AMCIL Limited (AMH.AX) Earnings Call Transcript & Summary

Well, good afternoon, everyone. I'm Mark Freeman, the CEO and Managing Director of AMCIL Limited. I'm also the Portfolio Manager for AMCIL, having taken over that role about 2.5 years ago.  So welcome to this full-year result briefing. I'd like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today and pay my respects to the elders past, present, and emerging. Joining me today on the webinar we have Andrew Porter, our CFO; Matthew Rowe, our Company Secretary; and Geoff Driver, our General Manager of Business Development.  This briefing is based on the material available on the company's website. Presentation slides will change automatically via the webcast. [Operator Instructions].  So now we'll turn to the slides. Slide 2. There's a disclaimer just to say we're here to talk about the company. We're not giving any advice as such. So at this point, we'll move into the results, and I'll pass over to Andrew Porter, our CFO, to talk through those.

Thank you, Mark, and good afternoon, ladies and gentlemen. So for those of you that are seeing the presentation on screen, which hopefully is all of you, there are 4 boxes up there. The profit for the year, $6.7 million, that's the top left-hand box, down from $7.5 million in 2024. There was a reduction in the dividends that we received, part of that through the sale of some of the higher-yielding stocks and purchasing of stocks that have different growth profiles. And in some cases, like our larger stocks, BHP, et cetera, they reduced their dividends over the year. The count that was the revenue from cash deposits went up, of course, as one would expect in what had been an increasing interest rate environment. Also, we had slightly fewer gains on the trading portfolio this year. So that was the profit.  However, what's not included in that profit are the realized gains for the year. And after tax, AMCIL had about $13.7 million of realized gains. So AMCIL has had a history of paying out proportion of those as part of its total dividends. And this year is no exception, the exception perhaps being that it's slightly larger than it has been in more recent years. So the normal final dividend of $0.025 has been accompanied by a $0.03 special dividend. So that brings the total dividend for the year up to $0.065 as opposed to $0.04 last year.  The portfolio return of 6.4%, that is below the market of 15.1%, but Mark will be coming on to that later on. The management expense ratio, that's the cost of running the business at 56 basis points. That's the same as last year. That's $0.56 in for every $100 that you have invested in AMCIL. Regularly, the Board do a check against comparative investment type vehicles to make sure that those costs are within the parameters that the Board would like to see. They again did that exercise this year and are comfortable that we still continue to be a relatively low-cost investment vehicle.  Moving on to Slide 5. Obviously, shareholders will be aware that AMCIL is trading at a discount to its net tangible assets. This is an issue that is faced by the vast majority of LICs at the moment. So it's not just an Ansell issue, it is an LIC issue. The Board are very conscious of this. And 2 things have eventuated this year as part of those efforts to look at what we can do to reduce the discount. First of all, the company did do a share buyback during the year, so neutralized shares issued under the DRP and the DSSP during the year. And also the AICS, which provides staff for AMCIL and the other LICs, we've engaged a business development manager who has been talking to various investors and investor groups about the benefits of investing in a vehicle like AMCIL.  Ultimately, though, although we can take those steps, we can't control the share price, but the Board and management are very aware of it. So obviously, happy to take any questions in the Q&A afterwards. But in the meantime, I'll hand over back to Mark.

