WAM Research Ltd. · ASX:WAX
WAM Research — Investor Presentation (May 2012)
38 slides from WAM Research's investor presentation, May 7, 2012
Slide 1: WAM Research Limited (WAX)
WAM Research Limited (WAX) For personal use only
Slide 2: Executive summary
Executive summary For personal use only • Investment Portfolio outperformed by 6.0% financial year to 31 March 2012 • 8.3% increase in fully franked interim dividend to 3.25 cents per share • A Annualised li d ffully ll ffranked k d di dividend id d yield i ld 8 8.7%* 7%* • Cautiously optimistic on
Slide 3: Performance
Performance For personal use only Since Since Performance 1 Yr 1 July 3 Yrs 5 Yrs Inception as at 31 March 2012 % 2010* %pa %pa %pa % pa (Aug-03) WAX Investment Portfolio +2.5% +13.4% +15.4% -1.2% +4.8% S&P/ASX 300 Industrials +1.4% +7.7% +13.3% -3.4% +6.7% Accumulation Index Outperformance +1.1% +5
Slide 4: Performance
Performance Financial Year 31 March 2012 For personal use only WAX Investment Portfolio +6.0% WAX Pre-tax NTA p per share g growth p plus dividends +3.8% WAX Share price growth plus dividends +12.4% S&P/ASX All Ordinaries Accumulation Index -1.5% 4
Slide 5: Premium / Discount to NTA
Premium / Discount to NTA For personal use only 10% 5% 0% ‐5% um unt / Premiu ‐10% ‐15% Discou ‐20% ‐25% 30% ‐30% ‐35% ‐40% 5
Slide 6: Discount Yield Benefit
Discount Yield Benefit Advantage of paying “85 85 cents for $1.00 of Assets” Assets For personal use only 12.00% 10.00% 8.00% 8.72% Discount Yield Benefit = 1.34% Yield uplift = 18.16% 6.00% Market Price: 74.5 cents NAV: 88 88.1 1 cents 4.00% 7.38% Discount: -15.44% 2.00% As of 3 May 2012 0.00% Yiel
Slide 7: Dividend Growth
Dividend Growth For personal use only C Cents per share h 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Special fully franked dividend Ordinary fully franked dividend * Annualised interim dividend 7
Slide 8: Discussion – some recent portfolio changes
Discussion – some recent portfolio changes For personal use only New stocks • Webjet Limited (WEB) • Flexigroup Limited (FXL) • Logicamms Limited (LCM) Disposals • STW Communications Group Limited (SGN) • Australian and New Zealand Banking Group (ANZ) • SAI Global Limited (SAI) 8
Slide 9: Contributors / Detractors
Contributors / Detractors For personal use only Best Performing Stocks Financial Year to 31 March 2012 Company Sector Unrealised/ Realised Gains APE AP Eagers Ltd Consumer Discretionary $1,395,988 AGI Ainsworth Game Technology Ltd Consumer Discretionary $1,217,667 BRG Breville Group Ltd Consumer Dis
Slide 10: Top Stocks
Top 10 Stocks as at 31 March 2012 For personal use only % Gross Company Assets NAB National Australia Bank Limited 5.3% APE AP Eagers Limited 4.4% BRG Breville Group Limited 3.9% MMS McMillan Shakespeare Limited 3.1% COF Coffey International Limited 2 8% 2.8% RKN Reckon Limited 2.7% ARP ARB Corporat
Slide 11: Breville Group Limited (BRG) - Research Driven
Breville Group Limited (BRG) - Research Driven For personal use only • Idea generated in August 2010 reporting season from a company visit • Started to build position in August 2010 at $2.44 • Market was not pricing in the companies expansion into the USA • Followed up with several one on one meetin
Slide 12: Webjet Limited (WEB) - Research Driven
Webjet Limited (WEB) - Research Driven For personal use only • Idea g generated from reporting p g season company p y visits • Followed up with one on one meeting with management in March 2012 • Company rated on our ratings template • Company upgraded earnings guidance in April 2012 • Catalysts: New
Slide 13: Current state of play
Current state of play For personal use only • US economic data has surprised on the upside • European debt concerns remain. Spanish debt 85% of GDP with unemployment >20% • Australian economy non mining has weakened further into 2012 • Chinese growth has been slowing in the last 6 months • S&P500 ha
Slide 14: Looking ahead
Looking ahead For personal use only • Further interest rate cuts • US economic recovery to continue • Global deleveraging cycle to continue • Cautiously optimistic on the Australian equity market 14
Slide 15: Consumer deleveraging
Consumer deleveraging For personal use only 15
Slide 16: Household gearing increases
Household gearing increases For personal use only Household gearing increasing reflecting f declining asset prices • Global deleveraging to continue • Interest rate cuts positive for equity markets • Industrial stocks cheap on a historical basis • Expect continued merger and acquisition activity in
Slide 17: Rise in unemployment rate since 2007
Rise in unemployment rate since 2007 For personal use only 16 • Global deleveraging to continue 14 • Interest 12 rate cuts positive for equity markets 10 8 • Industrial stocks cheap on a historical 6 basis 4 • Expect 2 continued merger and acquisition activity in Australia with 0 balance sheets in g
Slide 18: Online retail sales on the rise
Online retail sales on the rise For personal use only • Global Represents less than deleveraging to5% of Australian total retail sales but growing rapidly continue •• Interest rate cuts Penetration positive higher for equity by category: footwear,markets apparel and books • Industrial stocks cheap o
Slide 19: Online retail sales by category
Online retail sales by category For personal use only Category penetration of US online retail sales Online Market 2009 Online 2012e Online Sector Size (US$m) Penetration Penetration Computer hardware, software and peripherals $27.3 52% 55% Books- recreational only $5.8 20% 28% Music / video $5.8 16
Slide 20: Summary
Summary For personal use only • Investment team continue to apply rigorous investment process that will identify opportunities pp and deliver p performance • Board is focused on delivering a rising stream of fully franked dividends • Cautiously optimistic on Australian equity market 20
Slide 21: Questions?
