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LICs LICs

Wilson Asset Management Reports Record Operating Profit and Maintains Final Dividend

Currently, last traded price is $2.345. Till June 2021 net profit is 266.62 Million while Revenue is 379.57 Million.

Till 31 July 2021, Pre – tax net tangible asset is $1.89 while post – tax net tangible asset is $1.93 and Annualised dividend yield is 7 percent.

Gross asset of Wilson Asset Management Capital Limited is 1,682.2 Million.

WAM Capital’s Investment portfolio has returned 16.6 percent p.a and their overall 22 years outperforming the market by 7.9 percent p.a.

WAM Capital Limited ((WAM)) reported a record operating profit before tax of $343.3 million for fiscal year 21 due to strong portfolio performance. In FY21, WAM’s investment portfolio increased 37.5 percent (before expenses, fees, and taxes). 

The final dividend was maintained at 7.75cps, fully franked, bringing the full year dividend to 15.5cps, fully franked. This is consistent with the full-year dividend for fiscal year 2020.

WAM offered the most appealing dividend yield for domestic equity LICs as of 31 July 2021, with a dividend yield of 7.01 percent despite trading at an 11.6 percent premium.

Company Profile 

WAM Capital Limited (WAM) is an Australia-based investment company, which is primarily an investor in equities listed on the Australian Securities Exchange. The Company’s investment objectives are to deliver a stream of fully franked dividends, provide capital growth and preserve capital. The Company engages in investing activities, including cash, term deposits and equity investments. The Company’s trading opportunities are derived from initial public offerings, placements, block trades, rights issues, corporate transactions (such as takeovers, mergers, schemes of arrangement, corporate spinoffs and restructures), arbitrage opportunities, listed investment companies (LIC) discount arbitrages, short selling and trading market themes and trends. Wilson Asset Management (International) Pty Limited is the Company’s investment manager.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Currencies Trading Ideas & Charts

Recent flash crash urges Bitcoin whales to buy it at a discount

 nearly 15% less than the previous day and reflecting a loss of more than $410 billion. A selling spree among the investors drove the prices of nearly every single coin, erasing the gains of the retail traders amidst the news of El Salvador’s first day accepting bitcoin as legal tender. This move resulted from the $4 billion cascading liquidations from the over-leveraged Bitcoin and Ethereum futures.

In the middle of the flash crash, El Salvadoran President Nayib Bukele remarked that the country took advantage of crashing prices to purchase 150 bitcoins in addition, boosting its total to 550 coins, which amounts to about $25 million. The correction in the Bitcoin market highlighted the need to book profits consistently along the rally. 

The Bitcoin fear and greed index, which is considered as an indicator of the overall sentiment of traders in the market, recently indicated ‘fear’. Analysts expect a potentially volatile period ahead for Bitcoin, as nearly 336,000 traders positions were liquidated in the crash. However, post Tuesday’s downfall, BTC is now on its road to recovery. Spent output ratios that look at profitability and losses taken over a particular time frame shows that the long-term holders have largely maintained their positions indicating the larger wallet moves were on-balance active short-term traders. On the contrary, it is observed by the analysts that the whales have been significantly buying BTC, increasing their holdings. Historically, whenever large wallet investors have increased their holdings and accumulated BTC, a price rally has followed. The proponents have claimed that if new buyers constantly inject capital in Bitcoin, it could break key resistance and set an all-time new record, further in 2021. Analysts expect Bitcoin to continue upwards climb and target the $57,000 level next.

About Bitcoin:

Bitcoin is the world’s first decentralized cryptocurrency- a type of digital asset that uses public-key cryptography to record, sign and send transactions over the Bitcoin blockchain.

Launched in 2009, bitcoin is the world’s largest cryptocurrency by market capitalization. Unlike fiat currency, bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain. Bitcoin’s history as a store of value has been turbulent; it has gone through several cycles of boom and bust over its relatively short lifespan. As the earliest virtual currency to meet widespread popularity and success, bitcoin has inspired a host of other cryptocurrencies in its wake.

(Source: FXStreet, Investopedia, Forbes)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Australian Brokers Call – 13 September 2021

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Daily Report

Morning Report Global Markets Update – 13 September 2021

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USA Market Outlook – 10 September 2021

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Commodities Trading Ideas & Charts

APA’s Medium-Term Outlook Is Supported by Accretive Expansion Opportunities

Limited regulation, scale, and a superior skills base help it capitalise on gas demand growth and generate competitive advantages that warrant a narrow economic moat. However, gas market reform will weaken its competitive advantages. Fair value uncertainty is medium, as secure revenue is balanced by high gearing and limited transparency over customer contracts.

