Traded Managed Fund (ETMF), also known as an Active ETF. If approved at a unitholder meeting to be held in September 2021, the ETMF will employ the Single Unit (dual registry) structure that allows for investors to buy and sell units in the Fund either directly with the Responsible Entity (RE) or on-market through the relevant stock exchange.

QRI Raises a Further $12.7m

Qualitas Real Estate Income Fund (( QRI)) has raised $12.7m through a Unit Purchase Plan which closed on 29 June 2021. Units were issued at a price of $1.60 per unit. QRI units were trading at $1.62 per unit at the close of the offer. The new capital raised will be invested in accordance with QRI’s investment strategy. The new units commenced trading on 7 July 2021 and will rank equally with existing units.

With the completion of the Unit Purchase Plan, QRI has raised $66.7m in CY2021, through placements to new and existing unitholders.

WAR Commences Trading

On 28 June 2021, WAM Strategic Value Limited ((WAR)) commenced trading on the ASX at a price of $1.25 per share and 180m shares on issue.

The portfolio increased following the IPO with Templeton Global Growth Fund Limited ((TGG)) a positive contributor following the merger proposal with WAM Global Limited ((WGB)). Under the offer, TGG shareholders will have the option to receive WGB scrip consideration with an attaching option or cash consideration equal to the NTA after tax and transaction costs.

The portfolio would have also received a boost from the announcement of the restructure of MHH from a LIT to an ETMF, with the MHH unit price responding positively to the announcement.

Spotlight – WAM Global Limited (WGB)

WGB has just ticked over its three year anniversary since listing on the ASX. The Company listed in June 2018, raising $465.5m at IPO at an issue price of $2.20 per share.

WGB provides exposure to an actively managed, benchmark unaware portfolio of global securities, with a bias to small and mid-cap companies. The portfolio is relatively diversified with the portfolio typically comprising 40-80 stocks. The Company seeks to deliver capital growth over the medium-to-long term, deliver a stream of fully franked dividends and preserve capital. The Manager is able to hold up to 100% of the portfolio in cash. While it would be highly unlikely for this to happen, the investment style of the Wilson Asset Management cohort of LICs can result in high levels of cash holdings for extended period of times.

A key focus of all of the Wilson Asset Management LICs is providing a growing stream of fully franked dividends. WGB has achieved this in its short history, with the company paying an increasing fully franked dividend for each of the dividends declared to date. The Company announced a final fully franked dividend of 5 cents per share for FY21, a 25% increase on the final dividend in the previous year. This represents a dividend yield of 3.4% based on the share price at 30 June 2021. The Company had over 5 years of dividend coverage at the FY21 total full year declared dividend of 10 cents per share, based on the current number of shares and profits reserve at 30 June 2021.

For comprehensive comparative data tables for LICs please see attached.

Independent Investment Research, “IIR”, is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPOs. IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

INDEPENDENCE OF RESEARCH ANALYSTS

Research analysts are not directly supervised by personnel from other areas of the Firm whose interests or functions may conflict with those of the research analysts. The evaluation and appraisal of research analysts for purposes of career advancement, remuneration and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Research analysts do not report to, and are not supervised by, any sales personnel nor do they have dealings with Sales personnel

Evaluation and remuneration: The remuneration of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients.

INDEPENDENCE – ACTIVITIES OF ANALYSTS

IIR restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for corporate mandates on behalf of a Broker and are not permitted to prepare or review materials for those pitches. Pitch materials by investor clients may not contain the promise of research coverage by IIR.

No promotion of issuers’ transactions: Research analysts may not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer. For this reason, analysts are not permitted to attend “road show” presentations by issuers that are corporate clients of the Firm relating to offerings of securities or any other investment banking transaction from that our clients may undertake from time to time. Analysts may, however, observe road shows remotely, without asking questions, by video link or telephone in order to help ensure that they have access to the same information as their investor clients.