Thanks, Andrew. Now we'll get on to the portfolio performance and the activity. So we start with the performance, and these are the 1-, 3-, 5-year, 10-year numbers. So AMCIL's performance is shown after expenses, but also after tax. And obviously, to this point, we hadn't paid out a lot of franking credits we've been accumulated. We have obviously announced a special dividend of $0.03. So we don't include the franking until we've actually paid it out. So that crimps the performance. But still having said that, these are not the sort of returns we're looking for from AMCIL. I'll come to shortly. We do have a slide on what the last 2.5 years has looked like to put into perspective.  In that 2.5-year period, we had a very -- the first couple of years were very strong. Then that performance has slowed. There's been some rotation in the market. The market had a bit of a run, but it's interesting to go back and say, well, how have we gone over the last 2.5 years, and I'll come to that shortly.  So if we go back to what we're doing in AMCIL, it is a focused portfolio, and we've been consistent against our process over that time frame. It is a comparatively low-cost product. There's no performance fees. There's strong equity ownership by the directors and staff. We try to keep the portfolio relatively low turnover. And we want to stay in a portfolio, what I call quality stocks. We want to be in businesses that are moving forward. Ultimately, in the long run, share prices follow profit growth. So you want to be in stocks that are growing profits over time, and our frameworks have been set up to do that.  So if you move on to the next slide, we have -- just to go over our investment frameworks here. These have been set up to find companies that can grow profits over time. And the attributes of businesses that have that is usually companies that have a unique set of assets or an industry leadership position. So companies that dominate an industry have a strong propensity to produce high returns and grow profits, businesses that have a sustainable competitive advantage. We're wary of companies that have external risk factors. Unfortunately, we've caught one of those in the portfolio over this time frame, and it just shows you that these issues that I'm talking through how important they are, but I'll come to that shortly.  Balance sheets are critical. Many companies blown up through poor balance sheets. We prefer companies that have annuity-type revenue streams, and we want businesses that have effective management. So all those factors together usually drives a sustainable competitive advantage. These generally lead to high return on capital. So businesses that produce high return on equity generally perform well over time. When you're doing that, it gives you lots of cash to reinvest to continue to drive growth, continue to capture market share, build on your leadership position, and all these usually result in profit growth and therefore, shareholder value creation over time. And do we want to buy these type of companies when we see value. The best time to do that is to be early to an emerging quality growth stock or wait for a significant price dislocation in a more established or strongly growing business, and make sure you capture those opportunities. So we're set up to try and capture opportunities. That's the key to funds management.  So if you move on to some of the activity and putting that lens through that. We will exit stocks if we think they are completely overvalued. And we thought CBA was in that position, and I've got charts on that shortly. We did have mineral resources at this point during this year, PEXA, Domino's, we exited all those because we thought they had issues against our framework. So we got out PSC, we were only for a short time, but then we had a takeover in that, which is good. PWR, we had some short-term concerns, so we got out, and Cuscal, you can see it is in the buy and sells. We participated in the IPO. It was a very small trading position, and we traded it out.  In some of our trimming, again, I've got slides on some of these further in the presentation, being Wesfarmers and the banks. And we just take a little bit off the top and some of the stocks that have run hard at that point, such as Goodman, Breville Netwealth. I'm not sure this is good or bad, but we trimmed quite a bit of our risk at high prices. Looking back, we probably should have got out of the lot, but we still think that's a good business going forward, but we did reduce the position substantially.  We've added to just some of our existing holdings through the period in WiseTech, ARB, Block, NEXTDC. There was a nice pullback in Cochlear that gave us a chance to add to our holding there. The rest of the acquisitions on the right, we've picked up on the slides further through the presentation.  So just moving to the next slide. I guess, trying to understand what happened to our portfolio over the last 2.5 years. As I said, we really haven't substantially turned over the portfolio in that period. It's just that in the first 2 years, some of the stock listed here had incredible runs like Macquarie Technology, ARB, Reece got to incredibly high prices. And then over the last 6 months, some of those have fallen back to what I'd call probably fair value. And that's why we sort of say, but what does it look like over that 2.5 years. Our most disappointing investment over that period has been IDP. It was a business that did have issue against a couple of elements in our frameworks, particularly outside influence being governments. It's fair to say government influence has had a much greater impact on that stock than we had thought at the time. It does have a strong leadership position. It's a very fragmented market. They continue to grow share, but the sector has been -- it's fair to say it's been brutal on the business. We're probably going to continue to hold the stock from here, but we're not looking to add to that position. And as I said, CBA, exceptional growth. So we've exited that.  So if we move on to the next slide, then to pick up, I guess, the point that I've been trying to make is that over the first -- over the last 2.5 years, the portfolio has done well. The first 2 years were very strong, and then we've just given back some of those gains over the last 6 months. We test the quality of the transactions in the last financial year, even though the portfolio underperformed, the transactions we did were still adding value to the portfolio, which is pleasing following our process. We've had some good buying last financial year from Life360, EVT, HUB, and Sigma. We keep focusing on quality opportunities to add to the portfolio. So the 2 charts below, the chart on the left shows how the portfolio performance has gone over the last 2.5 years. This is -- the first slide is on a pretax basis. So after MER, but pretax, portfolio is up 14.2%, index up 12.2%. And then after tax, up 14.1% against 13.6%, but with a lot of franking credits sitting there. So sort of check those numbers.  So over that period, the index is up about 36%. The portfolio pretax but after cost is up 43%. So I'm still comfortable with -- very comfortable with what's going on in the portfolio. I'm never happy with our performance. And the key is we've got to continue that performance going forward, which is sticking to our process, and I'm confident if we continue to do that, we'll continue to do well against our benchmark. So I guess digging into those -- couple of those transactions over the last year. As I said, we continue to find opportunities that align with our framework. The key is to act on those. So Sigma has been a good investment for us. We bought into the stock at about $1.56. This is a founder-led company. It's got a significant market position, a leadership position in the category killer in that segment. Strong balance sheet, great track record, plenty of opportunities for growth, good return on capital. It fits everything we look for. So we bought that one, and it's done well.  Life360, which is the app on your phone that can track where you are or where your family are, also where your luggage is, if you'd like to do that. I do that on my phone. Again, these had many of the attributes we look for. It was a founder-led company, growing its business substantially. It's -- sorry, it's a global business. The opportunity is still significant, strong balance sheet. Again, it ticked all our boxes. So we took a position there at around $18.90. I think it's up to $40 today.  