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June 2019: SNC's before-tax NTA (ex-div) on May 31st was 95.07 cents per share. As a LIC (listed investment company), the NTA is the market value of the portfolio of investments that SNC hold, which is regarded as the real value of the LIC. SNC typically trades at a discount to their NTA and that discount is currently around 12 to 13%.

Sandon Capital Investments is a specialist ‘Activist’ LIC, managed by Sandon Capital. Sandon Capital devises and implements activist shareholder strategies that seek to unlock value inherent in securities held in their investment portfolios. Through active engagement with the target company, Sandon Capital seeks to release the embedded value for shareholders. Target companies are likely to be in the small to mid cap market segment. Sandon Capital has successfully employed its Activist investment strategy since September 2009. The wholesale Sandon Capital Activist Fund’s investment performance since inception is 11.8% p.a. (after all fees and expenses).

SNC currently pay 7c per year in dividends - fully franked - (3.5c FF, twice a year, for the past couple of years), and based on the current 83c share price (05-Jul-19), that puts them on a dividend yield of 8.4%, plus franking.

Update: 20-Oct-2019: SNC BT NTA at Sep 30 was $0.9656, hence the update to their valuation. They also now own 100% of MVT (Mercantile Investment Company, another LIC), which will now be delisted. SNC is therefore now a bigger LIC which increases their relevance in the market. They released a good Shareholder Presentation on October 14th, which can be viewed here: https://www.asx.com.au/asxpdf/20191014/pdf/449gb6jwdpc7bx.pdf

20-April-2020: Update: SNC have spent most of the past year trading between 80c and 90c, then got smashed down to as low as 47c on March 23. They've since recovered +62.8% from that low point to close today at 70c. Their March 30 before tax NTA was 74.38c, down -18.1% for the month of March, but it would be higher now after a couple of good weeks in the first half of April. I've reduced my exposure somewhat on my Strawman.com scorecard today, because the NTA gap has closed significantly, but they're still one of my larger holdings in my main income/trading portfolio, mostly due to the high dividend yield. I also like a lot of their exposures - meaning the companies they are invested in. Not all, but most. Last week (April 15) they held a shareholder conference call and released this Shareholder Presentation: https://www.asx.com.au/asxpdf/20200415/pdf/44gyl3skbc6ptx.pdf

In that presentation, which first looks at the macro backdrop and then focusses on the SNC portfolio, they disclose their top 10 positions, and then devote a whole page (slide) to each one of those, explaining what each company does, the financial status of each company (including debt levels), and the "End Market Exposures & COVID-19 impact" concerning each of those top 10 holdings - which are:

1. Spectra Systems Corp. (10.2% of the SNC portfolio)
2. Fleetwood Corporation Ltd (8.4%)
3. Foundation Life (6.0%)
4. MG Unit Trust (5.7%)
5. Consolidated Operations Group Ltd (5.0%)
6. CM Capital Venture Trust 4 (4.9%)
7. Iluka Resources Ltd (4.6%)
8. Yellow Brick Road Ltd (3.9%)
9. OneMarket Ltd (3.5%) and
10. Coventry Group Ltd (3.2%).

They also mention 3 other positions, being:

• Stanmore Coal Ltd (ASX:SMR) ~3.0% of portfolio [SMR received an unsolicited takeover offer from Golden Investments at $1/share; Sandon are pushing the Board for an increased price as well as a special dividend given the company’s large franking account balance]
• BCI Minerals Ltd (ASX:BCI) ~1.9% of portfolio [BCI announced the sale of its Buckland Project to Mineral Resources for up to $20m; In the short term, the company’s net cash position increases by $10m to >$40m] and
• IDT Ltd (ASX:IDT) ~1.4% of portfolio [At the request of the Australian Government, IDT has been asked to assist with certain COVID-19 response activities; IDT was on its way back to profitability; Any onshoring of the manufacturing of pharmaceutical intermediate products could expedite that return to profits].

Because SNC are an activist fund, they not only invest in undervalued companies, they also have a strategy to try to unlock value and/or get the company positively re-rated by the market.

Disclosure: I hold SNC, and they are one of my best income stocks, with an excellent fully franked dividend yield. However, they do invest in some risky companies occasionally, so DYOR.

11-May-2020: SNC's April 30 pre-tax NTA was $0.7872 and their after tax NTA was $0.7877. Love that double 7. It's a good omen. Their SP last closed (on Fri 08-May-2020) at $0.63, so the discount on Friday was -19.95%. Close enough to a 20% discount to NTA in the SP. Still a buy for mine.

