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#Monthly Reports
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#Results/Dividend/Options
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17-Feb-2021:  Interim Results Update, Dividend and Bonus Options Issue   plus   Appendix 4D and 2021 Half Year Results

Also:  16-Feb-2021:  Weekly NTA 12 February 2021

Interim Results Update, Interim Dividend and Bonus Options Issue

  • Strong investment performance: 14.8% portfolio return for the half
  • Commencement of fully franked dividends: Interim dividend of 2.0 cps fully franked
  • Attractive dividend reinvestment terms: 3% DRP issue price discount
  • Bonus options issue: 1 for 3 bonus options exercisable at $1.50 per option by 31 August 2022

Half Year Results

WCM Global Growth Limited (WQG or the Company) today announced an outstanding result with net operating profit after tax for the half-year ended 31 December 2020 of $27.21 million.

The strong profit result reflects continued investment outperformance of the Company’s Portfolio Manager, WCM Investment Management LLC (WCM). The portfolio has delivered a return of 14.8% over the reporting period, outperforming its benchmark the MSCI All-Country World ex-Australia Index by 3.5%.

For the half-year ended 31 December 2020, the pre-tax net tangible asset value per share of the Company has increased from $1.45 as at 30 June 2020 to $1.65, after payment of a 2.0 cents per share dividend (50% franked) on 30 September 2020.

Fully Franked Interim Dividend of 2.0 cps

The Board is delighted with the progress made in relation to the Company’s dividend policy. Dividends were commenced in August 2019 and in September 2020 WQG commenced partial franking of dividends, together with the implementation of a Dividend Reinvestment Plan (DRP).

The Company has further enhanced its dividend policy and is pleased to announce the commencement of fully franked dividends, where possible, with the declaration of an interim dividend of 2.0 cents per share which will be 100% franked. The interim dividend will be paid on 31 March 2021, with a Record Date of 19 March 2021.

It is expected that any FY2021 final dividend will also be fully franked.

Bonus Options Issue

The Company is pleased to advise that the Board has resolved to issue bonus loyalty options (Options). These Options will be issued on a one (1) for three (3) basis and allow holders to subscribe for new shares in the Company at a fixed exercise price of $1.50 per share.  The exercise period will run until 31 August 2022 and the Options are expected to list on the ASX under the code “WQGOA”.

The issue of the Options as a bonus, at no cost to shareholders, rewards the loyalty and ongoing support of the Company’s existing shareholders.

Shareholders should note that new shares issued pursuant to the DRP for the interim dividend will be eligible to receive the 1 for 3 bonus Options issue.

--- end of excerpts ---

--- click on the links at the top for more, including all of the Key Dates for the dividend and the options ---

I note that the NTA of WQG as at 12-Feb-2021 (5 days ago) was $1.75, so issuing options at $1.50 is an interesting move and will obviously cause significant dillution unless the share price drops below $1.50 and very few options are exercised.  WQG closed at $1.59 this afternoon.

On the plus side, at least it's only a 1 for 3 issue of options, rather than the 1 for 1 issue that WAM Global (WGB) have proposed.  I'm a big fan of WCM (in Laguna Beach, California) who are the investment managers of this fund, but not so much Contango (ASX:CGA) who manage the marketing and shareholder relations aspects of the fund here in Australia.  I know a lot of shareholders like free options, but I don't like to see them issued when they mainly serve to increase the FUM and therefore the fees generated for the managers, while dilluting the NTA or NAV.  Good for those who exercise them at a discount to the prevailing share price, but not good for those who choose not to.  One possible outcome is that these options could act like an anchor through until their expiry in August 2022 because WQG shareholders can and will sell existing shares on-market to cover the cost of exercising their options at $1.50, as long as the prevailing price is north of $1.50.  The higher the WQG share price tries to go, the more likely people will sell shares to fund their options conversion.  Which is likely to put a ceiling of sorts on the SP.

[I hold WQG shares.]