EVT, again, we're happy to look across the market. This was more what we call a cyclical or an asset play, founder-led business again, strong balance sheet, and we felt a couple of the businesses were right at the bottom of the cycle. So if you're buying to cyclical companies, the key is to buy at the bottom of the cycle. And so we did that, and I think we bought at about $10.90, and it's performed very well for us. And we just thought I'd add in there, the one we bought at the end of last year, Technology One, which again, was originally a founder-led business, annuity income streams, strong balance sheet, high return on equity, massive market position. Customer churn is less than 1%, fits our process perfectly, and that's been a good investment for us as well.  So we're sticking with the process, and our transactions have continued to add value. As I said, the disappointing one was IDP. Then on to the next slide.  Just again, it doesn't have to be all about growth stocks. We've taken a position in Amcor, really around the value we think they can create from the recent acquisition of Berry. We've seen in the past where this company makes an acquisition, they do quite well in extracting synergies. It usually gives a period of 2 or 3 years of good earnings growth. The PE is very low. The yield is about 5.5%. That is still yet to come through. So I think we're sort of around breakeven on that stock when you include the dividends we received. So hopefully, we do get those synergies and the stock does start to creep up. And we did buy some region group. The yield is around 6.5% when we bought it. I mean, I think the market is expecting 3% to 4%. I think it might be like 2% to 3%. But those sort of returns, we think that's an attractive opportunity to add to the portfolio. So we are happy to look for value in income stocks as long as we think there's growth in cyclical stock, as long as we think that's at the bottom, as well as good quality emerging growth stocks that fit our frameworks.  So if we just move to the next slide, just to give a bit of color around perhaps why we've exited CBA and why we've held on to CSL through this period. It's an interesting chart this because if you look at the yellow bars for CBA, that's the earnings per share. It's been pretty flat over time, but the black line shows the share price. So despite quite a flat EPS profile, the share price is up probably around 70% with very minimal earnings growth. On the right, if you look at CSL, the EPS growth -- sorry, the last 2 bars are what the market is forecasting, CSL that we've had strong EPS growth with forecast for that growth to continue, but the black line shows the share price has been in decline. That's why we've held on to CBA, but we've got out of CBA.  And if you go to the next slide, just to complete the picture. As a result, this shows the PE, the PE ratio of CBA over time. And you can see it's spent most of its time trading at a PE, or the average of this period is 20x. If you go back further than this, it's probably more like 15x. The PE has gone up to nearly 30x despite flat earnings growth. CSL, despite having still good solid earnings outlook, the PE has actually declined to 23x. So the way I'd describe that is CSL is exhibiting good value at these prices, whereas CBA looks very overpriced to us. So we've held CSL and exited CBA. But we do -- we are conscious that CSL is a reasonably big position. If we get what I think is full value or fair value for our stock, it's probably one that we could probably have a little bit less on over time.  Similar story with Wesfarmers, we've taken quite a bit out of Wesfarmers, like CBA, a fantastic company, well-run, great market position. We really like the companies. It's just price. And so again, Wesfarmers on the left, if you look at that PE over the long term, it's fair to say, the best way to describe this would be extreme. And the yield on the right tells a similar picture. It used to get a yield of close to 4% fully franked. It's now down to 2.7%. So with those sort of extreme pricing, even though it's a great company, we've substantially reduced the stock.  And Westpac is the next one just to round out on the banks. We still have Westpac. We still have some NAV where we've got some call options against both those stocks, but we have reduced the positions substantially for the same reason, the pricing looks extreme. We do get some questions about why that -- what's going on in the market. It's hard to determine, but it just feels like there's more buyers than sellers, but it feels like money is chasing assets in certain segments, which is always, I find concerning. I think when you really feel like there's a lot of money chasing a particular stock or a sector of the market, it's often a good idea to go the other way.  We do have the entire portfolio here. I'm not planning on going through these stocks, but for completeness, we've shown just how we think about our positions. We like -- in the growth segment, there are a lot of names there, but the way we think about it, it's important if we find a stock that fits our frameworks and processes, the best thing you can do is own it. The worst thing you can do is not own it because we don't want to try and cherry-pick which are going to be the winners.  You want to have a spread of stocks to try and make sure you capture the best growth opportunities as long as they fit our frameworks, and we have made our biggest mistake since I've been running AMCIL over 2.5 years hasn't been holding IDP because that's fallen a lot, which has been terrible. The worst mistake is actually not owning Pro Medicus, which actually passes our frameworks. We're looking to buy it, and we're trying to get a bit cute on price. That's a bigger miss for us than owning IDP, and we really learned our lesson on that, that we've got to make sure we own the good stocks. But we've learned our lesson from that, hence, why we purchased Life360, Sigma, Technology One, for example, and they've done well for us.  The Stalworks, we're happy to be in larger companies if they have strong market positions and they have the ability to grow. And we're happy to have some income stocks. If we can buy them well, if they can get some growth, and as I touched on earlier, we can use call options to improve the yield we can have on some of the slower growth businesses. And as I touched on earlier, some cyclical asset plays like Amcor and EBT, we have to look at those. So we look for value across the market in a range of segments.  We've got our top holdings just to show that we do continue to be a longer-term investor, which is what we want to be. And so many of these companies have been in the portfolio for a very long period of time. The general reason we will look to exit stocks is if the model is starting to crack, and we touched on some of those earlier. If something is getting to extreme, like a CBA, we're probably more likely to exit if we think the earnings will struggle to catch up to the valuation. A strongly growing company that's overpriced, we might, but we probably won't accept because we tend to find that eventually, the earnings will catch up, and we want to stay on board the businesses that can give us growth into the long term.  Just on to the outlook at this point. We just start with a chart. So we've generally got a more cautious stance on markets. This is the PE or the ASX 200, goes back 20 years. But if you took this chart back further, it still tell you the same picture. The PEs are very high on not just the Australian market, you could do this on the U.S. market as well. The other indicators you can look at, which sometimes can be more instructive, is something like price to sales or even price to book will tell you the same story. The valuations are very high. And another one to look at is dividend yield. We are really at extremes that feels like, again, money is chasing assets. People not worried about risk. But when I see these parts, it does make me nervous. We're holding a little bit of cash at the moment. We've got some more call options against some of our positions that we normally have, and we're probably more in a mode of trimming unless something exceptional comes along.  And then more broadly, there's obviously a number of issues out there that I think the market really isn't factoring in. We're back into tariffs again in that discussion, the market seems to be looking over that. We've got reporting season coming up and we're getting a bit of a sense that corporates are a little bit more nervous about the future, elevated valuations. And as I said, we're trying to take a more defensive position. But at the end of the day, we want to make sure we're in good companies that are financially strong and have the opportunity to grow profits over the long term, and we'll continue to go down that path.  So that's the end of the formal presentation. Now we're happy to take some questions, and I'll pass it over to Geoff.