09-Nov-2020: SNC's September 30 (2020) pre-tax NTA was $0.8475/share, so that's my new valuation for SNC. Their after tax NTA was $0.8517 after allowing for a deferred tax asset $0.0198/sh as well as their deferred tax liability on unrealised income and gains ($0.0156). I'm not currently an SNC shareholder, as I have rotated that capital into another idea some months back. They had a good win with Iluka (ILU) and the Deterra (DRR) spin-off (the MAC iron ore royalty). I have also sold my Iluka shares now, but I'm still holding my new DRR shares. I think their plans to buy and add further diversified royalties to the base asset (the MAC royalty) to create a passive investment company that collects royalties and distributes that cash to their shareholders is a business model that has worked in the US and Europe and it should work here, particularly with our low interest rates and the hunt for yield. So I'm positive about DRR's future.

I do watch SNC - mostly to see what they're investing in. I rate Gabriel as a fund manager, however I don't see SNC as one of my best investment ideas at this moment in time, despite the discount to NTA in their SP. There are bigger discounts on offer elsewhere, with more potential upside IMHO. Particularly with globally focused LICs - meaning ASX-listed LICs that invest ex-Australia. Many of them are trading at bigger discounts - and they give me exposure to markets outside of Australia via an ASX-listed company. SNC on the other hand, will always invest in public - and some private - Australian companies where they believe that their various activist tools and techniques have the potential to unlock value. Some is hidden value, and some is value in plain sight that the market is simply ignoring.

Unfortunately, they (SNC) don't always manage to do that (unlock that value) - and in their latest webinar they gave a couple of examples of where they have virtually given up on a couple of their longer term holdings. They do have the occasional win, but those wins seem too few and far between to me.

26-June-2021: SNC's 31-May-2021 NTA before tax (ex-dividend) was $1.0764. Their NTA after tax (ex-dividend) was $1.0293. I'm going to split the difference and call it $1.05.

Independent Investment Research (IIR) have published an investment review of SNC. SNC has been rated as "Recommended" by IIR. You can download the report by clicking on the following link:

https://www.sandoncapital.com.au/images/pdfs/IIR_SNC_Final_Report.pdf [edit: June 2022: Sorry - that file has now been removed from SNC's website, probably because it is no longer relevant - one year later - so the link will no longer work.]

SNC's latest (May 2021) Monthly Report can be found here:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383936-2A1303164?access_token=83ff96335c2d45a094df02a206a39ff4

I'm not currently holding SNC shares, but I like their SP graph for the past 12 months. Very bottom left to top right!

UPDATE: 27-Dec-2021: In their Monthly Report for the month ending 30-Nov-2021 SNC stated that their NTA before tax (ex-dividend) (on 30-Nov) was $1.1544/share (up +1.7% on 31-Oct-21). They have a deferred tax asset $0.005/share and a deferred tax liability on unrealised income and gains of $0.0664/share so if you add the deferred tax asset to the before-tax-NTA and then reduce that number by their deferred tax liability (on unrealised gains, on shares they have not sold), their NTA after tax (ex-dividend) was $1.0931, also up +1.7%.

I've split the difference and come up with a valuation of $1.12375, so call it $1.1238 or $1.124, or $1.12 if you round it down to the nearest whole cent. $1.125 if you round it to the nearest half cent.

Here's a snippet from page 1 of that November 2021 monthly report:

Click on the image above to see a larger version of it, then click on it again to come back to this valuation.

As you can see there, their benchmark index is the All Ords Accumulation Index (which includes reinvested dividends) and SNC's 1 month outperformance (against that index) was +1.7%, their 1 year outperformance was +31.4% (SNC's 1 year gross portfolio return was a whopping +48.1% vs the index which was up +16.7%) and since inception SNC have delivered an average annualised gross portfolio investment performance of +13.4% p.a. vs the index's +9.4% return, so that's a +4% p.a. outperformance since inception.

Those SNC gross returns are after investment management fees and brokerage expenses but before performance fees and corporate expenses. Index returns are before all fees and expenses and before any taxes. Dividends paid during the period are included when calculating SNC’s gross investment performance (as they also are with the index - because the index is an accumulation index).

So after a brilliant year in which they have produced a +48.1% gross portfolio return, SNC are back batting above their benchmark index average over all relevant timeframes, so they are clearly adding value versus an ETF based on the All Ordinaries Index.

