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Consensus community valuation
$1.430
Average Intrinsic Value
12.2%
Undervalued by
Active Member Straws
#Reports
Last edited 4 months ago

04-Feb-2020:  The WAM Microcap (ASX: WMI) Board of Directors announced today a 311.9% increase in operating profit before tax to $27.3 million and a 333.1% increase in operating profit after tax to $19.7 million in its FY2020 half year results*. The Board also announced a fully franked interim dividend of 3.0 cents per share, representing a 33.3% increase on the prior corresponding period and currently representing an annualised fully franked dividend yield of 4.2%**.

The fully franked dividend has been achieved through the strong performance of the investment portfolio since inception and the profits reserve available and is consistent with the Company's investment objective of delivering investors a stream of fully franked dividends. The Company's profits reserve is currently 28.3 cents per share and forms a part of the net tangible assets.

*The HY2020 profit figures are unaudited. Audited half year results will be announced to the market in February 2020.

**Based on the 3 February 2020 share price of $1.435 per share.

[taken from email sent out this morning by Geoff Wilson to WMI shareholders and others on their mailing list]

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#Valuation
Last edited 4 months ago

Just to add to the valuation straw just posted by #CamSmedts34

Firstly, good post.  Plenty of excellent points there.  It's no biggy, but Martin Hickson no longer works for Geoff Wilson or Wilson Asset Management Group (WAMG).  Marty left before the last WAM & FG Funds roadshow (which occurred in November 2019).  I spoke to Oscar Oberg in November and he is now the sole portfolio manager of WAM, WAX, WAA & WMI, while Matt Haupt is the lead PM of WLE and Catriona Burns is the lead PM of WGB.  Oscar said that Geoff has stepped back from portfolio management and with Chris Stott, their previous CIO (Chief Investment Officer) leaving and now starting up his own firm, the everyday portfolio management decisions are really left up to Oscar, Matt & Catriona, who have their own support teams of course.  Geoff has also recruited a new guy with plenty of experience in managing alternative assets to manage their new Alternative Assets LIC, which will be their 7th LIC.  Initially it will be the BAF assets that were previously managed by Blue Sky (BLA).  Management of BAF is in the process of being transferred to WAMG currently.  This has been announced by the BAF board to the ASX and I have spoken to one of the members of the BAF board - Miles Staude - who has confirmed that to me also.  BAF was trading at a 22% discount to their NTA when I last checked (last week), so you would also expect that to narrow once its management has fully transferred to WAMG and they start to promote the fund.  I currently hold BAF, WAM, WLE & WGB, and have held WMI, WAA & WAX in the past, and probably will again.

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#Valuation
Added 4 months ago

Thanks for cleaning my mess there #Bear77. I only went in to refresh the straw I posted last June and noticed an errand comma that I thought I might fix while nobody looking - I guess now it appears as a recently updated post haha. Appreciate the commentary, super valuable to have insight from somebody actually speaking to those within the company!

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#Valuation
Last edited 4 months ago

If you think that you can allocate funds better than Wilson as a part-time investor, chances are you're wrong.

Wilson Asset Management has been operating LICs on the ASX since August 1999 with the listing of its flagship fund WAM Capital (ASX: WAM). Lead by chairman and CIO Geoff Wilson, WAM has fast become one of Australia's largest LICs, managing $1.3b in funds and returning 16.7% per annum since inception. Geoff Wilson is best known for his unashamed love of paying returns to investors in the form of generous fully franked dividends. 

The WMI portfolio, like WAM's is now lead by Martin Hickson and Oscar Oberg. Since inception in June 2017 the fund has returned 18.1% per annum and currently offers a fully franked dividend yield of 4.5%. With just $186m under management WMI is able to much more freely trade illiquid stocks than its ASX200 focussed counterparts, reminiscent of Wilson’s original strategy with WAM.

I think that any risk of WMI underperforming its benchmark over the long term is minimal, however 1 key risk is that constituents of the benchmark itself, the ASX Small Ords index will underperform their blue-chip counterparts. Given the rise and rise of the SMSF (usually offering investment only in ASX200 or ASX300 companies), it is entirely possible that this theme could play out for years to come. Australia’s current distribution of wealth with respect to age (and an overall aging population) could contribute to this, as could the long-term rise of interest rates drawing investment away from (typically higher growth) small-cap stocks.

