August has a bit of everything for LMIs

There was plenty happening in August with a flurry of results being released. Below provides some of the key news items and announcements during August, which included increases to dividend guidance, capital raisings, structural reviews and a new LIT. We will provide a comprehensive review of the FY24 results in due course.  

AUI reported its FY24 results on 15 August 2024. As was expected, revenue and earnings was down 9.4% and 12.9%, respectively, on the prior year due to lower dividends from its resource and energy holdings. The Company declared a final dividend of 28 cents per share, fully franked, comprising an ordinary dividend of 20 cents per share and a special dividend of 8 cents per share. This takes the full year dividend for the FY24 period to 45 cents per share, fully franked, up from 37 cents per share in FY23. 

This is first special dividend paid in the Company’s history and will be sourced from retained earnings which comprise special dividends received from its investments over a number of years.

As at 30 June 2024, AUI had over 3 years of dividend coverage at an annual dividend of 45 cents per share in the retained earnings. Given the NPAT often covers the dividend payment the Company does has sufficient reserves for the ongoing special dividend. Income would have to decline sharply for consecutive years for the Company to eat through its reserves. With regards to the franking account, after the payment of the final dividend, the Company has more than 1 year of fully franked dividend coverage without the accumulation of additional franking credits. The Company generates its franking credits from both taxes paid and franked dividends/distributions received from the investments in the portfolio.

WAR Takes Cash from QVE Acquisition

WHF Considering Increase to Dividends

The Company stated that it is considering increases to the dividend subject to a further leg of sustainable income growth from the portfolio of investments and dependent on market conditions. The Board has always ensured that increases to the dividend will be sustainable for the long-term and we expect this time to be no different. 

WCM Global Growth Limited (ASX: WQG) reported its FY24 results on 15 August 2024. NPAT was up 21.9% on the pcp to $45.3 million, driven primarily by the increase in the value of the portfolio, which returned 25.6% over the 12-months to 30 June 2024. The Company had previously advised a June quarter dividend of 1.76 cents per share, however due to the portfolio performance the Company increased the June quarter dividend to 1.81 cents per share, fully franked.

WQG was trading at a double-digit discount to NTA as at 31 July 2024. We view the discount to provide an attractive entry point for the Company that has delivered strong returns and provides an attractive grossed-up dividend yield for a global equity portfolio.

PM Capital Global Opportunities Fund Limited (ASX: PGF) reported its FY24 results on 8 August 2024. Net revenue from ordinary activities was down 0.42% on the pcp to $195.98 million and NPAT was down 0.98% on the pcp to $125.53 million.

The strong performance of the portfolio in recent years has resulted in the Company increasing dividend guidance for FY25 to 11 cents per share, fully franked. The Company has a healthy level of dividend coverage through its retained profits and profits reserve. 

In July, the Company announced its was seeking to raise $120 million through a Placement to wholesale investors and a Share Purchase Plan (SPP). The Company raised $135 million through the Placement and $16 million through the SPP for a total of $151 million. New shares were issued at a price of $2.19 per share, which represented the NTA at the time of the announcement of the capital raising. 68.8 million new shares have been issued through the Placement and SPP with the Company now having 478.4 million shares on issue and a market cap in excess of $1 billion as at the date of this report. 

Metrics is raising capital for what will be their third LIT. The Metrics Real Estate Multi-Strategy Fund (ASX: MRE) is a stapled structure consisting of Metrics Real Estate Passive Trust and Metrics Real Estate Multi-Strategy Active Trust. Metrics is seeking to raise $300 million through the issue of 150 million stapled units at $2.00 per unit.

The Fund is designed to provide broad exposure to commercial real estate (CRE) investments in Australia and New Zealand, with the ability to invest in Developed Asia. The objective of the Fund is to provide income, preserve capital with the potential for equity upside with the portfolio investing across the capital structure, including senior loans, mezzanine dent and equity instruments. The Fund has a total target return of 10%-12% p.a, net of management fees and expenses, through the economic cycle.

The Passive and Active Trusts will invest in Sub-Trusts being the Metrics CRE Multi-Strategy (Debt) Trust and the Metrics CRE Multi-Strategy (Equity Trust). The Sub-Trusts will invest in and alongside two wholesale funds being the MCP Real Estate Debt Fund (REDF) and the Metrics Real Estate Equity Opportunities Fund (MREPIIM). An overview of the structure of the Fund is provided below. 

The Passive Trust is expected to qualify as an AMIT and therefore returns will flow through the Passive Trust and be subject to tax by unitholders. The Active Trust is expected to be a public trading trust and taxed as a company with the Active Trust paying tax on taxable income and then paying distributions which may be franked. As such, distributions received by the Fund may be partially franked.

TGF Taking Another Look at the Structure

This suggests the Board is considering restructuring the Company as a listed or unlisted trust to provide shareholder’s the opportunity to exit at NTA. The response from the market has been muted with the Company continuing to trade at a discount to pre-tax NTA of ~20% at the date of this report based on the most recent NTA release. We attribute this to a level of uncertainty with regards to the outcome of the review given the Board conducted a review last year and it was determined that the available options were either infeasible and/or a prohibitive cost to shareholders. The Chair highlighted in the AGM address in November 2023 that TGF’s portfolio includes assets that do not offer daily liquidity and therefore an ETMF option was not available. This suggests that if the Company were to move forward with a structural change it would likely be as an unlisted trust. 

Ryder Capital Limited (ASX: RYD) has completed the strategic review that was announced at the AGM in 2023. The Board have recommended no action be taken with regards to the structure.

The decision also took into consideration the strong performance in the FY24 period, with gross portfolio performance of 27.1% and an increase in NTA (after tax on realised gains and before tax on unrealised gains) of 17%. The strong portfolio performance saw the Company declare a final dividend of 5 cents per share, fully franked.

BTI Invests in Hapana Holdings Pty Ltd

BTI invested $7.7 million in Hapana alongside OIF Ventures who invested $9.6 million. The funds will be used to accelerate investment in product development, expand the onboarding and operations teams, and support continued growth in international markets.

GCI Updates Investment Guidelines

At least 50% of the portfolio will continue to be invested in Investment Grade assets, however the maximum exposure to Non-Investment Grade ABS has increased from 15% to 25%.