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TRANSCRIPT
Executive summary
• 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 li d f ll f k d di id d i ld 8 7%*• Annualised fully franked dividend yield 8.7%*
• Cautiously optimistic on Australian equity market
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* Based on 3 May closing price
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Performance
Performance as at 31 March 2012
1 Yr %
Since 1 July2010*
3 Yrs %pa
5 Yrs %pa
SinceInception
%paas 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 Accumulation Index +1.4% +7.7% +13.3% -3.4% +6.7%
Outperformance +1.1% +5.7% +2.1% +2.2% -1.9%
S&P/ASX Small Industrials Accumulation +1.5% +12.7% +18.3% -6.0% +5.9%Industrials Accumulation Index
1.5% 12.7% 18.3% 6.0% 5.9%
Outperformance +1.0% +0.7% -2.9% +4.8% -1.1%
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*Investment process revised in July 2010
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PerformanceFinancial Year 31 March 2012Financial Year 31 March 2012
WAX Investment Portfolio +6.0%
WAX Pre-tax NTA per share growth plus dividends +3.8%p g p
WAX Share price growth plus dividends +12.4%
S&P/ASX All Ordinaries Accumulation Index -1.5%
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Premium / Discount to NTA
5%
10%
um
‐5%
0%
unt /
Pre
miu
‐15%
‐10%
Dis
cou
30%
‐25%
‐20%
‐40%
‐35%
‐30%
5
‐40%
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Discount Yield BenefitAdvantage of paying “85 cents for $1.00 of Assets”Advantage of paying 85 cents for $1.00 of Assets
12.00%
Discount Yield Benefit = 1.34%8.72%8.00%
10.00%
Yield uplift = 18.16%
Market Price: 74.5 centsNAV: 88 1 cents
6.00%
NAV: 88.1 centsDiscount: -15.44%
As of 3 May 2012
7.38%
2.00%
4.00%
0.00%
Yield on NTA Yield on Market Price
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Dividend Growth
C h
7.0
Cents per share
5.0
6.0
3.0
4.0
1.0
2.0
0.0
Special fully franked dividend Ordinary fully franked dividend
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Special fully franked dividend Ordinary fully franked dividend
* Annualised interim dividend
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Discussion – some recent portfolio changesportfolio changes
New stocks• Webjet Limited (WEB)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)
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Contributors / Detractors
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 Discretionary $1,167,235
Worst Performing Stocks Financial Year to 31 March 2012
Company Sector Unrealised/Realised Losses
CAF Centrepoint Alliance Ltd Financials ($968,277)
WBC Westpac Banking Corporation Financials ($541,043)
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ALS Alesco Corporation Ltd Industrials ($535,613)
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Top 10 Stocks as at 31 March 2012as at 31 March 2012
Company % GrossAssets
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%COF Coffey International Limited 2.8%
RKN Reckon Limited 2.7%
ARP ARB Corporation Limited 2.5%
SKE Skilled Group Limited 2.4%
AMM Amcom Telecommunications Limited 2.3%
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WEB Webjet Limited 2.0%
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Breville Group Limited (BRG) Research Driven- Research Driven
• Idea generated in August 2010 reporting season from a company visit• 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 meetings with management
• Catalysts: earnings surprise and capital management. Approaching $40m net cash on the balance sheet
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cas o t e ba a ce s eet
• Current P/E 11.5x. EPS Growth 20% FY2013.
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Webjet Limited (WEB) Research Driven- Research Driven
• Idea generated from reporting season company visitsg p g p y
• 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 Managing Director, earnings surprise and capital management
• Current cash adjusted P/E 13x, EPS Growth 30% FY2013. Net cash $40m on the
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j ,balance sheet.
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Current state of play
• 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 has risen 24.6% off October 2011 lows. S&P/ASX All Ordinaries hasS&P500 has risen 24.6% off October 2011 lows. S&P/ASX All Ordinaries has underperformed rising only 12.9%. However, in USD terms, the S&P/ASX All Ordinaries has risen 21.4%
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Looking ahead
• Further interest rate cuts
• US economic recovery to continue
• Global deleveraging cycle to continue
• Cautiously optimistic on the Australian equity market
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Household gearing increases
f
• Global deleveraging to continue
Household gearing increasing reflecting declining asset prices
• Interest rate cuts positive for equity markets
• Industrial stocks cheap on a historical basis
• Expect continued merger and acquisition activity in Australia with balance sheets in good shape
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Source: GS Global ECS Research
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Rise in unemployment rate since 2007since 2007
• Global deleveraging to continue14
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• Interest rate cuts positive for equity markets
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• Industrial stocks cheap on a historical basis
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• Expect continued merger and acquisition activity in Australia with balance sheets in good shape
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0
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-2
Spai
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Gre
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rela
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US
UK
Italy
anad
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Fran
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Aust
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Japa
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G Ir Po Ca F A J
Ger
Source: Merrill Lynch
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Online retail sales on the rise
• Global deleveraging to continue• Represents less than 5% of Australian total retail sales but growing rapidly
• Interest rate cuts positive for equity markets
• Industrial stocks cheap on a
• Penetration higher by category: footwear, apparel and books
A i t l 1/ t t d ff h B A d ASOShistorical basis
• Expect continued merger and acquisition activity in Australia with balance
• Approximately 1/3 transacted offshore eg. eBay, Amazon and ASOS
• Can be 20-50% cheaper to purchase online in some casessheets in good shape
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Online retail sales by category
Sector Online Market 2009 Online 2012e Online
Category penetration of US online retail sales
SectorSize (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% 35%Consumer electronics $13.0 14% 29%Toys and video games $7 3 13% 32%Toys and video games $7.3 13% 32%Sporting Goods $2.8 11% 14%Jewelry $3.0 9% 20%Apparel accessories and footwear $27 3 9% 18%Apparel, accessories and footwear $27.3 9% 18%Pet Supplies $1.8 6% 9%Appliances and tools $17.7 5% 9%Furniture $1.7 2% n.a.