Thanks, Mark. So you can ask via the bottom of the screen there. I've got a few questions here, Mark, and a couple of them are associated. So I'll put these ones together. Given that AMCIL has not achieved its goals over 1, 3, 5, and 10 years, what steps are being implemented to improve the performance of the portfolio? And persistent discount to NTA, is that reflecting poor investment performance over the number of years? What have we done to improve investment performance?

So I think I pretty much -- well, I have covered the first question pretty clearly in the presentation that we were not happy with the 1, 3, 5, and 10, and that we -- since taking over AMCIL, we're following a pretty disciplined approach, which has been going for 2.5 years, and we're outperforming over that period. So we're just going to continue to do that. And hopefully, over then over time, you'll start to see that in the 3-year numbers and hopefully, the 5-year numbers.  In terms of the NTA discount, look, it doesn't help underperformance, absolutely, and we think better performance will help with that. But we do see these sort of discounts across the market in many LICs, not just ours. Obviously, we run 4 LICs. 3 of them are trading at discounts. This one is bigger, but there are a number of other LICs in the market. So I think the whole sector is out of favor. I think AMCIL, being a smaller fund, gets that bigger discount as well. But if you look back 3 or 4 years ago, many of these LICs were trading at premiums. And it's interesting when we look at what happened about 3 months ago when there was a big sell-off in the market, the LICs share prices held up pretty well when the market fell quite substantially. So the discounts closed a lot.  So it's a hot market, and we've seen that in the past. When you get a hot market, people shy away from products like LICs. We are trying to educate the market more on -- we're not -- like a lot of the LICs in the market. There's no external manager. There's no performance fees, relatively low MER across our groups. And I think that probably -- that piece has been lost a little bit on the market. So we're doing more marketing. We've employed another resource within the group to, I guess, discover new buyers of the stock, and they are out there, but they're a little bit more fragmented, i.e., we're looking for financial planners that can take, I guess, decisions rather than following some model portfolio, and we're getting some traction there already.  At the end of the day, the first step is just to continue the performance.