SNC’s FY21 final dividend of 2.75 cps (cents per share) was paid on 5 November 2021, then they also paid a special dividend of 1 cps on 20 December 2021. The Board anticipates paying an interim dividend for FY22 of 2.75cps, provided the Company has sufficient profit reserves, franking credits and it is within prudent business practice. They currently have plenty in their profit reserve and a healthy franking credit balance.

Interestingly, they managed to outperform their index over the month of November (by +1.7%) despite holding a position in NXL (Nuix). They said about NXL, "NXL, which is a recent addition to the portfolio, fell more than 26% during the month, after a poor trading update delivered at the AGM. NXL, whose initial public offerings was one of the hottest tickets in town, has had a disastrous first year as a listed company. It has been plagued by scandal and delivered far less than investors had been led to expect. Unsurprisingly, its first six months as a listed company piqued our interest, as its share fell from a high of $11.16 to a low of $1.97. Expecting the company is not yet out of the woods, we have (and continue) to slowly accumulate NXL shares. At this stage, we have nothing further to add."

Other bits and bobs from that November 2021 Monthly Report:

"Key contributors to the month’s return were Australian Silica Quartz Group (ASQ) and IDT Australia Ltd (IDT). The detractors included Coventry Group Ltd (CYG) and Nuix Ltd (NXL). The rest of the portfolio was also largely down."

"November saw the bulk of the portfolio companies hold their Annual General Meetings. Although few gave earnings guidance, the qualitative commentary and announcements made during the month bodes positively for the future performance of the portfolio. Notwithstanding the positive outlook commentary and the longer dated revenue pipelines within many of our companies, the share prices of most were down. We consider most share price moves to be related to general investor anxiety than company performance."

"ASQ was up 100% for the month after JV partner DevEx Resources Ltd (ASX:DEV) announced that early drill holes at the Sovereign prospect (50:50 JV between ASQ & DEV) had identified the potential for nickel-copper mineralisation. The market’s excitement relates to Sovereign’s proximity to the recently discovered Julimar Nickel-Copper-PGE project, owned by Chalice Mining Ltd (ASX:CHN). It is still early days in the drilling program, so we believe it is too early to draw any conclusions. We expect to receive further updates on the drilling program in the first quarter of 2022. In the meantime, we expect volatility in the ASQ share price."

"Last month, IDT’s share price fell due to an absence of news. This month the share price rose after the company announced that it had manufactured Australia’s first mRNA vaccine candidate, developed by Monash Institute of Pharmaceutical Sciences (MIPS) and the Doherty Institute. IDT manufactured 450 doses of a vaccine that will be used in the first phase of clinical trials expected to begin soon. The Federal Government is yet to announce its decision on domestic mRNA vaccine manufacturing. Irrespective of the outcome, until an announcement is made, we expect IDT’s share price to remain highly volatile."

"Fleetwood Ltd (FWD) and COG Financial Services Limited (COG) both gave encouraging updates at their respective AGMs. FWD is well-placed after having been awarded contracts totaling $68 million for the Centres for National Resilience (CNR), the Orwellian-named federal quarantine facilities. FWD is also well-placed to win some of the work at the WA CNR, for which the lead contract has been awarded to Multiplex (as is the case in Melbourne and Brisbane). COG reported on a solid 2021 and updated its market share of the SME finance broker market to 18%. Using data presented by COG in their AGM update, it would seem COG brokers are involved in approximately 12.6% of all bank-funded SME finance in Australia. We don’t believe the market quite understands the pivotal role COG and its brokers play in SME finance. We remain patient supporters of the strategy."

"We expect financial market volatility will continue, with COVID (and any future variants), interest rates and inflation, and geopolitics all likely sources of concern. Markets are likely to overshoot, both up and down. We continue to see such volatility as opportunity for patient long term investors like us."

I have recently jumped back into SNC (during the first half of December) at prices ranging from 98 cps to 99 cps, adding them to two of my real life portfolios. They closed at 98 cps on Friday (24-Dec-2021).

I like Gabriel Radzyminski and I like SNC for exposure to a LIC with an activist investor style and gameplan. Those are two different links to further info about Gabriel R and Activist Investing, which show there as bold text (above, but below the image of Gabriel) and will show up as underlined bold text if you hover over them with your mouse or pointer.

I rarely invest directly in the companies that Sandon Capital invest in - with Iluka Resources (ILU) prior to their MAC iron ore royalty been spun out into Deterra Royalties (DRR) being one instance where SNC and I did both hold the same company at the same time, but otherwise I tend to not have the same risk/reward mindset or temperament as Gabriel does. The big difference is that Gabriel has a good idea of what needs to happen to unlock hidden value - or value not currently reflected in the SP - from these companies, and also knows some good methods of going about prodding the management of these companies to make those changes. And he's not afraid to follow those strategies. He's had plenty of practice.