Another risk to WMI is the death of the LIC structure itself, corresponding to the well documented rise in the popularity of ETFs, however I believe herein lies the opportunity. Many LICs that find themselves performing broadly in line with or trailing their index benchmarks are struggling to attract and retain shareholder funds due to the automated, lower fee structure of ETFs, however I think Wilson’s long-term outperformance of its benchmarks will protect its funds from this theme.

The premise behind ETFs is that they will replicate the performance of some underlying benchmark. As such, these funds have found an innovative way to mitigate the impact of supply/demand of the fund itself whereby new units will be issued or existing units removed from quotation in order to preserve the close link of the fund’s performance to that of its benchmark. LICs do not operate in this manner and have only a limited number of units on issue, opening the WMI share price to outperformance due to limited liquidity throughout periods of high demand. It is worth noting that many of Wilson’s funds have traded at up to a 20% premium to NAV for extended periods in recent years and the underlying outperformance of the funds themselves should keep demand for the fund managers’ expertise in vogue.

Illiquidity is a powerful cause of inefficiency in capital markets and, in this case, it presents an opportunity for entry into a cleverly managed pool of assets where the notion of underlying value is relatively prescriptive. Potentially, there is some leverage to overall market conditions, however, Wilson have proven their ability to change strategy as required through challenging conditions both throughout the GFC in 2008-2009 as well as the end to the mining boom in late 2013.

At approximately 4% - 7% based on this last week’s trading, I think the current discount to NAV as well as the long-term performance of the entire Wilson stable of funds points to a compelling risk-reward trade off for WMI.

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#Business Model/Strategy
Last edited 4 months ago

http://wilsonassetmanagement.com.au/2018/10/08/wilson-asset-managements-new-partnership-rises-from-slater-gordon-debacle/

That story (link above) is about the partnership between Martin Hickson and Oscar Oberg, who have been given the keys to Wilson Asset Management’s small caps strategies; the listed funds WAM Capital (ASX:WAM), WAM Research (ASX:WAX), WAM Microcap (WMI) and WAM Active (WAA), and an unlisted fund, worth about $2 billion combined.

Geoff Wilson is still involved, but Hickson and Oberg are the lead portfolio managers who run those funds now, under the watchful eye of Wilson Asset Management's CIO (Chief Investment Officer) Chris Stott.  


Disclosure:  I hold shares in WAM, WAX & WAA, but not WMI currently.  I have held them in the past and did participate in the WMI IPO, and did very well out of that investment.


16-Jan-2019:  Additional:  Chris Stott, previously the CIO (Chief Investment Officer) at WAMG (Wilson Asset Management Group), and CIO of all of their LICs (including WMI) has now retired.  He's still on the board of WMI - as a director - as well as WAM Capital (WAM) - but has resigned from the boards of WLE, WAA & WAX, and doesn't work for WAMG any longer on a day-to-day basis.  Martin and Oscar are pretty much running the show there now, as far as WMI, WAA & WAX go at least.  WLE and WGB have their own teams.  I still don't own any WMI at this point in time, but I do hold some WGB, WAM, WAX, WAA and WLE shares currently.

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#Media
Last edited 6 months ago

http://www.livewiremarkets.com/wires/wilson-the-return-of-global-growth

That's a link to a 23rd May 2019 article published this week on Livewiremarkets.com (Livewire) in which Geoff talks about what has happened over the past 6 months to turn him from being ultra-bearish to now moderately bullish ("My prognosis was wrong"). 

Each of Geoff's lead PMs (portfolio managers) also talk about their own views and discuss some individual holdings that they have within their own portfolios and why they like them (and why they hold them).  Those PMs are Catriona Burns (responsible for WAM Global, WGB), Matt Haupt (WAM Leaders, WLE), Oscar Oberg (WAM, WAX & WMI) and Martin Hickson (WAM, WAA & WMI).  [Note: Oscar is the PM of WAX - WAM Research, Marty is the PM of WAA - WAM Active, and they jointly manage WAM & WMI - WAM Capital and WAM Microcap]. 

