Australian Listed Investment Company Report – August 2021

Weekly Reports | Aug 03 2021


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.

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