Infrastructure, primarily gas transmission and distribution, is the core business, generating more than 90% of group EBITDA. The rest comes from part-owned investments and asset management. The investments division owns stakes in smaller gas infrastructure companies, providing solid returns and giving some influence. The asset management division provides management, operating, and maintenance services to most part-owned companies, leveraging APA Group’s skills base to generate good returns outside the regulatory framework.

APA Group’s core strategy during the past decade has been to create an integrated east-coast gas transmission grid connecting multiple gas sources to multiple markets. This is now complete following numerous acquisitions and the firm is progressing a similar strategy in Western Australia, connecting to remote mine sites and towns. Expansion creates economies of scale and synergies from linking pipes together into a network with one manager.

Financial Strength

APA Group is in sound financial health. It carries a lot of debt, but this should be manageable given highly secure revenue. Net debt/EBITDA to fall to 5.5 times in fiscal 2023 as development projects complete and earnings start to flow. The firm’s average interest rate is around 4.8%, down substantially in recent years following the issue of the cheap debt to fund the WGP acquisition and expensive hedges rolling off on other debt. The recent refinancing of medium-term debt should reduce average interest rate to about 4.8% in fiscal 2022. Average debt maturity is long at more than seven years, and 100% of interest rates are fixed or hedged.

Our fair value estimate for APA Group is AUD 9.80 per security. Our valuation implies a forward fiscal 2022 enterprise value/EBITDA multiple of 12.5 times, with a distribution yield of about 5.4%. Expansion projects drive solid EBITDA growth of 4.8% on average for the next five years in our discounted cash flow model, while revenue growth for some existing assets is likely to be soft because of regulatory headwinds, gas market reform and some demand shifts.

Bulls Say’s

  • APA Group owns and operates an excellent portfolio of gas infrastructure assets. Its large footprint ensures it is at least partially exposed to growth anywhere in the country.
  • The east-coast gas grid provides improved reliability, greater flexibility, a wider range of services, and economies of scale over single pipelines.
  • Limited regulation allows stronger returns on investment than regulated peers, particularly from organic expansion. However, gas market reform will reduce its advantage.
  • Strong returns are possible from organic growth.

Company Profile 

APA Group is Australia’s largest gas infrastructure company with an extensive portfolio of transmission pipelines, distribution networks, and storage facilities. It is internally managed and has direct operational control over all assets. It owns minority stakes in a few smaller gas infrastructure companies and manages operations for most of these. The stapled securities comprise a unit in Australian Pipeline Trust and in APT Investment Trust.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Qube reported solid FY 20 result and also made progress in the property monetisation process

Investment Thesis:

  •  The assets are attractive as well as strategically located.
  • Leveraged to improving economic growth (e.g. commodity markets, new passenger vehicle sales).
  • Improved margins on account of additional project work in future years.
  • Moorebank Logistics Park was successfully ramped up and offered logistics services at incremental margins.
  • Better cost outcomes and improved margins on account of technological advances (and automations) at its ports and operations.
  •  In order to supplement organic growth potential bolt-on acquisitions is done 
  •  The balance sheet position of Qube is sound enough.

Key Risks:

  • Excess capacity and pricing pressure because of Downturn in the domestic economy (or key end markets such as agriculture, retail)
  • Margin pressure due to cost pressures. 
  • Coronavirus outbreak leading to potential direct and indirect impacts.
  • Value destructive acquisition (dilutive to earnings and a distraction for management). 
  • Margin erosion because of competitive pressure. 
  • High competition in the logistics industry.
  • Market expectations are not met by QUB in achieving capacity utilization at Moorebank Logistics Park.

