Third LIC/LIT coming to market for 2024

Below we take a look at the key news items and announcements during October, which included the commencement of trading of MRE and a new LIC coming to market. In the attached monthly update, we also take a look at the state of play of premiums/discounts across a range of categories, with the current environment providing a number of attractive opportunities for investors to potentially enhance returns.

Whitefield Income Limited (expected ASX code: WHI) has lodged a Prospectus with ASIC. The Company is seeking to raise up to $200 million (before oversubscriptions) through the issue of up to 160 million shares at $1.25 per share. The capital raised will be systematically invested in a portfolio of Australian equities, predominantly from the S&P/ASX 300 Index. The Company’s objective is to generate regular distributable income including franking credits and deliver a total return similar to or higher than the benchmark index (S&P/ASX 300 Equal Weighted Franking Credit Adjusted Daily Tax-Exempt Total Return Index) over rolling three year periods.

The Company will employ a dividend harvesting strategy to maximise the income generated by the portfolio. The investment process is largely quantitative based using the proprietary models developed by the Manager. The portfolio will be diversified, typically comprising 70-100 securities. The portfolio will increase exposure to select securities during the dividend/distribution payment periods with any residual portfolio value invested in securities from the investment universe. This will result in significant turnover in the portfolio. The strategy seeks to be largely exposed to the market at all times with a small amount of cash held for liquidity purposes. The Company seeks to pay dividends monthly, franked to the maximum extent possible, with the payment of dividends expected to commence after the first full calendar quarter of operations.

The product is targeted towards retirees with the fully franked monthly dividend objective. The Company will be seeking to pay a base grossed-up dividend yield of 8%p.a. (net yield of 5.6%p.a.) over the long-term, plus top up/special dividends where available. The base yield would provide an above-market yield for investors. We note that the dividend yield objective is a target and may not be achieved by the Company. While the product is targeted towards retirees, an investment in the Company may appeal to other investors with the strategy offering a differentiated risk/return profile to the broader domestic market given the benchmark index is an equal weighted index. As such the portfolio provides a different level of exposure to companies in the market cap weighted index with equal exposure to both small and large cap stocks. With a maximum investment in a dividend harvest security of 4% of the portfolio value and an average security exposure of approximately 1.5%, the portfolio is significantly less concentrated to individual securities than the market cap weighted index in which the top 50 account for over 70% of the index. The portfolio will be largely exposed to the market at all times, therefore will have equity market volatility.

Metrics Real Estate Multi-Strategy Fund (ASX: MRE) Commences Trading

As we discussed in the LMI Monthly Update published on 6 September 2024, 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 debt 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.

Gryphon Capital Income Trust Raises $167.8 million

The Offer closed on 28 October 2024. The Offer was fully subscribed with the Trust raising $167.8 million issuing 83.89 million new units. This included 32 million to existing unitholders with the remainder issued to wholesale investors under the Shortfall Offer. The new units issued increases the number of units on issue to over 400 million units and increases the market cap of the Trust to ~$850 million.

On 10 October 2024, Zeta Resources Limited (ASX: ZER) announced that the major shareholder of the Company, UIL Limited, exercised its right to compulsory acquire all shares in the Company. Share were acquired at a price of $0.2973 per share, which was above the price of $0.22 per share prior to the announcement.

Following the compulsory acquisition ZER shares were suspended from trading.  

Naos Ex-50 Opportunities Company Limited (ASX: NAC) announced a Share Purchase Plan (SPP) Offer during the month, with the Offer capped at $5 million. Shares under the Offer will be issued at $0.45 per share, which was the pre-tax NTA of the Company as at 30 September 2024 and represented as 9.1% discount to the share price at the date prior to the announcement. The SPP Offer opened on 16 October 2024 and was scheduled to close on 5 November 2024.

WHFPB Converting into WHF Shares at Upcoming Reset Date

WHFPB holders may sell their shares on market prior to the last trading day (26 November 2024) if they do not want to convert to WHF shares. WHF is currently conducting an on-market buy-back of the shares to facilitate this process.

MFF to Acquire Montaka Global

Under MFF’s ownership, Montaka’s primary focus will be its research and portfolio management systems and processes to target long term results for unitholders in the funds it manages. Montaka’s existing senior investment team of Andy Macken, Chris Demasi and Amit Nath will continue in their respective roles as CIO/Portfolio Manager, Portfolio Manager and Director of Research at Montaka Global. All staff will be retained by Montaka Global and its funds will operate independently of MFF, which will continue to be managed by its existing portfolio manager.

NSC to Refinance Wholesale Notes

The Company will provide further details once the refinancing has been finalised. Refinancing of the notes is imperative given the Company had a market cap of $62.7 million as at 30 September 2024. A concern is that the interest obligations will be significantly higher than the current obligations.

During the month, Clime Capital Limited (ASX: CAM) completed the Share Purchase Plan (SPP). The Company raised $4.3 million through the SPP, issuing 5.3 million new shares. The new shares will be entitled to the September quarter dividend of 1.35 cents per share, fully franked.

BTI Sells Down Portion of SiteMinder Stake and Makes Follow-On Investments

BTI also announced that it had made a follow-on investment in Rosterfy and DASH Technology Group.

BTI also made a $10 million follow-on investment in DASH. The investment is structured as a $5 million equity investment and $5 million debt facility. The carrying value of the investment will be increased to $25 million. BTI’s investment will be utilised by DASH to fund its acquisition of Integrated Portfolio Solutions Pty Ltd (IPS). IPS was established in 2012 and administers over $10 billion of investment portfolios. IPS’s unique combination of technology and service removes the burden of portfolio administration and reporting as a ‘whole-of-wealth’ non-custodial platform. IPS currently serves investment advisers, family offices, financial planners, and ultra-high-net-worth clients. 

Argo Investments Limited (ASX: ARG) and Argo Global Listed Infrastructure Limited (ASX: ALI) announced the retirement of Russell Higgins from the respective Boards during the month.

Mr. Higgins had been on the Board of ALI since July 2018 and will retire effective 31 December 2024. Peter Wayne will take Mr. Higgins role as Chair, effective 1 January 2024. Mr. Wayne has been a Non-Executive Director on the ALI Board since 2022.

On 18 October 2024, Lowell Resources Fund (ASX: LRT) announced a Placement to wholesale and sophisticated investors and a Security Purchase Plan (SPP). The Fund raised $5.7 million through the Placement. 39.8 million new units were issued through the Placement at $1.10 per unit, which represented a 15.1% discount to the trading price prior to the announcement.

Capital raised from the Placement and SPP will be invested in line with the investment mandate. A portion of the capital raised is expected to be invested in Koonenberry Gold Limited (ASX: KNB), with KNB announcing that it had received a commitment from LRT in its $4.5 million placement. The capital raising by KNB is to support the acquisition of assets.