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Valuation of $1.830
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Added 3 years ago
Latest updates are at the bottom - scroll down... March 2020: WCM Global Growth (ASX: WQG) reported their end-of-Feb-2020 pre-tax NTA this morning as being $1.369. And that's with all of the falls we experienced in the last week of Feb priced in. WQG closed yesterday at $1.135, being a 17% NTA-discount. I hold WQG. They focus on sustainable competitive advantages with global (ex-ASX) companies, and they're particularly interested in positive company culture that reinforces and facilitates those competitive advantages. Some call these competitive advantages "moats". WCM Investment Management (who manage WQG for Contango here in Australia) are based in Laguna Beach, California (far from Wall Street) and their focus on "moats" is a little different, in that they are only interested in companies who have significant "moats" that are increasing, not staying the same or shrinking. They believe that the right company culture is key to sustaining a growing moat. WCMIM is majority employee-owned and manages in excess of A$69 billion (as at 31 December 2019) of assets on behalf of institutional and retail investors around the world including Australia. Their ASX-listed LIC, WQG, has traded at a persistent NTA-discount, despite WCM's outstanding performance over multiple time-frames. They recently commenced paying dividends, which are unfranked because they make all of their money outside of Australia. Excellent manager, and a LIC that has performed very well, but is certainly under the radar of most investors here in Australia. 01-Sep-2020: Contango have done a reasonable job of raising the profile of this LIC somewhat, and the SP has risen +20% over the last 12 months, and +14.5% over the past 6 months (since March 1st). However, WQG is still trading at a 12.8% discount to last Friday's $1.525 before-tax NTA (on 28-Aug-2020) and that's using their closing share price on the same day. They closed today at $1.30, which is a 14.8% discount to last Friday's NTA. I'll admit that trading at NTA discounts is par for the course for globally-focussed LICs here in Australia at the minute, but this one is a particularly well managed fund, which has been doing very well. Their benchmark is the MSCI ACWI ex-AU (All-Country World Index ex-Australia), and they have outperformed that index over every conceivable time frame: PERFORMANCE(*) (after management fees): TIME PERIOD, WQG PORTFOLIO, MSCI ACWI (ex-AU), VALUE ADDED(***) 1 Month, 3.74%, 1.57%, 2.17% 3 Months, 11.48%, 3.60%, 7.88% 6 Months 10.17%, -5.99%, 16.16% 1 Year 20.20%, 4.09%, 16.11% 3 Year (PA) 22.62%, 7.90%, 14.72% Inception(**) (PA) 22.52%, 11.73%, 10.79% Notes: 1. (*) Portfolio return is calculated before expenses and after Investment management and performance fees are paid. The company’s operating bank account balance is excluded from the portfolio value. 2. (**) Inception date is 21 June 2017. 3. (***) Value Add equals portfolio return minus benchmark return. I hold WQG shares, and have done for a couple of years now. VERY happy with them. The fund is managed by WCM Investment Management who are based in Laguna Beach, California, and they have a unique approach, focussing strongly on expanding moats backed by well aligned company culture. They spend a lot of time examining the corporate culture of each company they look at to see that the culture is aligned with growing the company's competitive advantage(s) - i.e. their moat (as Warren Buffett refers to it). They have to have a good and aligned culture, AND they have to have a substantial and GROWING moat. For more info: https://wcminvest.com/ https://wcminvest.com/our-firm https://wcminvest.com/quality-global-growth I'll also try to create a straw with an uploaded slide presentation, but I don't know if it will work because it's a rather long Powerpoint presso. At the end of July, the WQG portfolio's top ten positions were: Shopify 5.56% West Pharmaceuticals 5.13% MercadoLibre 4.92% Stryker Corp 3.78% Taiwan Semiconductor 3.78% Visa Inc 3.56% Tencent Holdings 3.44% lululemon athletica 2.92% Thermo Fisher Scientific 2.73% Crown Castle International 2.67% Total 38.49% 21-Jan-2021: Update: WCM Global Growth LIC (ASX:WQG) had a pre-tax NTA on 15-Jan-2021 of $1.675 (their after tax NTA was $1.485.) Their share price closed that