Listed managed investments - PL8, MXT & FPC look to raise capital

There was plenty of activity coming into the end of the year in the LMI market with a number of LICs/LITs looking to raise capital. Below we take a look at the key news flow for the month of November 2023 with the attached report providing full details of the news flow as well as pricing and returns for the LMI market as at 31 October 2023.

Rob Luciano Resigns from VGI Partners: During the month, Rob Luciano resigned from VGI Partners, a wholly owned subsidiary of Regal Partners Limited (ASX: RPL). Rob was the Founder and Chief Investment Officer of VGI Partners and Portfolio Manager of VGI Partners Global Investments Limited (ASX: VG1). Rob’s resignation follows a six-month period of sabbatical leave.

PM Capital to be Acquired by Regal Partners: On 3 November 2023, PM Capital Global Opportunities Fund Limited (ASX: PGF) confirmed rumours that the investment manager of PGF, PM Capital Limited, has entered into an agreement with Regal Partners Limited (ASX: RPL), in which RPL will acquire 100% of the issued shares of PM Capital Limited.

PL8 Announces SPP: Plato Income Maximiser Limited (ASX: PL8) has announced a Share Purchase Plan (SPP) providing shareholders the opportunity to acquire between $2,500 and $30,000 worth of PL8 shares. The offer opened on 23 November 2023 and is scheduled to close on 11 December 2023. Shares under the SPP will be issued at the lower of: 

• $1.04 per share, which represents the pre-tax NTA per share plus the franking credit balance per share on 20 November 2023; and 
• the pre-tax NTA on the day the SPP closes (scheduled for 11 December 2023) plus the franking credit balance of $0.024 per share on 20 November 2023.

The maximum issue price of $1.04 per share represented a 15.4% discount to the close price of PL8 on 20 November 2023, the business day prior to the announcement. Shares issued under the SPP will be entitled to the December monthly dividend of $0.0055 per share. 

PL8 has been trading at a premium to pre-tax NTA for a prolonged period of time. The SPP provides PL8 shareholders the opportunity to acquire additional shares at pre-tax NTA. In response to the announcement, the share price declined towards the pre-tax NTA. In a recent webinar, the Portfolio Manager, Dr. Don Hamson, acknowledged the investment strategy was close to capacity, which may limit the ability of the Company to undertake further capital raisings.

The Company believes the profits reserves and franking credit balance are sufficient to maintain the current level of monthly dividends with any additional capital raised.   

RYD has traded at a discount to pre-tax NTA for the majority of the Company’s history. The options available to RYD will include restructuring to an open-ended listed fund, delisting and operating as an unlisted unit trust or winding up the company and returning capital to shareholders. 

The Trust raised ~$196.4 million through the Placement with the Trust to issue 98.2 million new units. The UPP offers investors the opportunity to acquire up to $30,000 of new units. The UPP is scheduled to open 11 December 2023 and close on 30 January 2024.

MXT investors have benefited from the increasing interest rate environment with distributions for the FY23 period increasing 77% on the prior year with the Trust currently offering attractive risk-adjusted returns.  

The maintenance of the annual dividend amount amongst a difficult market for small industrials and a significantly increased number of shares on issue in recent years has seen the Profits Reserve become depleted. As was highlighted in the Chair’s address at the recent AGM, “to sustain a fully franked dividend of 15.5 cents per share, at the current net asset level, the investments portfolio would need to be approximately 16% per annum, grossed-up for expenses and fees.” This is a high level of returns to generate consistently, particularly in the current market environment, resulting in heightened risks regarding the prospects of a dividend cut in the near-term. 

In the Chairman’s address at the AGM in November, the Chairman detailed that the Board has reviewed the structural options to address the discount. The Board concluded that the available options are either infeasible or pose a prohibitive cost to shareholders. As such, the Company has no intentions to restructure to address the discount to NTA. 

This is the second SPP undertaken by the Company in the last 12-months and comes after the Company undertook an Equal Access Buy-Back (EABB) scheme which resulted in the Company buying back over 13 million shares in total across the three tranches. The EABB scheme was implemented to allow shareholders the ability to convert their FPC shares to units in Fat Prophets Global High Conviction Hedge Fund (ASX: FATP), an ETMF managed by the Manager of the FPC portfolio. FPC shares were bought back at a price equal to a 3% discount to the NAV of the Company.

WQG Declared Dividend of 1.68 cents per share for September Quarter and Reaffirms Dividend Guidance: On 15 November 2023, WCM Global Growth Limited (ASX: WCM) announced a dividend of 1.68 cents per share, fully franked, for the September quarter 2023. The Board also reaffirmed its intention to pay dividends of 5.22 cents per share, fully franked, for the next three quarters. This will take dividends for the FY24 period to 6.9 cents per share, which represents a dividend yield of 6.3% (9.0% grossed-up) based on the share price at 31 October 2023.

WHF Declares Interim Dividend of 10.25 cents per share: During the month, Whitefield Industrials Limited (ASX: WHF) released its 1H’FY24 results for the period ending 30 September 2023. The Company reported Investment Income of $12.15 million, up 15.8% on the pcp and NPAT of $907 million, up 16.7% on the pcp.

The Company declared an interim dividend of 10.25 cents per share with the Company noting that the continuing growth in EPS will increasingly position the Company to consider increases to dividends in future years.

Jennifer was the Chief Executive of the Business Council of Australia from February 2011 to October 2023. Jennifer is currently Chancellor of the University of Western Sydney, a Non-executive Director of Wesfarmers, Chair of the Western Parkland City Authority and Chair of the Board of Studio Schools of Australia. Jennifer is also a patron of Mental Health Australia, co-patron of Pride in Diversity and a patron of the Pinnacle Foundation. 

The investment will increase LSX’s holding in Plutonic from 31.1% to between 37% and 48% depending on the size of the capital raise with the company seeking to raise between $3 million and $5 million at $0.10 per share. The Company stated in its announcement - “Plutonic is a key investment to Lion for the unique leverage to discovery it provides. A discovery of gold or copper mineralisation at Champion could result in meaningful value creation, which Lion has a strong exposure to via its high percentage ownership. This investment has been made for a low cost and currently represents a small proportion of Lion’s overall value. Plutonic is unlisted so this exposure is a unique aspect of Lion that is not easily obtainable elsewhere.”