Australian Listed Investment Company Report April 2022

This story features PENGANA PRIVATE EQUITY TRUST, and other companies. For more info SHARE ANALYSIS: PE1

Download related file: Monthly_LMI_Update_31_March_2022

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 Plus Rating for Pengana Private Equity Trust

Independent Investment Research has reaffirmed its Recommended Plus rating for Pengana Private Equity Trust ((PE1)). The Trust has performed strongly in its nearly three years since listing, delivering on its strategy to mitigate the J-curve nature of private equity returns through its investment across a range of private market strategies to deliver returns in the initial years of the Trust. The Trust provides access to a highly diversified portfolio of private market investments with the benefit of a regular distribution expected to be paid semi-annually. IIR views Grosvenor to be a highly experienced manager of private market investments with a strong track record across private market asset classes. Grosvenor has developed a sizable investment platform that provides it with unprecedented access to fund managers and co-investment opportunities in the private equity market which retail investors have access to through the Trust.

PE1 is seeking to raise up to $74m through a 1-for-5 Entitlement Offer. New units will be issued at a price of $1.54, which is the rounded up NAV per unit at February-end 2022. The capital raised will provide the Trust the ability to capitalise on opportunities arising from the current market environment, increase portfolio diversification and provide improved liquidity for investors. The Offer is scheduled to close on 31 March 2022.

PIMCO Launching First Australian Listed Investment Trust

PIMCO is seeking launch the PIMCO Global Income Opportunities Trust (Proposed ASX Code: PMX). The PDS was lodged with ASIC on 14 March 2022 with the Broker Firm and General Offer scheduled to close on 1 April 2022. Units are expected to commence trading on the ASX on a normal settlement basis on 21 April 2022.

The Trust is seeking to raise up to $502.5m (up to $703.5 with Oversubscriptions) through the issue of up to 250m (up to 350m with Oversubscriptions) at a price of $2.00.

The Trust seeks to provide attractive risk-adjusted returns and a regular income stream by investing predominantly in a portfolio of globally sourced fixed interest securities, which may include government and government-related debt, corporate debt, mortgage-related and other credit securities of varying maturities.

The Trust will have a distribution target of 4.75%-5.75%p.a. (net of fees and expenses). The Responsible Entity (PIMCO Australia Management Limited) has advised the market that given the recent market volatility, the Responsible Entity expects distributions to be in the upper half of the target distribution range (5.25-5.75%p.a.).

Argo Investments Limited ((ARG)) Raises $191.8m from Share Purchase Plan

ARG completed a Share Purchase Plan on 29 March 2022, with applications totalling $191.8m from 14,544 eligible shareholders. 20.63m new ARG shares will be issued on 31 March 2022 at the issue price of $9.30 per share. The capital raised will be invested in line with the investment strategy.

ECP Emerging Growth Limited ((ECP)) Seeing to Raise Up to $12.5m through Convertible Note Issue

On 4 March 2022, ECP announced it is seeking to raise up to $12.5m through a listed unsecured redeemable convertible note offer (the “Notes”). The Notes will have a price of $1.43 and will pay a fixed interest rate of 5.50%p.a., paid quarterly until the Step Up Date of 11 April 2025. The Step Up Date will be 3 years after the issue at which time the interest rate will increase to 6.50%p.a. in the event the 2 year Bank Bill Swap Rate (BBSR) is above 2.5859%. In the event the BBSR is not above this rate the interest rate will remain at 5.50%. The Notes will have a Maturity Date of 11 April 2027, at which point all outstanding Notes will be redeemed at face value.

The Notes will be convertible into ECP ordinary shares on a one-for-one basis (subject to adjustment for certain dilutionary and other capital transactions) during the conversion period, which will commence two years after issue and finish ten business days prior to the Maturity Date.

The Notes may be redeemed prior to maturity if a change of control event or tax event occurs. ECP may also redeem the Notes prior to maturity on the first Step Up Date or any subsequent interest payment date, or if a Clean-Up Event occurs at face value.

The proceeds of the Offer will be invested in the existing portfolio and used to pay the costs associated with the Offer. ECP believes the Notes provide the opportunity to grow the assets of the Company without diluting shareholder positions.

The Notes will be listed with the ticker ECPGA. The Offer is subject to shareholder approval which will be sought at the EGM scheduled for 6 April 2022.

PM Capital Asian Opportunities Fund Limited (PAF) Removed from ASX

During February, WAM Capital Limited ((WAM)) announced that it had succeeded with its off-market takeover offer for PAF. WAM compulsorily acquired the remaining shares of PAF to complete the acquisition and PAF was removed from the ASX on 28 March 2022.

Amcil Limited ((AMH)) Raised $10m through SPP

During the month, AMH announced that it had raised $10m through the Share Purchase Plan (SPP). Approximately 530 shareholders participated in the SPP, representing a participation rate of 16%. Shares were issued at $1.15 per share with new AMH shares issued on 9 March 2022.

