WAM Capital Ltd. · ASX:WAM
WAM Capital — Investor Presentation (May 2010)
35 slides from WAM Capital's investor presentation, May 2010
Slide 1: WAM Capital Limited Presentation May / June 2010
WAM CAPITAL LIMITED (WAM) A.B.N. 34 086 587 395 Presentation May / June 2010
Slide 2: What is WAM Capital (WAM)
What is WAM Capital (WAM) • An dynamic investor in listed Australian equities • Two distinct styles: 1. Research Driven (700+ company meetings per annum) 2. Market Driven (participated in 168 capital raisings in last 10 months) • Concentrates on small to medium industrial companies Objectives • To p
Slide 3: What WAM Delivers
What WAM Delivers • Quick decision making • Bottom up approach • Staying very close to the market and investee companies • Strong risk adjusted returns • Significant market experience • Closed end fund avoiding being forced seller and buyer at inappropriate times 3
Slide 4: Risk Profile – Low
Risk Profile – Low • Average net cash position of 27.4% over the last 11 years Percentage • Cash was 29.1% in Aug 2009, in Cash 70.00% cash 46.3% at April 2010 60.00% • Closed end fund – avoids major redemptions when market is 50.00% falling 40.00% • Highly diversified with purchased positions of 3%
Slide 5: Markets
Markets 5
Slide 6: S&P/ASX All Ordinaries Index vs S&P 500 Index
S&P/ASX All Ordinaries Index vs S&P 500 Index 110.0% 108.0% 106.0% 104.0% 102.0% 100.0% 98.0% 96.0% Australian market has 94.0% underperformed the US 92.0% market in calendar year 2010 to date. This is a direct result 90.0% of rising interest rates in Jan-10 Feb-10 Australia. Mar-10 Apr-10 May-10 S&
Slide 7: S&P/ASX Industrials Index vs S&P/ASX Resources Index
S&P/ASX 300 Industrials Index vs S&P/ASX 300 Resources Index Index 1.05 1.03 1.01 0.99 0.97 0.95 The Resources 0.93 sector has been 0.91 more volatile in calendar year 2010 0.89 to date. 0.87 0.85 Jan-10 Feb-10 Mar-10 Apr-10 May-10 ASX 300 Industrials ASX 300 Resources
Slide 8: S&P/ASX Small Ordinaries Index
S&P/ASX Small Ordinaries Index Index 4100 3900 3700 3500 3300 The small companies index has not risen since August 3100 2009. 2900 2700 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 y -0 y-0 n-0 n-0 n-0 l-0 l-0 l-0 g-0 g-0 g-0 p-0 p-0 p-0 t-0 t-0 t-0 v-0 v-0 v-0 c-0 c-0 c
Slide 9: S&P/ASX All Ordinaries Index 1985 - 1994
S&P/ASX All Ordinaries Index 1985 - 1994 Index 2500 2300 2100 1900 1700 1500 1300 1100 Bear markets can take up to 5 900 years before a new bull market begins. 700 500 31050312443143631630318243201632210324023259632790329823317633368335623375633948341423433434528
Slide 10: S&P/ASX All Ordinaries Index 1969 - 1979
S&P/ASX All Ordinaries Index 1969 - 1979 Index 500 450 400 350 300 250 200 150 It can take up to a decade before a new historical 100 high is reached. 50 0 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
Slide 11: S&P/ASX All Ordinaries Index from 2005 to date
S&P/ASX All Ordinaries Index from 2005 to date Index 7000 We are currently only 6500 2½ years into current bear market. 6000 5500 5000 4500 4000 3500 3000 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Slide 12: S&P/ASX Prospective P/E valuation
S&P/ASX 300 Prospective per valuation Price to earnings ratio 21 20 19 18 17 High (+1Std Dev) 16 15 14 AVERAGE 13 12 Lower (-1 Std Valuations for the Dev) 11 Australian sharemarket look cheap BUT expect 10 2011 earnings to be 9 downgraded. 8 90 91 92 93 94 95 97 98 01 02 03 04 05 07 08 96 99 00 06 0
Slide 13: S&P/ASX Industrials Index
S&P/ASX 300 Industrials Index Index 10000 The Australian Industrial Index is only 10% higher over the last 10 8000 years. 6000 4000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 14: S&P/ASX Small Industrials Index
S&P/ASX Small Industrials index Index 4000 Meanwhile, the Small 3500 Industrial Index has fallen approximately by 20% over last 10 3000 years. 2500 2000 1500 1000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 15: Financial Highlights
Financial Highlights 15
Slide 16: Financial Year to April 2010
Financial Year to 30 April 2010 2010 Total Income $43.1m Operating profit after tax $28.7m Operating profit per share 27.6c 16