He also has a lot of good contacts within the industry (such as Geoff Wilson, Miles Staude, Chris Cuffe and others) who will often join him in pushing for those changes to be made at a company level. Miles Staude runs his own fund, the Global Value Fund (GVF) that does the same type of thing (activism) with global CEFs (closed end funds, such as LICs and LITs) and Geoff Wilson also runs a similar fund (WAR: WAM Strategic Value) which does the same thing on a domestic (Australian) level. Gabriel however targets normal listed companies (rather than CEFs), and he's certainly not afraid to tackle resources companies, an area that many fund managers tend to consign to the "too hard basket". As a follower of the resources industry with particular interest in gold, silver, copper, nickel, aluminium (bauxite/alumina) and iron ore, I like to see where Gabriel thinks there are companies worthy of adding to his fund, because that usually means that he sees a positive market re-rating to be a likely outcome (for those specific companies) in the near-to-mid-future.

Currently he has Australian Silica Quartz Group Ltd (ASQ, formerly Bauxite Resources Limited) in the SNC portfolio, as well as a bunch of industrial, services, biotech and fintech companies. He tends to target smaller companies mostly (hence using the All Ords Accumulation index as SNC's benchmark rather than the narrower ASX200 Accumulation index of the ASX300 Accumulation index, however he's not afraid to take on bigger companies, such as Iluka (ILU).

Have a look at their 2021 AGM Presentation (released on 25-Nov-2021). You can skip to page 10 and start from there as the first 9 pages are just related to the AGM and their disclaimer.

Also here's the link to the SNC fund manager's website: Sandon Capital | Activist Investment Firm

And to the pages related specifically to SNC: Sandon Capital | Sandon Capital Investments Limited (ASX:SNC)

That's their 10-year chart, and as you can see they've been up a little, down a lot, but they're really only now back to around where they were 10 years ago, however you need to factor in their higher than average fully franked dividend yield when looking at their total shareholder returns. With the benefit of hindsight, they were a real bargain earlier this calendar year (during the first half of calendar 2021) when you could buy them for below 60 cps.

This is one of the lesser known LICs on the ASX, and there is a lot lower liquidity (buyers and sellers) than there is with the larger and more well known LICs such as AFI, ARG, and the larger LICs of the 8 LICs that Geoff Wilson's WAM Funds manages, however I believe they offer a superior dividend yield than most of their peers, and they have also been performing very well, which should result in the increasing NTA dragging the share price up as well at some point.

They will likely usually (if not always) trade at a discount to their NTA, just because of the perception of higher risk with the types of companies that Gabriel invests in, and the hit/miss nature of activist investing, but that's fine - it just means you are buying a bunch of exposure to a variety of companies at a discount to their current combined market values. The high and fully franked dividend yield is worth the share price volatility, IMHO.

This is one of a bunch of recent new additions to my real-life portfolios, along with GVF, FMG, MIN, WOW, WES and CAT. I have held all of those companies before, but had sold out of all of them at various times, and was not exposed to any of them directly in the current financial year, up until December 1, but now I am once again. I'm looking to add them all to my Strawman.com virtual portfolio (WES is already in there but not the others yet), but I clearly need to sell stuff first, because I have only 77 cents in cash here on SM at this point in time.

That bunch offers a good mix between above-average fully franked dividends (with most but not all) and capital growth prospects, which is what I'm after at the moment, both income and growth.

Edit: Correction: I had referred above (twice) to the "Small Ords Accumulation Index" being SNC's benchmark index, but I meant the "All Ords", not the "Small Ords", so have corrected those references now to read "All Ords Accumulation Index".

Update: 19-June-2022: At May 31st, 2022, SNC's NTA before tax (ex‐dividend) was $0.9043/share (down ‐8.4% for the month) and their NTA after tax (ex‐dividend) was $0.8849/share, so I'm updating my value for SNC to the lower of those two figures, i.e. 88 cents per share.

Gabriel released a "Shareholder Update" on Friday (17-June-2022) which you can access here: SNC-Letter-to-Shareholders-220617.pdf

It's a good read because it puts a fair bit of stuff in perspective regardless of whether you are interested in Gabriel's LIC (SNC) or not.

Earlier this year I got back into SNC IRL and then here on SM also. It's not one of my larger positions but I have exposure. Here's their dividend history:

SNC has paid 48 cents per share of fully franked dividends since listing in December 2013.  At May 31st, their profits reserve was 26.5 cents per share and they had 6.5 cents per share of franking credits available.