I'd also note, Mark, of course, that 6 months ago, when AMCIL was shown as outperforming the market, we're still trading at a significant spend. So it is an industry-wide issue. So we're trying to do our bit, but I still probably keep thinking that to me, it's just another sign of how extreme the market is at these levels. In one way, I think people probably be more rational around the LICs. They're probably cautious about chasing the market at these prices. But we just need to do what we can to do, and that's probably to focus a bit more on who are the potential buyers, who are the financial planning groups that can make their own decisions and approach those people.

Question here about CSL. I mean, I think you've covered this, but why is AMCIL so weed to CSL, obviously, it's been impacting performance and--

Yes. And so I mean, obviously, we've just covered that in the presentation. We've shown why we like it, which is that EPS growth that's achieved and what we think we can achieve going forward. I think it certainly moved out of favor when Trump became President. So I think there was a lot of fear for what was going to happen to pharmaceutical products. I think you probably had a position where a lot of Australian institutions already had a lot of stock, but it kept a lot of international buyers out of it. But as things at least on that front has settled down a bit, and it feels like there's some buying coming back in the market, and the stock was only a few weeks ago, it was down around $2.55. It's already bounced back to $2.70-odd. We've got the result coming up. If that's okay, it seems -- it feels like it's starting to recover a bit. So if we think there's value there, we're happy to hold it. But it's all about earnings growth, and if the company have been pretty open about wanting to get double-digit EPS growth for the next few years, that's pretty good growth to me. So that's the reason why we're still there.

Will continue to hold IDP?

Yes. Look, probably at this point, we will because it's still got that leadership position. So you've got to take a view -- looking back, it was probably at the top of the cycle. Are we at the bottom of the cycle now in terms of is this the worst it's going to get for student placements? If it is, you don't want to sell at the bottom. So, but I think it's going to take a bit of patience to get there. And I guess an interesting example of this was on reflection, we did have some PEXA. About a year ago, we sold out of PEXA because we sort of wanted to see a few changes at management, and a lot was relying on the U.K., but there was no indications that it was going to improve. But the thesis on that eventually starting to play. So we actually bought back into it because they've actually picked up their first contract in the U.K., and there's been some changes in management.  So -- but it does take a while. And so I think at the moment, we will stay there, but it's one we need to watch pretty closely. But if we do see any pickup in student volumes again because universities have relied heavily on international students to fund the business. And if you take that away, they're in an interesting position. So there's a bit to work through there, but we'll hold it in the short term anyway.

A question about the buyback. I guess, we did stop the buyback after having had a buyback in place earlier in the financial year. Will we look to buy back more shares and will we look to buy back the DRP shares on market?

Yes. So that's -- we were buying back stock. And I think -- I mean, this is really up to the Board, but the way I presented it to us to them was particularly around -- the first step is around that DRP because when you at such a big discount, if you're issuing new stock at a discount, if you don't go in it, it's diluting. So to me, that makes sense to have an intent at least of buying back that stock, and then whether you do more than that. But look, we have done a bit more, and it didn't really close the gap, but it does add value if the market continues to go up. But I think that neutralizing the DRP kind of makes sense, but we'll make that decision, but it's potentially something we can do.