For personal use only Questions? 21
Slide 22: Additional Information
For personal use only Additional Information 22
Slide 23: Who is Wilson Asset Management?
Who is Wilson Asset Management? For personal use only • The WAM Group is the fund manager of three listed investment companies and one unlisted fund, with funds under management g of approximately pp y $340 million • 3 Listed Funds: − WAM Capital Ltd (ASX: WAM) − WAM Research Ltd (ASX: WAX) − WAM Ac
Slide 24: What Wilson Asset Management delivers
What Wilson Asset Management delivers For personal use only • Quick decision making • Bottom up approach • Staying y g very y close to the market and investee companies p • Strong risk adjusted returns • Significant market experience • Closed end fund - avoiding being forced seller and buyer at inap
Slide 25: The Team
The Team For personal use only Geoff Wilson - Chairman / Portfolio Manager Kate Thorley - CEO & Company Secretary Chris Stott - CIO / Portfolio Manager Matt Haupt - Equity Analyst Martin Hickson - Analyst / Dealer Mark Tobin - Assistant Analyst Linda Vo - Senior Financial Accountant Lillie Johnson -
Slide 26: Our Business Model
Our Business Model For personal use only Investment Focus – Growth Companies LIC Structure + Experienced Benefits Team Investment + Flexible + Tight Cost Process Mandate Control Superior Long Term = Performance Record 26
Slide 27: Our Funds
Our Funds For personal use only WAM Capital (WAM) WAM Research WAM Active (WAX) (WAA) Research Market Driven Driven 27
Slide 28: Superior returns from growth companies
Superior returns from growth companies For personal use only • We buy growth companies that trade on low price to earnings multiples (P/E) • We buy when we can identify a catalyst that will increase the valuation • We find W fi d th these opportunities t iti are more prevalent l t in i the th smalll
Slide 29: Mid to small cap sector benefits
Mid to small cap sector benefits For personal use only • Small cap value has outperformed all other sectors* • Under researched • A Access to t managementt - ability bilit tto b build ild strong t relationships l ti hi • Life cycle of the business - ability to grow at a faster rate than larger compa
Slide 30: Smaller and more rewarding
Smaller and more rewarding For personal use only *Source – The New York Times 30
Slide 31: LICs are superior investment vehicles
LICs are superior investment vehicles For personal use only Listed Investment Companies are very attractive investment vehicles • LICs have outperformed the market ^ • Studies show LICs outperform managed funds*^ • Closed pool of capital – never forced seller or buyer • P id consistent Provide i t t
Slide 32: LICs outperform the share market over the long term
LICs outperform the share market over the long term For personal use only 10000 LIC Total Return Index ASX All Ords Accum 1000 100 979 981 983 985 987 989 991 993 995 997 999 001 003 005 007 009 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 * Source: Morgan Stanley Smith Barney 32
Slide 33: WAM Funds outperformance vs ASX LIC Index
WAM Funds outperformance vs ASX LIC Index For personal use only Source: Iress 33
Slide 34: Investment objectives
Investment objectives For personal use only The investment objectives of WAM Research are to: 1) Achieve a high real rate of return, comprising both income and capital growth, within risk parameters acceptable to the Directors; 2) Deliver investors a secure income stream in the form of fully franked
Slide 35: Robust investment process
Robust investment process “Research Research Driven” Driven For personal use only Identify Company Undertake Detailed Research Visit with Management – 800+ companies p.a. Rank R k th the C Company (WAM’s unique rating template) Catalyst identified or occurs Buy or short sell shares 35
Slide 36: External research coverage
External research coverage For personal use only Research Houses covering listed investment companies & WAM Research: - Bell Potter Securities - Morgan Stanley Smith Barney - Z ith P Zenith Partners t - Independent Investment Research - APAM LIC Research - Evans & Partners - JBWere - Morningstar - E
Slide 37: Investor communications
Investor communications For personal use only ¾ Website – wamfunds.com.au ¾ Subscribe for weekly emails – includes market update ¾ Audio casts – Monthly ¾ Media – Sky Business, Switzer, CNBC, Newspapers, Industry Magazines ¾ Half yyearlyy Investor Newsletters ¾ Half yearly Results and Media Release
Slide 38: Disclaimer
For personal use only Disclaimer This presentation has been prepared for use in conjunction with a verbal presentation and should be read in that context. Information for the graphs, charts and quoted indices contained in this presentation has been sourced from IRESS Market Technology, Credit Suisse