Key Highlights: Relative to the pcp:

  • QUB reported solid FY20 results reflecting record underlying earnings.
  • The firm majorly has four division-operating, property and patrick
  • Revenue increased by 7.9% to $2,032.4.
  • The increase in revenue was majorly driven by its operating and Patrick division.
  • The Operating Division experienced high volumes across most parts of the business with container, grain, forestry, motor vehicles and bulk volumes particularly strong, and the result also benefited from earnings from growth capex undertaken in the current and prior periods.
  • The operating division saw underlying revenue growth of by 12.5% to $2.0bn driven by Logistics, up by 8.5% to $860.3m and Ports & Bulk, up by 8.0% to $1,148.2m.
  • Property underlying revenue of $23.7m. The division made a loss of $2.1m
  •  In Patrick, underlying contribution from Qube’s 50% interest in Patrick of $41.3m
  • EBITA increased by 14.1 percent to $182.9 million.
  • The net profit after tax (NPAT) increased by 36.8% to $142.5. 
  •  NPATA was up 31.7 percent to $159.6.  
  • EPS was up by 16.7 percent at 8.4cps. 
  •  The Board declared a final dividend of 3.5cps (full-year dividend of 6.0cps, up 14.4%). 
  • The leverage ratio (ND/ND+E) of 29.2% is substantially below the goal range of 30-40% set by management.

Moorebank monetisation: 

QUB entered non-binding commercial terms to sell 100% of its interest in warehousing and property components of the Moorebank project (MLP project) to LOGOS for a total consideration of $1.67bn before tax, transaction costs and other adjustments. QUB will retain ownership of IMEX terminal and interstate terminal. Management noted “subject to the completion of the monetisation process, the Board will assess the appropriate use of the monetisation proceeds which is expected to include debt reduction, investment in accretive growth opportunities and potential capital management initiatives”.

Company Profile:

Qube Holdings Limited (QUB) is a diversified logistics and infrastructure firm that serves clients in both the import and export cargo supply chains. Ports & Bulk (integrated services, bulk material handling, and bulk haulage), Logistics (Australia’s largest integrated third-party container logistics provider), and Strategic Assets are the company’s three primary segments (investing and developing future infrastructure).

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Commodities Trading Ideas & Charts

Woodside Petroleum operating revenue increases by 31% buoyed by demand for LNG and oil

Investment Thesis:

  • Superior free cash flow breakeven price relative to peers have been generated by quality assets (NWS, Pluto, Australia Oil, Browse, Wheatstone) 
  • Focus on cost reduction and positioning of the business for lower oil price environment
  • Earnings improvement through improving oil and gas prices 
  • WPL well positioned to fulfil increasing LNG demand 
  • Strong balance sheet position
  • Good with free cash flow generation
  • Potential exploration success in Myanmar, Senegal, Gabon. 
  • Change in CEO could either result in some uncertainty around future strategy or it could also be an opportunity to refresh the strategy with a “fresh” set of eyes 

Key Risks:

  • Imbalance in supply and demand in global oil/gas markets
  • Low oil / LNG prices
  • Not meeting cost-out targets (e.g. reducing breakeven oil cash price)
  • Disruptions in production

Key Highlights:

  • WPL reported 31% increase in operating revenue, buoyed by higher realised prices mainly driven by the recovery in demand for LNG and oil
  • Underlying NPAT was up +17% 
  • Board declared an interim dividend of US 30cps (up +15% over pcp), representing a payout ratio of ~80% of underlying NPAT
  • Announcement of merger with BHP’s oil and gas business, which is expected to deliver cost synergies north of US$400m p.a. by leveraging combined capabilities and capital efficiency, creating a higher margin oil portfolio
  • Improvement in balance sheet with gearing declining -110bps over 2H20 to 23.3%, remaining within target range of 15-35% and free cash flow (FCF) was up +18% to $311m.
  • Appointment of Meg O’Neill as the new permanent CEO and managing director
  • Revenue generated by WPL segments are; Pluto contributes 47% of the total revenue, NSW contributes 26%, Australia Oil contributes 14% and Wheatstone contributes 13%.
  • EBITDA generated by WPL segment are; Pluto contributes 49% of the total EBITDA, NSW contributes 24%, Wheatstone contributes 15% and Australia Oil contributes 12%.

Company Description:

Woodside Petroleum Ltd (WPL) explores for and produces natural gas, liquefied natural gas, crude oil, condensate, naptha and liquid petroleum gas. WPL owns producing assets in the North-West Shelf (NWS) project, Pluto LNG and Australian Oil. WPL is currently developing Browse, Sunrise, Wheatstone, Grassy Point and Kitimat LNG. WPL is currently undertaking exploration activities in Myanmar, Senegal, Morocco, Gabon, Ireland, NZ and Peru.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Daily Report Financial Markets

Shanghai Market Outlook – 10 September 2021

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Indian Market Outlook – 10 September 2021

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