Thanks, Mark. A question about Transurban, I should say, it's holding at 4.4% in the in the portfolio. Assuming it's ongoing core metrics, ROE, sort debt, and modest insider ownership, does it appear a high-quality company on all 4 metrics?

Yes. Well, this is a large company. So it's never going to have big insider ownership. The ROE is really a function. You've got to look at the stock slightly differently because this is a business where you put a huge amount of CapEx in at day 1. And then over time, as the cash flows grow and grow, you eventually get the returns you want. And we know the company when they model out new investments, they want to get an appropriate return on capital, return on equity over time. So I think that discipline is there. So I think it ticks those boxes. It's got a leadership position, dominant market position.  The yield is around 5% or so. And we think that could grow at 4%, 5%. And what we're -- which should be a good sound investment. Not every stock is going to shoot the lights out, but we expect the distribution growth to continue. So as long as we can get distribution growth plus the dividend yield, it should be a solid investment. And what we've been doing is that when it has little runs in share price, then we get and sell some call options against it, which then enhances the yield. So we've been getting a yield well above that through the option activity. So as long as we can keep doing that, it's okay. But it's probably one that if we see better opportunities, we could take a bit out of. But it's making sure we work the stock hard when we get the opportunities.

Given our framework of investing in quality companies, what are the explanation of the shareholding in NEXTDC dividends always had negative earnings, partictly losses in the future years are even higher. In what way can this company be described as growth stock, and why is it in the portfolio?

Yes. So that's another good question because it really follows on from Transurban. I've always viewed NEXTDC. It's actually similar to the Transurban model, where it's infrastructure, and you've got to invest all your capital upfront on the hope that the business comes later. And if you look at the long-term returns from Transurban, it's actually been pretty good from where they listed. NEXTDC is the same. It's building out a leadership position in Australia. So I certainly think it's -- now if you want a data center and you're a very large business, you're going to be speaking to NEXTDC. What you're starting to see now.  And so, when they build out a data center, you've got to put all the capital in front, you've got to build it out you don't sign up the contracts until the end, but they're only building out because they're discussing with groups like Microsoft and Google and Amazon and all these types of companies. So they get a pretty good feel for what they want. And we're -- certainly, I'm pretty confident when you speak to NEXTDC about modeling out, they want to get an appropriate return on capital, and they price their data centers on that basis, but you don't get it until it's full. So it's an interesting model. We believe they're in a position now where the stock started to tick up because they started to announce some contract wins. I think the next couple of years, you'll see a lot more of that, and the market will start to recognize more of the infrastructure that they've built.  So what I look for is we keep probing on are they making an appropriate return on capital? And do they have the ability to keep growing over time? So infrastructure stocks, you have to look at them slightly differently.

A question here on Soul Pattson. Why is AMCIL not investing in Soul Pattson? Stock is the only dividend aristocrat in the ASX. Furthermore, off exposure to private equity and private credit.

Yes. We really like the people at Souls. Probably where I've been struggled with is the valuation. It's an interesting model because they've had to grow out that piece into private equity and private credit. That's a different style of investing, but they seem to have done it pretty well. So as a result of that, it's a stock that I watch pretty closely. But probably where it is now, I struggle with the valuation. If the valuation became more appealing, it's certainly something I'd look at.

Thanks, Mark. Given we invest in large and small companies, do you divisionalize the portfolio and say, compare the AS 200 stocks with that index and the stocks outside the 200 with a more relevant index or similar practical visualization?

Look, I think we're kind of in AMCIL because we want to try and -- I mean, most people think about the ASX 200.  Again, I mean, if I go into -- if I was looking at a mid-cap or small-cap fund, I'd be doing it -- not trying to beat the small and mid-cap fund. I'd be going in trying to be the $200. And that's why, again, what we're trying to do in AMCIL, and that's sort of our expectation is that we can beat the $200. Now we can use mid- and small-cap stocks to do it. That's okay, but we're just trying to beat the $200 over time.

Has AMCIL examined some of the retirement stocks as lifestyle, such as lifestyle community and Gen Life?

Yes, we have. And yes, it's fair to say we've got a number of issues with those models. One of the biggest ones more lately is just the gearing they put into the portfolio. And as I touched on when these companies started to gear up, I got really worried because taking on too much gearing like that, you're putting too much financial risk in the model, and they wanted to build out very quickly to achieve that. And obviously, then you get an adverse sort of tax ruling over the top of it, which we would classify as outside influence. Yes, it's not for us at this point.