Mirrabooka Investments Limited ((MIR) Seeks to Raise Capital through SPP

On 3 March 2022, MIR announced a Share Purchase Plan (SPP) Offer. Eligible shareholders will be able to invest up to $30,000 in MIR shares. The share issued under the SPP will be eligible for 50% of the final dividend that may be declared for FY22. As a result, shares issued under the Offer will trade under a separate code (MIRNB), until shares trade ex to the final dividend expected to be in July 2022.

Shares will be issued at the lower of $3.18 per share or by applying a 10% discount to the VWAP of MIR’s share price over the 5 trading days up to and including the day on which the SPP closes (scheduled to close 4 April 2022). Therefore, the maximum price for shares under the Offer is $3.18 per share

Bailador Technology Investments Limited ((BTI) Sells it’s Investment in SMI

On 11 Match 2022, BTI announced it had entered into an agreement to sell all of its interest in Standard Media Index (SMI) for approximately $20m. The sale price represents an uplift of approximately 67% to the current carrying value of SMI. The sale price is subject to final adjustments and the agreement is subject to certain conditions, including foreign investment regulatory approval.

BTI’s portfolio has performed strongly over the 12-months to 28 February 2022, with the pre-tax NTA (including dividends) increasing 23.4%. This compares to the 10.0% increase in the ASX All Ordinaries Accumulation Index over the period. Over the last six months, the pre-tax NTA has increased 17.3%, however the share price has declined 23.7%, resulting in the share price trading at a substantial discount to pre-tax NTA of 32.4% and a discount to post-tax NTA of 21.7% at February-end. The sell-off comes with a market correction in the Information Technology sector. The S&P/ASX 200 Information Technology Accumulation Index declined 28.5% over the six-month period. In its February monthly update to the market, the Manager reiterated that the BTI portfolio is conservatively valued, most the companies in the portfolio are cashflow positive or cashflow breakeven, all are well financed and the most recent investments have been in the health care sector. We note that SiteMinder remains the largest holding in the portfolio and the share price has experienced a continued decline in March which will have a negative impact of the March NTA, however this will be offset to some degree by the valuation uplift of InstantScripts that was announced on 31 March 2022. BTI has made a follow-on investment in InstantScripts of $7.7m on top of the existing $7.8m investment.

VGI Partners and Regal Funds Management Set to Merge

On 30 March 2022, VGI Partners ((VGI)) and Regal Funds Management (Regal) entered into a Merger Implementation Deed in relation to the merger of the two firms. On implementation of the merger, VGI will acquire 100% of the shares in Regal in consideration for the issue of new VGI ordinary shares. Immediately following the merger, VGI shareholders will represent approximately 33.3% of the merged entity and Regal shareholders will represent the remaining ~66.7%. VGI will remain listed however will seek to be renamed post the merger and a new ticker assigned.

The merger is subject to VGI shareholder approval. The VGI Board intend to unanimously recommend that VGI shareholders vote in favour of the merger, in the absence of a superior proposal, to create a market-leading alternative investment manager.

Post the merger, Phillip King (Co-Founder and CIO of Regal) will hold approximately 43% of the shares on issue and Robert Luciano will hold approximately 20% of shares on issue. Neither Phillip nor Robert will be on the Board of the merged entity allowing them to focus on their investment roles.

The total consideration payable by VGI will be the issue of 139,612,338 new VGI shares to Regal shareholders, which equated to a value of $614.3m based on the share price of VGI at the close of the date of the announcement.

VGI believes the merger will provide benefits for VG1 and VG8 with key investment staff able reduce non-investment related activities and the ability for the VGI team to leverage Regal’s experience and expertise in Asia.

We view the merger to be a positive, particularly for VGI, with VGI able to leverage the distribution platform and investment expertise of the Regal investment team.

Resignation of Portfolio Manager of Perpetual Loan Fund

On 29 March 2022, the Perpetual Credit Income Trust ((PCI)) announced that the Portfolio Manager of the Perpetual Loan Fund and Head of Corporate High Yield, Anne Moal, has resigned and will be leaving on 10 June 2022.

Anne’s responsibilities will be transitioned to Michael Korber, the Portfolio Manager for PCI. Michael will continue to be supported by the broader credit and fixed income team.

Head of Investments at Clime Asset Management Moves On

After the completion of Clime Asset Management Limited’s ((CIW)) investment in Ralton in January 2022, Will Riggall was appointed as the Chief Investment Officer of the Manager. This resulted in the previous Head of Investments, Adrian Ezquerro, moving on from the Manager. Will is also the CIO of Ralton Asset Management and has over 15 years’ experience in funds management.

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.

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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.

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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.

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