Forum Topics WMI WMI WMI Valuation
8 months ago

Hi @TycoonTerry - I'm not sure why WAM Microcap (WMI) rose +10 cents (+6.71%) today. They may have been tipped by a subscription service like one of TMF's services, or another service. They haven't been tipped by any that I subscribe to. I do know that the boss has been buying shares on-market this month - see here: Change-of-Directors-Interests-Geoff-Wilson-16-March-2023.pdf and that WMI was mentioned in a blog by Tristan Harrison at TMF last week - 2 exciting small cap ASX shares to buy for market-beating growth: expert (

...although the two tips in that report (the "2 exciting small cap ASX shares to buy for market-beating growth") are actually two companies held by WMI, not WMI itself, WMI being a LIC (Listed Investment Company).

In terms of what they hold, I've highlighted their top 20 positions below (in the blue square) as at 28th Feb:


Since then they've:

Of those 4 companies, three were already in WMI's top 20 (on Feb 28, as shown above), but GDG (Generation Development Group) was not, however the 6.88% of GDG that WAM (Wilson Asset Management) hold is spread across 4 of their funds, being WMI, WAX (WAM Research), WAM (WAM Capital) and Botanical Nominees Pty Limited ATF Wilson Asset Management Equity Fund, and GDG itself is a $238m microcap company, so 6.88% of that is only just over $16m ($16.37m). So WMI might hold somewhere between $1m and $2m worth of GDG - the bigger funds tend to hold more, and WAM Capital (market cap of $1.73 billion) is 5.5 times (five and a half times) bigger than WMI (a $313m fund). Even if WMI held as much as $4m worth of GDG, I doubt that would be enough to get GDG into WMI's top 20. I estimate that the average market value of each of WMI's top 20 positions would likely be between $8m and $16m so a mid-point of around $12m, allowing for the NTA-premium in their share price, and assuming that their top 20 positions would not represent any more than around 80% of their entire fund's market value. Of course there might be some much larger positions in there and some smaller ones, and GDG might just scrape in to WMI's March 31 top 20 positions, but I doubt it.

WMI is one of WAM Funds better LICs, because their Profit Reserve (from which their dividends are funded) has enough in it for 5 years worth of dividends based on their last 12 months of dividend payments:


Their flagship fund (WAM Capital: ASX:WAM) has less than 12m worth of div's, and WAA has just over a year's worth, WAR has 2 years, WGB has 3.5 years, WMA and WAX both have 4 years, WLE has almost 5 years, and WMI has over 5 years worth of dividends in their profit reserve.

Those LICs with healthy profit reserves are likely to see their dividends being increased each year - which is one of the aims of WAM Funds - to provide a growing stream of fully franked dividends to their shareholders. I would expect that the dividends would all be gradually increased as long as the respective profit reserves had 3 or more years worth of dividends in them.

Looking backwards, WAM Capital's dividend has been maintained since 2018, being the last year they increased their dividend (because they have bugger all in their profit reserve), while WAM Microcap's interim dividend has increased every year since 2018 and their final dividend has increased every year since 2018 except for one, being 2022. The LIC with the second best profit reserve, WLE, has increased their dividends EVERY year:




So profit reserves here can be a reasonable indicator to what you might expect in relation to dividends from these LICs; They certainly do indicate whether the current dividend yield is sustainable or not. And the dividends of WMI, WLE, WAX, WMA and WGB are definitely sustainable for the next 3 to 4 years at least.

The downside is that a few of these LICs are trading at significant premiums to their NTA (net tangible asset backing) - as shown in the "LIC Snapshot" slide (where I have circled all their profit reserves). You can see on that slide all of the NTA's as at 28th Feb versus their share prices on March 13th. WAM and WMI are trading at significant premiums while WAX is trading at a rediculous premium (of circa +36.8%).

WLE is trading close to parity, while WGB, WMA and WAR are all trading at various discounts to their respective net tangible assets. WGB is at an NTA-discount because it's a global share fund, and pretty much all LICs full of global (ex-Australia) shares trade at significant NTA-discounts at this point (and it's been like that for some time now), WMA is trading at a discount due to the nature of their assets (alternative assets, with water rights being just one example) and the fact that is often hard to get comfortable around the valuations of some of those assets (as opposed to traded companies where the market value is displayed for everybody to see every trading day), and although WMA now hold a lot of cash, it's unclear what they are going to invest that cash into, and WAR is trading at a discount because they're an activist fund that tends to hold other LICs and funds that are already trading at NTA-discounts themselves, and Geoff hasn't demonstrated a great track record of closing those NTA gaps on many of those funds since WAR added them to their portfolio. He has a good record of achieving positive shareholder outcomes in similar situations in the past, but not so much since he started doing it via this LIC (WAM Strategic Value: WAR).

But back to your question: No, I don't know why WMI rose +6.71% today @TycoonTerry - sorry.

WMI do not have any Subs (substantial shareholders) listed for them, so we could probably safely assume that Geoff Wilson himself (the founder of WAM Funds - Wilson Asset Management, and the boss of the management company, and the Chairman of 7 out of the 8 LICs that they manage, including WMI, and a director of WMA - the only LIC where he is not the Chairman) is probably WMI's largest shareholder, or one of them, and he was buying more WMI earlier this month (as I mentioned at the top of this post), but otherwise... no idea really.

It wasn't me. I like WMI, and their increasing dividends, but not enough to pay around 15% to 20% above their NTA for their shares. Their NTA could now be higher or lower than it was at the end of Feb (when it was $1.33 before tax, and $1.34 after tax - which suggests to me that they may currently be sitting on slightly more unrealised losses than unrealised gains) but their share price is now $1.59, so they ain't cheap. I also only like about 25% (one quarter, or five) of their top 20 positions, so that's another reason I'm steering clear of them at this point.

2 years ago

Hi @Llati

I hold WMI in the long term set and forget part of my real life portfolio.

I buy across my holdings once a month and aim to top up where a particular position is underweight. I am using the strawman valuation feature as an easy reference point for price vs recent NTA announcements.

Based on this I don’t particularly look at other valuation methods beyond comparison to NTA, (which can be adjusted slightly based on market movements between announcements) and try to align topping up my position where the share price is close / below the NTA.

There could be potential to prescribe a higher value to the price based on an assumed level of performance or dividend payouts, and the Wilson Asset LICs tend to trade at a premium for this reason but I can’t provide much insight here. I know @Bear77 holds this LIC and may be able to help out on this front.