With dividend growth slowing with AMCIL dividend growth, I guess, is the market slowing. Will AMCIL end up being like Mirrabooka, where the gains will be used to source dividends?

Yes. Well, I mean, in this result, that's exactly what we've done. We've made quite a bit of gains, and we are paying out a lot of those as a special dividend.

Always has been.

Yes. So that's been the case. And our -- what we're calling ordinary dividend is above the earnings. So we are saying there will be a little bit of capital coming through to support that. But if we make excess gains, then the Board has made the decision that there is significant excesses, so we'll pay that as a special.

Thanks, Mark. So more -- I guess a few more comments about where the share price is trading relative to NTA and how it may be linked with portfolio performance. But I guess the question, ultimately, if the discount to NTA persists, will the Board consider selling holdings and returning cash to shareholders?

Well, that's, again, for the Board decision, but it's not what we're talking about at the moment. I think we want to -- we see this as a little bit different in the way we go about it. We think there's other things we can potentially do around AMCIL. So last time I heard back from the Board, which was only recently, the intent was to keep it going. And again, they are focused on that 2.5-year number. And I think they're saying just keep that going.

Thanks, Mark. A question here about do we really want to see -- sorry, what do we really want to see Woolworths do to either maintain your conviction? Or would you consider exiting it?

It's getting back to some reasonable EPS growth, and we think they can from here over the next few years. It's still -- we think still got the strongest footprint. I think Coles has done an excellent job. I think the CEO there has been great. Coles is one that actually looked at a couple of years ago when they changed CEO, and thought that may have done well, and it has. We've held on to Woolworths. So it's looking a little bit better for them in terms of getting EPS growth. So -- but I don't think it's ever going to be spectacular. So I see it more of a stock that is a good business if it gets too expensive. So 2.5 years ago, we actually -- the stock ran really hard and the PE was very high. We took a lot out of it. We took it back to an index position. It sort of retraced a lot since then. So while it's around these sort of levels, we're happy to hold it. But again, it could be another stock that you look at call options to work the stock a bit harder. So that's something I'm thinking about at the moment.

Does AMCIL [indiscernible] financial within the portfolio? And do we think the buyer will go ahead?

No, we don't own it, and it really hasn't aligned well with our frameworks anyway. And so yes, I don't know how that's going to go because it hasn't been something I've been focused on.

Question about stock. Woodside, is it an income track with all the expenses going to new project commitments?

Yes, that's the right question, and that's the question where I'm asking myself at this point is that what is their ability to actually grow earnings? And we think they can grow earnings from here given some of the projects that they're doing. And with the yield and the franking, as long as they can do a bit of growth over time, then it's okay. That's the test that I keep running on this stock. It's the sell-off is quite dramatic, and it was I think it started to look at pretty good value. But that's the test we keep running on that one is that we need to get the yield and the franking and some earnings growth to keep it in the portfolio. So at the moment, we do think we'll get some earnings growth, but that's the test for that one. Yes.

Do you feel the underperformance of Redox is temporary?

I hope so. I think that's one that I went too quickly. So for those that don't know, they're a distribution company that was a family-run owner-led business that listed a couple of years ago. They distribute a range of chemicals and products that go into so many different things, it's not funny. So for example, if you want to make shampoo, there's a whole lot of ingredients that go into that. If you read the back of the bottle, Redox will probably supply most of those. So they source these ingredients from around the world, and then they distribute those to manufacturers of a whole range of agricultural products, pharmaceutical products. And they've got a very strong market position in Australia. I'd call it kind of a leadership position in a fragmented market.  So they do regular acquisitions. The revenue growth track record over 20 years has been excellent. They pay fully franked dividends, which is good. We took a smaller position, but I think we probably bought it at the wrong time. I'm not sure how good the next result would be. But at this point, I'm backing that 20-year track record, and that they can continue to do what they've been doing. We haven't been buying any more. So I think we'll probably just hold, but probably not expecting a lot in the short term. But as I said, it's a family-run business. We think they know what they're doing, but there is a cycle through their business. So we'll stay there for the moment.

And another question about our holdings in the portfolio. What's most appealing about ReadyTech?