19*Source: Forrester Research, Goldman Sachs Research
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Summary
• Investment team continue to apply rigorous investment process that will identify opportunities and deliver performancepp p
• Board is focused on delivering a rising stream of fully franked dividends
• Cautiously optimistic on Australian equity market
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Who is Wilson Asset Management?Management?
• The WAM Group is the fund manager of three listed investment companies and one unlisted fund, with funds under management of approximately $340 milliong pp y
• 3 Listed Funds:− WAM Capital Ltd (ASX: WAM)− WAM Capital Ltd (ASX: WAM) − WAM Research Ltd (ASX: WAX)− WAM Active Ltd (ASX: WAA)
• Focus on listed industrial companies on the ASX
• Concentrates on growth companies predominantly in the small to mid cap area of the market
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What Wilson Asset Management deliversManagement delivers
• Quick decision making
• Bottom up approach
• Staying very close to the market and investee companiesy g y p
• Strong risk adjusted returns
• Significant market experience
• Closed end fund - avoiding being forced seller and buyerat inappropriate times
• Actively managed portfolio
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The Team
Geoff Wilson - Chairman / Portfolio Manager
Kate Thorley - CEO & Company Secretary
Chris Stott - CIO / Portfolio Manager
Matt Haupt - Equity AnalystMatt Haupt - Equity Analyst
Martin Hickson - Analyst / Dealer
Mark Tobin - Assistant Analyst
Linda Vo - Senior Financial Accountant
Lillie Johnson - Accountant
Mary-Ann Baldock - Office Manager
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Our Business Model
Investment Focus –Growth Companies
LIC Structure Benefits
Experienced Team
+Benefits Team
Investment Process
Flexible Mandate
Tight Cost Control
+ +
Superior Long Term
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Superior Long Term Performance Record=
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Our Funds
WAM Capital(WAM)(WAM)
WAM Active (WAA)
WAM Research(WAX)
Research Market
(WAA)(WAX)
ResearchDriven
MarketDriven
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Superior returns from growth companiescompanies
• 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
W fi d th t iti l t i th ll t id i d t i l• We find these opportunities are more prevalent in the small to mid cap industrials sector
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Mid to small cap sector benefitsbenefits
• Small cap value has outperformed all other sectors*
• Under researched
A t t bilit t b ild t l ti hi• Access to management - ability to build strong relationships
• Life cycle of the business - ability to grow at a faster rate than larger companies
• Higher risk and higher returns
• More takeover activity
29* Source – Ibbotson Associates
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LICs are superior investment vehiclesvehicles
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 i t t fl f f ll f k d di id d• Provide consistent flow of fully franked dividends
• Lower MER compared to managed funds
• Provide opportunities – can trade at a premium/discount to assets
Trades on the ASX hich pro ides intra da liq idit
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• Trades on the ASX which provides intra-day liquidity
^ Australian Study: Morgan Stanly Smith Barney* UK Study: Collins Stewart
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LICs outperform the share market over the long termmarket over the long term
10000
LIC Total Return IndexLIC 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
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19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20
* Source: Morgan Stanley Smith Barney
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Investment objectives
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 dividends; and
) f C3) Preserve the capital of the Company.
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Robust investment process“Research Driven”Research Driven
Identify Company
Undertake Detailed Research
Visit with Management – 800+ companies p.a.
R k th CRank the Company (WAM’s unique rating template)
Catalyst identified or occursCatalyst identified or occurs
Buy or short sell shares
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External research coverage
Research Houses covering listed investment companies & WAM Research:
- Bell Potter Securities- Morgan Stanley Smith Barney
Z ith P t- Zenith Partners- Independent Investment Research- APAM LIC Research- Evans & Partners- JBWere
Morningstar- Morningstar- E.L.&C. Baillieu
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Investor communications
Website – wamfunds.com.au
Subscribe for weekly emails – includes market update
Audio casts – Monthly
Media – Sky Business, Switzer, CNBC, Newspapers, Industry Magazines
Half yearly Investor Newslettersy y
Half yearly Results and Media Release
Attend and present at industry conferences – ASX, AIA, ASA
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DisclaimerThis 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 Strategy, Merrill Lynch, Morgan Stanley Smith Barney, Forrester Research, GS Global ECS Research, Westpac-Melbourne Institute, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd unless otherwise stated.
The information in this presentation is only intended for Australian residents.
The purpose of this presentation is to provide information only and the contents of the presentation does not purport to provide investment advice. We strongly suggest that investors consult a financial adviser prior to making any investment decision.
The presentation does not take into account the investment objectives, financial situation or particular needs of any person p j , p y pand should not be used as the basis for making investment, financial or other decisions. The information is selective and maynot be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular investment or security, or Fund offered by Wilson Asset Management.
The information provided in the presentation is given in good faith and is believed to be accurate at the time of compilation. Neither Wilson Asset Management WAM Capital Ltd WAM Research Ltd and WAM Active Ltd nor its directors orNeither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or employees make any representation or warranty as to the accuracy, reliability, timeliness or completeness of the information.To the extent permissible by law, Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd and its director and employees disclaim all liability (whether arising in contract, tort, negligence or otherwise) for any error, omission, loss or damage (whether direct, indirect, consequential or otherwise).
Performance figures quoted in the report are past performance. Past performance is not an indicator of future performance. Neither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or employees guarantee or make any representation as to the performance of the Funds, the maintenance or repayment of capital, the price at which shares may trade or any particular rate of return.
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