• WAM Capital Outperformance: Outperformed the All Ordinaries Index by 14% and the Small Ordinaries Index by 17%.
• WAM Research Outperformance: Outperformed the All Ordinaries Index by 18% and the Small Ordinaries Index by 21%.
• WAM Microcap Outperformance: Outperformed by 12%, marking the seventh consecutive year of outperformance since its IPO in 2017.
• WAM Active Outperformance: Outperformed its benchmark by 26%.
• Dividend Yield: WAM Capital trading at a fully franked dividend yield of around 10% compared to the market average of 4%.
• Net Tangible Assets (NTA): Declined by about 5% per year due to high dividend payouts, but recent performance has added to the NTA base.
• Profit Reserve Coverage: 1.5 years of dividend coverage, up from 0.7 years the previous year.
• Premium to NTA: Historically traded at a 16% premium, currently at parity with NTA.
• Small-Cap Market Performance: Small-cap companies underperformed by 2% in August, while the broader market was up 0.4%.
• Sector Performance: Healthcare and financial services sectors performed well, with companies like Healius, Australian Clinical Labs, and Judo Bank outperforming.
• New Zealand Market: Noted a 30% decline in foot traffic in New Zealand stores in June and July.
• Stock Highlight - HMC Capital: Current funds under management at $12 billion, with potential growth to $50 billion.
• Stock Highlight - Service Stream: Expected margin expansion due to a full pipeline and easing labor wage inflation.
• Stock Highlight - Smartpay: Dominant payment terminal provider in New Zealand, with potential earnings tripling over the next two years.
• Stock Highlight - Integral Diagnostics: Merger with Capitol Health expected to create significant synergies and potential valuation upside.

• Warning! GuruFocus has detected 2 Warning Sign with ASX:WAA.

Release Date: September 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WAM Active Ltd (ASX:WAA) outperformed its benchmark by 26%, showcasing strong performance in the larger small-cap companies.
• The company has been able to take advantage of increased capital markets activity, including discounted stock lines and acquisitions.
• WAM Active Ltd (ASX:WAA) has a market-driven process that has been beneficial in the current environment.
• The company has a positive outlook on small caps, anticipating a potential turnaround as interest rates stabilize or decrease.
• WAM Active Ltd (ASX:WAA) has a strong dividend yield, providing a significant return to shareholders compared to the broader market.

Negative Points

• The small-cap sector has underperformed the broader market, creating a challenging environment for WAM Active Ltd (ASX:WAA).
• There has been a lack of initial public offerings and capital markets activity, which the company had anticipated.
• The share price of WAM Active Ltd (ASX:WAA) has been affected by cyclical factors, including a decrease in the premium to net tangible assets.
• The company faces challenges with the underperformance of small caps, which it views as cyclical but persistent.
• WAM Active Ltd (ASX:WAA) has experienced frustration with the depletion of its investable universe due to takeover activity.

Q & A Highlights

Q: Did WAM Capital manage to exit Megaport prior to the disappointing results announcement? A: Tobias Yao, Portfolio Manager, stated that they managed to exit around 60% to 70% of the holding at around $12 to $13. They still had a small position going into the results, which was detractive, but they did sell a significant portion at a higher price.

Q: Given the significant decline in Celsion's share price, is the market concerned about its future? A: Oscar Oberg, Lead Portfolio Manager, mentioned that Celsion was one of their holdings and was probably the most disappointing result over the reporting season. He noted that management and the Board misread the market's desire for capital discipline, leading to the share price drop. However, he believes the company is still viable and could be a takeover target.

Q: If you had Tabcorp Holdings, would you continue to hold it or sell it at a loss? A: Oscar Oberg expressed confidence in the new CEO, Gillon McLachlan, to fix the company, although it might take time. He noted that the balance sheet needs fixing and that they would participate in a capital raise if it occurs.

Q: Are you still positive on EML Payments? A: Tobias Yao explained that EML Payments had new management and was undergoing a turnaround. The Board had provided margin targets, which the new CEO is reassessing. They believe the company is turning a corner, although it has taken longer than expected.

Q: What are your views on Smartpay regarding the government's review into surcharging? A: Oscar Oberg stated that they have increased their position in Smartpay and believe the review is right. He emphasized that Smartpay and Tyro are not the ones imposing surcharges; it's the retailers. He remains bullish on Smartpay, particularly due to its New Zealand operations.

Q: Do you think BSA is a logical acquisition target for Service Stream? A: Tobias Yao mentioned that Service Stream is focusing on organic growth and potentially diversifying its revenue base through acquisitions. Oscar Oberg added that BSA had a strong result and is a cheap stock, making it worth considering for their microcap fund.

Q: Are you still excited about Austin Engineering? A: Oscar Oberg confirmed that they are still excited about Austin Engineering. Despite a share price fall due to high expectations, the company had a good result and remains cheap with a strong outlook.

Q: What's your view on the data center industry after the recent Blackstone deal? A: Tobias Yao expressed bullishness on the data center space, highlighting SDC as a key player. He noted that demand far outstrips supply, and companies with assets in the ground are well-positioned to benefit.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.