Yes. We probably -- we took a small position in there. It's sort of fallen away a bit again. Those 2, we probably bought a bit too late in the cycle. ReadyTech is a founder-led business. They have a -- essentially a software company. They sell products. They compete sort of at the lower end than Tech One. So this is into TASE mainly, but they sell product tastes and universities, but smaller ones. It is annuity type revenue streams. Customers are generally sticky, although they did lose a customer recently, which we weren't happy with. There still seems to be plenty of opportunities for them. So as those characteristics around annuity revenue, founder-led, we had the sense that there was going to be lots of opportunities to grow, but it's probably been a little bit disappointing in the short term. Again, we're not adding to it, but we will just hold from here. I think each one is about 0.5%, one is about 0.7% of that order.

Thanks, Mark. I just -- as we're coming to the end of the questions that I've got here. NEXTDC and Goodman Group water supply, residential water quality might become an issue as a cooling operation requires lots of water this is obviously for the data centers.

Yes. So they do require water and power. Yes, I'm not seeing any of those issues at the moment because they basically have to -- have to get development approvals from local councils. And in those sort of submissions, they've got to cover off all the power, water, all those sort of issues have to be dealt with there. And they're pretty strict. So look, I'll take it away, but it's something we're probably not seeing at the moment.

Yes. Actually, I think that question was asked to AFIC, and I sent a response. So question here, a very good one. How do you think about balancing high-growth portfolio at a time where many growth stocks in the market have run hard?

Yes, that's a good question. I always prefer to be in a high-quality growth company that gets overpriced because, yes, they might stagnate over time, but eventually, the earnings can catch up. But when I look across the market, it's easy if you just focus on quality growth and say, well, they're too expensive. But I'm not seeing those are more overpriced than many other stocks in the market. So I gave an example of the banks, which are over 20% of the market. I mean, they'd be just as overvalued as growth stocks. And actually, when you dig into what is quality growth, and we'd be saying, well, Macquarie Technology, that's probably more around fair value, and we think ARB has been more around fair value, although it's had a bounce off its low point. CSL, we think it's fair value. So we think within that quality growth, there are a number of stocks that we think are fair value. Now of course, there's always going to be some that look extreme, but you can't have every stock in -- that's why we have a portfolio that's exactly the price the way you want to. It just doesn't work like that.  So Wesfarmers is another one that looks more overpriced than any of those growth stocks. So it's a mistake just to focus on one segment and say that's where things are overpriced. In fact, if you look at even our experience more recently, often, it's not the high-quality ones that give you trouble. It's the ones that give you big downgrades, and they can often be a cyclical stock that gives you a downgrade or a lesser quality stock that seems to have issues with something that makes it go down more. So it's a portfolio approach.

So speaking of stocks that may be expensive, Wesfarmers is getting close too expensive currently in the market?

Yes. Well, we covered that in the presentation with the slide where you saw the PE is looking pretty extreme, and we've halved our position, and we've got call options against a fair chunk of what we've got left, sorry. There's always a question, do you get out of it or not? But we're making the position work harder than what we have, and it's much more than what we have.

So we've got a question about the PE you've used for CSL and how that one has been calculated, given that the -- it looks like we've used earnings based on -- it's a different calculation of the same trade got on their website.

It depends what earnings you look at because the earnings they report are in U.S. dollars. So if you -- the first thing you got to do is translate back to Australian dollars and then look at the Australian price against Austrian dollars, and that's where you get that PE.

I don't think earnings are forecast to dip by 20% next year.

Earnings are rising, forecast double-digit EPS from the market consensus over the next couple of years. Yes. So that's what's on the slide. Okay, Mark, I haven't got any further questions. So I think I'll let you close. It's go nearly an hour here, and the number of viewers is going down. So I think we'll close it there.

Yes. So I just -- again, just to summarize that although the 1-year number looks very low, it's really an outcome of having 2 really strong years. And in the last 6 months, some of our stocks that are given back, but we really haven't -- we're still happy with the stocks we've got. The activity we're doing is still adding value. And we certainly feel like we're following the process that we said we'd put in place 2.5 years ago. And so to me, it's just holding the line and making sure that we've got good quality stocks.  And a big part of what we do is making sure we capture opportunities as they come along. That's a critical part of running a successful portfolio. So hopefully, you'll see those numbers start to translate over time into the numbers that we report to the market. And so we thank you all for participating in this call. Thanks.

Thank you. That does conclude today's webinar. Thank you for your participation. You may now disconnect your lines.