Geoff is the CIO (chief investment officer) with the overall responsibility for the performance of the 6 LICs that they manage, but Geoff's role is more hands-off nowadays, having set up the investing framework, philosophy and rules, he sits in on the weekly meetings and monitors their progress, but he mostly leaves the stockpicking to those 4 now.  He has other things that keep him busy, like media and takeovers.

Their previous CIO, Chris Stott, has recently retired, but is still a director on the board of a couple of those LICs.

This Livewire article is mostly distilled from the presentations given at the recent WAM Roadshow that has been happening over the past fortnight around Australia's largest cities, but it's presented in a nice, easy-to-follow way, and does contain a couple of additional bits that have been added in.

 

Disclosure:  I currently hold WAM, WAA, WAX, WLE and WGB.  I have also held WMI in the past, and may well do so again in the future.  I've become a little concerned with the performance of Oscar and Marty since Chris left, especially over the December-January period when they seriously underperformed, especially with WAM & WAX.  I'm happy enough with Catriona and the WGB portfolio, and I think Matt is doing a good job with WLE, which is my largest holding currently.  It's interesting that the two Wilson LICs that I'm most bullish about (WLE & WGB) are both trading at NTA-discounts, while the ones trading at NTA-premiums are the ones that have performed the worst (WAX & WAM) more recently - and the ones I hold the least amount of shares in currently.  I sold most of my WAM & WAX - and all of my WMI - earlier last year when they were still trading at NTA-premiums of over 20% in the case of both WAX & WAM and I can't remember what WMI's NTA-premium was, but it was significant.  Those premiums have all since reduced significantly.  Ideally, buy good quality LICs when their outlook is bright, they have tailwinds, and they are trading at NTA discounts.  I would argue that only two of Wilson's six LICs tick all those boxes currently.

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#Company Presentations
Added 6 months ago

19-Nov-2019:  November 2019 Shareholder Presentation

Note: This Presentation is related to the WAM Group (WAM Funds) + FG (Future Generation) Funds November 2019 Australian Roadshow (which I'll be attending here in Adelaide next Wednesday) and covers all of WAM Group's 6 LICs:  WAM Global (WGB), WAM Leaders (WLE), WAM Capital (WAM), WAM Research (WAX), WAM Microcap (WMI) and WAM Active (WAA).

This one is for the Sydney leg of the roadshow, which includes their AGMs, but similar Presentations will be made at all of the venues they attend during the roadshow over the next couple of weeks.

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#Reports
Last edited 7 months ago

March 2019 Report for all the Wilson LICs - including WMI - see here.

WMI had a pre-tax NTA of $1.27 on March 31st.

 

September 2019 Report for WMI and the other Wilson LICs - see here.

WMI had a pre-tax NTA of $1.43 on September 30th.

WMI's outperformance against the ASX Small Ordinaries (ASX:XSO) Accumulation index is +3.1% in September, +10.4% over 3 months, +14.8% over 6 months, +10.1% over the year to September 30, and also +10.1% per year since inception (June 2017).  All positive ourperformance, hard to achieve for a micro-cap fund, especially since Oscar and Marty went to cash towards the end of calendar 2018 and missed the start of the rally in January 2019, so had substantial underperformance (-3.9%) against their benchmark index (XSO Accumulation index) in January.  They've staged a good recovery from there.  Marty has followed Chris Stott out the door, and it looks like Oscar Oberg is now the sole PM for WMI (WAM Microcap), WAM (WAM Capital), WAX (WAM Research) & WAA (WAM Active).  Matt Haupt and John Ayoub are still running WLE (WAM Leaders fund, the large-cap fund), and Catriona Burns is still in charge of WGB (WAM Global).  Geoff watches over them all of course but he has other priorities as well these days (philanthropy, protecting franking credits - and activism mostly it would seem, as well as spending time with family and smelling the odd rose, plus promoting healthy eating and how a healthy gut positively affects mental health).  I have shares in WAM, WAX, WLE & WGB, and it looks like this ex-dividend period might be a good time to get back into WMI.  The WAM funds often fall by more than the grossed up value of their dividends in the fortnight following their ex-div dates, as some people rotate into something else, and WMI went ex-dividend on October 7th (along with WAX & WAA).  WGB & WLE went ex-div on 11th October, and WAM (WAM Capital) went ex yesterday (17th October) so we're in that "ex-div" period now.

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