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

Claire Aitchison

Independent Investment Research

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.

Marco Anselmi and Simon Birrell took over as Portfolio Manager’s for the VG1 portfolio when Rob was on leave and will continue in this position now Rob has resigned with oversight from the CIO of Regal Funds Management, Phillip King.  

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.

Paul Moore, Chief Investment Officer (CIO) of PM Capital Limited, will continue to manage the PGF portfolio and investment team with no changes to the investment strategy. The acquisition will include an upfront cash component of $20 million with deferred RPL scrip consideration of $130 million, with the conversion of scrip consideration subject to long-term arrangements, including the continued employment of Paul Moore and certain revenue and FUM targets among other conditions. Scrip consideration will occur at various dates between 30 September 2024 and 1 July 2028, effectively locking in Paul Moore’s employment for over four years.  

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 Commence a Review to Address Discount: At the AGM, Ryder Capital Limited (ASX: RYD) stated that the Board has commenced a review to address the discount at which RYD has traded and the low levels of liquidity. The Company will seek to provide a solution whereby shareholders are able to realise their investment at NTA. The Company anticipates it will be in a position to update shareholders no later than February 2024 with the outcomes of the review and the proposed course of action.

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. 

MXT Announces Placement and UPP: On 29 November 2023, Metrics Master Income Trust (ASX: MXT) announced a Placement to wholesale and sophisticated investors and a Unit Purchase Plan (UPP). New units for both the Placement and UPP will be issued at $2.00 per unit. 

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.

Capital raised will be invested in accordance with the investment mandate and target return. MXT invests in the MCP Wholesale Investment Trust, which in turn invests in three wholesale funds managed by Metrics Credit Partners Pty Ltd: (1) Metrics Credit Partners Diversified Australian Senior Loan Fund (DASLF) (60%); (2) MCP Secured Private Debt Fund II (SPDF II) (20%); and (iii) MCP Real Estate Debt Fund (REDF) (20%). The wholesale funds provide exposure to the Australian corporate loan market but with differing risk-return investment profiles and target loan investments.

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.  

HM1 Refreshes Conference Portfolio: The annual Hearts & Minds Investment Leaders Conference was held during the month with Hearts & Minds Investments Limited (ASX: HM1) refreshing the Conference Portfolio with the stock picks from the Conference Managers. The Conference Portfolio represents 35% of the HM1 portfolio. The Conference Portfolio is tabled below.

WAM Poised for a Dividend Cut: WAM Capital Limited (ASX: WAM) Profits Reserve was below the semi-annual dividend amount at 31 October 2023 which means the portfolio will need to finish the year strongly to stave off a dividend cut.

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. 

TGF Board Changes: Ben Cleary and Todd Warren have stepped down from the Board of Tribeca Global Natural Resources Limited (ASX: TGF) to focus on the management of the portfolio. Following the resignation of Ben and Todd, the Board comprises three independent Directors. Rebecca O’Dwyer has taken over the position of Chair of the Board from Bruce Loveday, who remains a Director on the Board. 

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. 

FPC Announces SPP: During the month, Fat Prophets Global Contrarian Fund Limited (ASX: FPC) announced a Share Purchase Plan (SPP), providing shareholders the opportunity to acquire up to $30,000 of FPC shares at the lower of $0.90 per share or the five-day VWAP during the last five trading days prior to, and including, the closing date for the SPP. The offer opened on 20 November 2023 and is scheduled to close on 11 December 2023.
Capital raised will be invested in accordance with the investment objectives adopted by the Company, with the Company believing shareholders will benefit from the increased size of the Company. 

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.

In recent years, the Company has tried to grow through SPP’s while at the same time reducing the size of the Company through the EABB as well as implementing an on-market share buy-back in March 2023 to buy back shares when trading at a discount of more than 10%. It may be time for the Company to decide what its ultimate objective is with recent initiatives seeming to be at odds with one another. 

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.

In addition to reaffirming the dividend intentions for the FY24 period, the Board announced its intention to pay a dividend of 1.77 cents per share for the September quarter 2024, which will be the largest quarterly dividend paid if the guidance is followed over the next 12-months. 

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 stated that dividend growth was widely spread across a large number of holdings, with notable dividend growth from AGL, IAG, Suncorp, QBE, Promedicus, Computershare, CAR Group, Wisetech and Macquarie Group. 

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 Westacott AO Joins FGG Board: Future Generation Global Limited (ASX: FGG) announced that Jennifer Westacott AO will join the Board and be appointed Chair, effective 27 November 2023. Jennifer will assume the role of Chair from the acting Chair, Geoff Wilson AO, who will remain on the Board as a Non-Independent Director. 

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. 

LSX Increases Position in Plutonic: During the month, Lion Selection Group Limited (ASX: LSX) announced it had made a follow-on investment in Plutonic Limited, committing to invest $2 million in a recent capital raising by the company. 

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.”

LSX continues to have a large cash balance which it is seeking to deploy in a market which has weakened.
The views here are not recommendations and should not be considered as investment advice.

Claire Aitchison
Head of Equities & Funds Research
Independent Investment Research
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