They are certainly able to continue to pay out between 5.5c/share and 7c/share per year in fully franked dividends. Remember that the purpose of the profits reserve is to enable LICs (listed investment companies) like SNC to "smooth" their dividends and potentially increase them, even when they have a poor year from a performance perspective.

In their May 2022 Report, they said, "The Board anticipates paying a final dividend for FY22 of 2.75cps, provided the Company has sufficient profit reserves, franking credits and it is within prudent business practice."

They certainly DO have sufficient profit reserves and franking credits. And the profit reserves mean that it IS within prudent business practice to maintain their dividend despite their actual result. That is indeed why the profit reserves exist.

They closed on Friday at 70.5c/share, so ignoring that recent special dividend, their basic dividends (2 x 2.75c/share) of 5.5c/share per year puts them on an annual dividend yield of 7.8%, PLUS the value of the franking credits, and their dividends are fully franked. I can stomach share price volatility for that sort of income.

And there WILL be share price volatility. These guys have even recently invested in Nuix (NXL), something I would not do personally, however they are activist investors and that's their game, not mine. I'm happy to let GR do what he does best and collect the income.

The capital gains aren't there. While they briefly got above $1/share again in late July/early August 2021 (almost a year ago), they are now back to below where they were 5 years ago, and 10 years ago, and also below where they were when they IPO'd back in late 2013. They hit the boards initially at about 95c/share back then.

Source: Commsec. Edited by me to remove stuff that was not applicable.

So they're an income play, not a growth play.

25-Aug-2023: Update: Although they could become a growth play if the gap closed between their share price and their NTA and their NTA was to rise during the same period.

But overall, they're an income play at this point. From today's results and dividend announcement:

SNC offers an attractive fully franked dividend yield of ~ 8.9% at a 21.8% discount to pre-tax NTA*

SNC shares are currently trading at a highly attractive annualised yield of 8.9% (which grosses up to 11.9% when including the value of franking credits at SNC’s corporate tax rate of 25%).*

The Company has significant profit reserves. As of 31 July 2023, SNC has profit reserves totalling 27.1 cents per share and a franking balance of 7.5 cents per share. Based on the current franking balance, SNC has the capacity to pay 22.5 cents per share in fully franked dividends. This equates to 4 years of dividends at the current rate of 5.5 cents per annum.**

Notes:

*Calculated assuming an annualised dividend of 5.5 cents per share, the pre-tax NTA at 31 July 2023 and the closing market price on 24 August 2023 of $0.62 per SNC share.

**These figures are as at 31 July 2023. Any future dividends are not guaranteed and will be paid at the directors’ discretion, subject to availability of reserves, franking and being prudent to do so.

--- end of excerpt ---

You can read the full announcement here: SNC-to-pay-275-cents-per-share-fully-franked-final-dividend.PDF

They will continue to pay the same 2.75 cents every half, or 5.5 cents every year for as long as their profit reserves allow it, regardless of their actual portfolio investment performance. Without any further profits from here, their profit reserve already provides for 4 more years of dividends at that rate, and all fully franked at their lower corporate tax rate of 25% (the vast majority of companies in Australia pay a 30% corporate tax rate, but there are a small handful that qualify for the lower 25% tax rate, and SNC is one of those).

Gabriel has a track record of lumpy performance, but he has his good years as well as his bad years - it's the nature of activist investing. Sometimes the thesis does not play out, and sometimes it takes longer than expected to play out when it does play out. But the wins can be substantial when they occur.

I'm updating my "Valuation" for SNC to their latest NTA - as at July 31st - see here: Net-Tangible-Assets-as-at-31-July-2023.PDF

Their July 31 NTA (both pre-tax and post-tax) was $0.7929, so that's what I'm using. Today, at 3pm Sydney time, SNC are up +2.42% (or 1.5 cps from yesterday's 62 cps close) on these well-flagged results, currently at 63.5 cps with only two trades today at that price for a total of less than $1K, so the liquidity is low - something to keep in mind if you may need to make a quick exit from a reasonable position at some point in the future. With these low-liquidity microcaps you can sometimes drive the price down a fair bit when you have to rapidly sell out. Not such a problem if you have time on your side however.

Disclosure: I still hold SNC in my largest RL portfolio. Good income stock, and exposure to a number of companies that I would not choose to invest in directly myself - for a variety of reasons. Although there are times when SNC and I do both hold the same companies, such as ILU prior to the DRR spin-out.