day at $1.695, so at a very small premium to their pre-tax NTA. I bought shares in WQG when they were trading at a 20%+ discount to NTA, and the investment thesis was that their persistent outperformance would drive the SP higher and the gap would close, and they could potentially trade at an NTA premium - because of their very high quality and performance. That has played out nicely. The LIC sector has recovered a fair bit from 2019 and early 2020 when big NTA discounts in the share price were very common, however, on the whole, most GLOBALLY focused LICs are still trading at decent discounts. WQG is one of the few ASX-listed global LICs that HAVE moved to an NTA premium. I would consider selling if the NTA premium was over 20% but that's a fair way off from here, if it happens at all. Meanwhile, the capital gains keep building and they are now paying dividends as well. WQG is a quality exposure to overseas shares, particularly as they focus on company cultures that provide and support growing competitive advantages (moats). That's the main difference with WCM - who manage WQG (out of Laguna Beach, California, USA). They have a very strong focus on GROWING moats and on company cultures that support and facilitate those growing moats. Much more focus on those two factors than any other funds management team that I've come across. Edit: The WQG share price (SP) has come back down to around $1.64, so there's probably a small discount in their SP once again, rather than the premium they were at on Friday last week (15-Jan-2021). That will depend on their portfolio value movement during the past 3 trading days, but it looks like they are still mostly trading at around NTA or slightly below, rather than at a premium, on most trading days. It seems last Friday was an exception. More here: https://contango.com.au/funds/wqg/ TOP TEN PORTFOLIO HOLDINGS WCM GLOBAL GROWTH (%) as at 31-Dec-2020: MercadoLibre 6.05% Taiwan Semiconductor 4.30% Shopify 4.13% Stryker Corp. 3.88% West Pharmaceuticals 3.64% Visa Inc. 3.31% LVMH (Moet Hennessy Louis Vuitton) 3.28% Amphenol Corp. 3.15% Tencent Holdings 3.09% First Republic Bank 2.94% Total 37.77%, i.e. those top 10 positions add up to 37.77% of the WQG portfolio (or did on 31-Dec-2020). Update: Saturday 24th July 2021: "WCM Global Growth Limited (ASX:WQG) advises that the estimated unaudited Net Tangible Asset backing (NTA) per share of the company as at 16 July 2021 was $1.83/share before tax, $1.60/share after tax," and the SP closed that day at $1.59/share. $1.83 is therefore my new valuation for WQG, which I hold. On Monday 12th July, Marty Switzer (one of their directors) wrote: "The Company is delighted to announce that the WCM Global Growth Limited (WQG) investment portfolio has delivered a return of 26.8% for the year ended 30 June 2021. This return was achieved notwithstanding a pronounced market rotation away from growth towards value and low-quality factors during the March 2021 quarter." "The portfolio has maintained its two year, three year and since inception outperformance for the year ended 30 June 2021." "Since inception in June 2017, the portfolio has achieved a compound return of 20.9% per annum compared with the benchmark MSCI All-Country World ex-Australia Index return of 14.3% over the same period." "WQG’s portfolio is managed by WCM Investment Management (WCM), a California-based investment management firm specialising in active global and emerging market equities. WCM's investment process is based on the belief that corporate culture is the biggest influence on a company's ability to grow its competitive advantage or 'moat'." At 30-June-2021, their top 10 portfolio positions were: Stryker Corp. (4.88%) Shopify (4.88%) West Pharmaceutical Services (4.17%) LVMH (Moet Hennessy Louis Vuitton) (3.81%) Sherwin-Williams (3.80%) MercadoLibre (3.63%) Thermo Fisher Scientific (3.45%) First Republic Bank (3.33%) Taiwan Semiconductor (3.31%) Visa Inc. (3.25%) Total: 38.51% (i.e. their top 10 positions represented 38.51% of their portfolio). Their Sector weightings were: Information Technology 26.95% Health Care 19.38% Consumer Discretionary 17.84% Financials 10.24% Industrials 9.65% Consumer Staples 6.07% Materials 3.80% Cash 3.15% Communication Services 2.92% Total: 100.00% Disclosure: I hold WQG shares in RL and they are also in my Strawman.com virtual portfolio.
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