Slide 17: Performance at April 2010
Performance at 30 April 2010 S&P/ASX Annualised All Ords. Gross Portfolio* Outperformance performance Accumulation Index 1 year +42.3% +34.2% +8.1% 3 years +2.1% -3.7% +5.9% 5 years +13.2% +8.6% +4.6% 7 years +15.6% +11.7% +3.9% Since inception +19.3% +9.0% +10.3% * The change in the portfolio befor
Slide 18: Portfolio Structure
Portfolio Structure As at 30 April 2010 Investment Type $m % Listed Equities 91.8 53.7% Term Deposits and Cash 79.3 46.3% Total Long Portfolio 171.0 100.0% Short Portfolio (2.0) 100.0% No. Ordinary Shares on issue 103,931,192 18
Slide 19: Dividends
Dividends 19
Slide 20: Dividends
Dividends • Government reform due June 2010 - will change the way dividends are paid • Dividends will no longer be affected by unrealised movements in value of the portfolio • Dividends can be paid if the company is solvent • WAM has franking credits which allows it to pay a 5.8c per share as at 30
Slide 21: Dividends
Dividends Minimum annual yield of 8% over last 11 Cents per years Share 18 16 14 12 10 8 6 4 2 0 9/0 0 0/0 1 1/0 2 2/0 3 3/0 4 4/0 5 5/0 6 6/0 7 7/0 8 8/0 9 0* 199 200 200 200 200 200 200 200 200 200 9/1 200 Ordinary Special Equal Access Share Buy-Back * Annualised interim dividend Source: ASX 21
Slide 22: WAM Capital Premium/Discount to NTA
WAM Capital Premium/Discount to NTA 30.0% 20.0% 10.0% 0.0% 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- ug- eb- A F A F A F A F A F A F A F A F A F A F A F -10.0% -20.0% -30.0% -40.0% 22
Slide 23: Stock Selection
Stock Selection 23
Slide 24: Top Stocks
Top 10 Stocks as at 30 April 2010 % FY10 Market % of Change P/E Value Gross Average Code Company Ratio* $m Assets Cost RKN Reckon Ltd 15.8 9.1 5.4% 129.7% REA REA Group Ltd 30.4 3.8 2.2% 92.0% MCP McPherson’s Ltd 8.3 3.4 2.0% 186.5% RHG RHG Ltd ^ 3.1 1.8% 80.8% ORL OrotonGroup Ltd 12.5 2.9 1.7% 121.
Slide 25: Best Performing Stocks
Best Performing Stocks 10 months to 30 April 2010 Unrealised/Realised Code Company % Gains RKN Reckon Ltd $4.3m +84% ORL OrotonGroup Ltd $2.2m +122% MCP McPherson’s Ltd $2.1m +89% REA REA Group Ltd $1.8m +109% AHE Automotive Holdings Group Ltd $1.6m +78% 25
Slide 26: Worst Performing Stocks
Worst Performing Stocks 10 months to 30 April 2010 Unrealised/Realised Code Company % Losses ALS Alesco Corporation Ltd ($0.7m) -23% BOL Boom Logistics Ltd ($0.6m) -30% PBP Probiotec Ltd ($0.5m) -20% CPR Clive Peeters Ltd ($0.4m) -53% MVU MatrixView Ltd ($0.4m) -89% 26
Slide 27: Stock Stories
Stock Stories • Primary Health Care Ltd (PRY) • Vision Group Holdings Ltd (VGH) • Skilled Group Ltd (SKE) 27
Slide 28: Structural and Regulatory Change
Structural and Regulatory Change 28
Slide 29: Regulatory Update
Regulatory Update Henry Review • Resource super profits tax (RSPT) • Superannuation levy from 9% to 12% by 2020 • Company tax rate reduced to 28% by 2014 • No change to tax concessions applying to the Not For Profit sector: positive for McMillan Shakespeare • No change to dividend imputation 29
Slide 30: Positive Structural Change for Listed Investment Companies
Positive Structural change for Listed Investment Co’s (LICs) • Banning of commissions and volume based payments to financial planners from 2012 (Ripoll Review)– very positive for LICs • LICs will have a level playing field from 2012 • LICs are very attractive investment vehicles compared to managed
Slide 31: Outlook
Outlook • Increase in M&A Activity • Increase in short selling opportunities • Participation in discounted capital raisings • Position for extreme valuation opportunities • Defensive 31
Slide 32: WAMI in the Community
WAMI in the Community Wilson Asset Management proudly support the following organisations: 32
Slide 33: Shareholder Communication
Shareholder Communication We value your feedback! Website www.wilsonassetmanagement.com.au Audio casts Presentations Investor Report Monthly Investment Update & NTA announcements 33
Slide 34: Questions?
Questions? 34
Slide 35: Disclaimer
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 and WAM Capital Ltd, Wilson Investme