Capital raisings are coming thick and fast for listed investment companies

Rodney Lay

Risk Return Metrics

Welcome to the Risk Return Metrics Listed Investment Company (LIC) / Listed Investment Trust (LIT) Monthly for July 2021. As usual, the key components of this monthly include comprehensive profiles on 90 LICs/LITs, performance tables, sector performance ranking analysis and monthly newsflow. On the topic of the latter, capital raisings are coming thick and fast. RRM refers readers to the WHF article below for what view as key criteria for the ability for a LIC/LIT to currently raise additional capital.

WAM Leader’s (ASX: WLE) capital raise

Who said the LIC sector couldn’t raise Capital? On 13 July, WAM Leaders announced a pro-rata one-for-five non-renounceable Entitlement Offer at an issue price of $1.44 a share, representing an 8% discount to the 12 July closing share price of $1.565 per share and equal to WLE’s pre-tax NTA of $1.44 per share as at 30 June 2021. The offer equates to a maximum capital raise of approximately $240 million, having the potential to increase total FUM to circa $1.45 billion, and making it the sixth-largest LIC/LIT (assuming the MLT/WHSP merger proceeds). This announcement was part of a broader announcement of a record operating profit for the FY21 period (on the back of 37% portfolio returns for the period) in addition to a final dividend (ff) of 3.5cps, providing shareholders with a fully franked dividend yield of 4.5% and a grossed-up yield of 6.4%. RRM also notes The Company recorded a profits reserve of 35.3 cents per share as of 30 June 2021, representing 5.0 years of dividend coverage for shareholders. Just like PIC, which recently issued a 1 for 1 Bonus Options, it is all about timing. And on that front, RRM suspects this will not be the last capital raise announcement over the next month, or so.

Whitfield (ASX: WHF) raises capital (too)

On 13 July, WHF flagged its intention to raise additional capital, mainly through an institutional placement (the "insto" channel has several benefits over retail). In RRM’s view, WHF was a clear candidate to go. Why? It has solid numbers; moved to a nice premium to NTA for the first time in a very long time; is a great consistent and fully franked yield, and because of the money coming out of MLT. There was a lot of criticism directed at the LIC sector in recent years. But performance since peak COVID may have highlighted to such investors that: the benefits of captive capital to capitalise on market dislocation events, and that a contraction in a discount to NTA (or increase in a premium to NTA) augments fundamental performance (just look at the share price returns of RF1 since March 2020, for example). On the topic of RF1 . . . but we would be merely speculating.

AUI / DUI – When old school goes new school

We recently published an article regarding AUI / DUI (Australian United Investment Company / Diversified United Investment). But under the guidance of relatively recently appointed Company Secretary James Pollard, we are happy to see changes are afoot. Note the new websites. And this is no bad thing, with AUI / DUI having nothing to hide. 

Both vehicles have performed relatively well and in a manner that is true to the larger cap old-style LIC style. In fact, there is many a virtue that can be made regarding AUI/DUI, in just the same way as AFI, ARG and MLT. Specifically: 1. As an ‘old style’ LICs, and by virtue of its capital account status/material embedded unrealised capital gains, portfolio turnover is necessarily low. The virtue of this is what you see is what you get regarding the stock, sector, factor tilts. No surprises. While it is commonly stated that past performance is not indicative of future performance, old-style LICs can deliver persistent, relative performance, especially against other old-style LICs. Again, the point is to note the relative stability and the ‘no surprises’ aspect.

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Rodney Lay
Rodney Lay
Risk Return Metrics

Investment analyst with particular experience in listed and unlisted investment strategies, equities and structured products.

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