Widely-attended conferences: Analysts are permitted to attend and speak at widely-attended conferences at which our firm has been invited to present our views. These widely-attended conferences may include investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by Firm sales personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations. Analysts may also carry out preliminary due diligence and vetting of issuers that may be prospective research clients of ours.

INDUCEMENTS AND INAPPROPRIATE INFLUENCES

IIR prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within the Firm including management, which might be perceived to result in inappropriate influence on analysts’ views.

Remuneration and other benefits: IIR procedures prohibit analysts from accepting any remuneration or other benefit from an issuer or any other party in respect of the publication of research and from offering or accepting any inducement (including the selective disclosure by an issuer of material information not generally available) for the publication of favourable research. These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm’s general policies on entertainment, gifts and corporate hospitality.

DISCLAIMER

This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (“IIR”) (ABN 11 152 172 079), an corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report (the “Report”) and will receive fees for its preparation. Each company specified in the Report (the “Participants”) has provided IIR with information about its current activities. While the information contained in this publication has been prepared with all reasonable care from sources that IIR believes are reliable, no responsibility or liability is accepted by IIR for any errors, omissions or misstatements however caused. In the event that updated or additional information is issued by the “Participants”, subsequent to this publication, IIR is under no obligation to provide further research unless commissioned to do so. Any opinions, forecasts or recommendations reflects the judgment and assumptions of IIR as at the date of publication and may change without notice. IIR and each Participant in the Report, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any opinion contained in the Report is unsolicited general information only. Neither IIR nor the Participants are aware that any recipient intends to rely on this Report or of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether opinions or recommendations (if any) contained in this publication are appropriate to their investment objectives, financial situation or particular needs before acting on such opinions or recommendations. This report is intended for the residents of Australia. It is not intended for any person(s) who is resident of any other country. This document does not constitute an offer of services in jurisdictions where IIR or its affiliates do not have the necessary licenses. IIR and/or the Participant, their officers, employees or its related bodies corporate may, from time to time hold positions in any securities included in this Report and may buy or sell such securities or engage in other transactions involving such securities. IIR and the Participant, their directors and associates declare that from time to time they may hold interests in and/or earn brokerage, fees or other benefits from the securities mentioned in this publication.

IIR, its officers, employees and its related bodies corporate have not and will not receive, whether directly or indirectly, any commission, fee, benefit or advantage, whether pecuniary or otherwise in connection with making any statements and/or recommendation (if any), contained in this Report. IIR discloses that from time to time it or its officers, employees and related bodies corporate may have an interest in the securities, directly or indirectly, which are the subject of these statements and/or recommendations (if any) and may buy or sell securities in the companies mentioned in this publication; may affect transactions which may not be consistent with the statements and/or recommendations (if any) in this publication; may have directorships in the companies mentioned in this publication; and/or may perform paid services for the companies that are the subject of such statements and/or recommendations (if any). However, under no circumstances has IIR been influenced, either directly or indirectly, in making any statements and/or recommendations (if any) contained in this Report. The information contained in this publication must be read in conjunction with the Legal Notice that can be located at http://www.independentresearch.com.au/Public/Disclaimer.aspx.

Content included in this article is not by association the view of FNArena (see our disclaimer).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

AFI MHH MIR PIA TGG WAR WGB WLE WLS WMA

For more info SHARE ANALYSIS: MHH - MAGELLAN HIGH CONVICTION TRUST

For more info SHARE ANALYSIS: MIR - MIRRABOOKA INVESTMENTS LIMITED

For more info SHARE ANALYSIS: TGG - TEMPLETON GLOBAL GROWTH FUND LIMITED

For more info SHARE ANALYSIS: WAR - WAM STRATEGIC VALUE LIMITED

For more info SHARE ANALYSIS: WGB - WAM GLOBAL LIMITED

For more info SHARE ANALYSIS: WLE - WAM LEADERS LIMITED

For more info SHARE ANALYSIS: WLS - WCM GLOBAL LONG SHORT LIMITED

For more info SHARE ANALYSIS: WMA - WAM ALTERNATIVE ASSETS LIMITED