September 28, 2022
  • September 28, 2022

WAM Capital stock price rises despite $426 million loss

By on August 15, 2022 0

Image source: Getty Images

The WAM Capital Ltd (ASX:WAM) The stock price is doing well today after the company released its full-year 2022 results. WAM Capital shares are currently trading at $1.87 each, up 0.81% for the day.

It comes after the listed investment firm (LIC) closed at $1.85 last week and opened at $1.86 per share this morning.

What did WAM Capital report?

  • Pretax operating loss of $425.9 million. That’s down from FY21 profit of $343.3 million.
  • After-tax loss of $293.7 million. That’s down from FY21 profit of $266.6 million.
  • Performance of WAM Capital’s investment portfolio of -18.8% over the year
  • A final dividend of 7.75 cents per share declared

What else happened in FY22?

As an LIC, WAM Capital invests in a portfolio of other ASX stocks and assets on behalf of its shareholders. The company said its after-tax operating loss of $293.7 million was “inflated by a tax benefit of $132.2 million, by the tax benefit on the operating loss for the period and franking credits received on the franked dividend income of the investee companies”.

But the company said its operating loss for the year was “result of the performance of the investment portfolio over the year”.

The 18.8% loss in the WAM Capital portfolio for FY22 was a slight outperformance against the Small S&P/ASX Ordinary Accumulation Index. This reference lost 19.5% over the same period.

But it was also a marked underperformance of its other benchmark, the S&P/ASX All Ordinaries Accumulation Index. This fell by 7.4%. LIC had an average cash position of 13.7% in FY22.

In FY22, WAM Capital completed the acquisitions of PM Capital Asian Opportunities Fund, Westoz Investment Company and Ozgrwoth Limited. The LIC said it realized returns of 16%, 21% and 22% on these acquisitions, respectively.

WAM Capital has declared a final dividend of 7.75 cents per share, fully franked. This will be paid on October 28 after the company negotiates the ex-dividend on October 17.

This was the company’s last interim dividend and its final dividend for FY21. This brings WAM Capital’s annual dividend to 15.5 cents per share, the same amount it has paid out each year since 2018.

What did management say?

Here are some of the words of Geoff Wilson, Founder of Wilson Asset Management (WAM) and Chairman of WAM Capital:

Fiscal 2022 has been a turbulent time for equity markets…

WAM Capital’s investment portfolio has shrunk 18.8%, with an average cash weighting of 13.7% over the year. Since its inception, WAM Capital has achieved investment portfolio performance of 14.7% per year, outperforming the S&P/ASX All Ordinary Accumulation index 6.7% per year.

This long-term investment the outperformance of the portfolio was achieved thanks to the diligence of WAM Capital and proven investment approach, which emphasizes identifying undervalued growth companies with a catalyst.

In these uncertain times, we remain focused on our commitment to our proven investment process which has provided solid returns for over 20 years.

And after?

Regarding FY23, and WAM Capital warns that “the company’s ability to continue paying fully franked dividends depends on the generation additional profit reserves, thanks to the positive performance of the investment portfolio and franking credits”.

He told investors that as of June 30, 2022, WAM Capital had 8.7 cents per share in its earnings reserves. Of this amount, 7.75 cents will be distributed in the final October dividend.

This means that WAM Capital only had 1 cent per share of profit reserves as of June 30 if this dividend is taken into account.

WAM Capital Share Price Overview

WAM Capital’s stock price remains down 16.3% year-to-date 2022 so far (at the time of writing) and 15.2% over the past 12 months. This ASX LIC offers a dividend yield of 8.31% at the current share price.