WAM Capital Limited (WAM) Earnings Call Transcript & Summary

Good afternoon. [Audio Gap] WAM Research. And we're doing the presentation here today because -- to report to yourselves as shareholders on the period from -- so far this financial year from June last year for WAM Capital, WAM Microcap, WAM Research and WAM Active, and just giving you a bit of an idea, a thumbnail sketch of the interim results. We've also got the -- really, the -- sort of the brains of these groups, sort of the people that are doing all the hard work and delivering these returns led by Oscar Oberg, Tobias Yao and Sam Koch will be here to take any questions and give you a bit of an idea of what they're looking at in the year ahead. The -- in terms of the various results, just on Oscar, is everything right? Can you guys hear me?

We can hear you. Yes, we can hear you at the moment, Geoff. We can't see you, though.

Okay. I'm not sure why that's the case, technology. The -- yes, I mean, my screen says it's patched. It's working. So let's see how it goes. Actually, I've just got a text. I think, it's all good from the other guys. In terms of -- sorry, look, thank you very much for ringing in. This is your company, and we can only do what we enjoy doing because you give us the opportunity to do that. In terms of looking at the various companies, yes, from the largest to the smallest, WAM Capital had a very, probably, I'd say, eventful year, not only was a very solid performance and, as I said, undertaken by Oscar, Tobias, Sam and Shaun on the portfolio management and research side, but in terms of the underlying performance of the portfolio, it was up a little over 22%. And that was a strong outperformance over the 6-month period. In terms of the interim result, it was good. We were able to maintain that at $0.0775 since -- and that's fully franked. So it's giving shareholders quite a high annualized return. Obviously, we need to continue to perform, to continue to deliver those type of returns to shareholders. Also, the -- not only the performance of the portfolio was solid, but the total shareholder return, and that's the movement in the share price. And the dividends was very solid for the 6-month period to December, and that was a little over 26%. Obviously, depending on if the shares traded at a premium or a discount, that impacts on the total shareholder return. It was very active for WAM Capital. There were a number of takeovers over that 6-month period. And that was just because of opportunities presenting themselves. The -- with Concentrated Leaders, there was a takeover there; also, Contango Income Generator; and more recently, a takeover bid we've announced and which actually opens officially today from Amaysim. All those bids are -- earnings -- sorry, NTA accretive for shareholders. Just to give you a bit of flavor, with Contango, we're in the process of exiting our position there, and well, for shareholders, it looks like we'll make a little under $11 million. With Concentrated Leaders, we're still in the process of receiving acceptances there. But it looks like we're close to -- we've made close to $8 million for shareholders. With Amaysim, it's a cracking deal for WAM Capital shareholders. I think it's a cracking deal for the Amaysim shareholders as well. It gives them an opportunity to invest in WAM Capital at a very good price. And for WAM capital shareholders, what do they get? Amaysim, even though people think of it as a telco and operating company, they've sold all their businesses, they're effectively a cash box. WAM Capital, we're using our WAM Capital script, which is trading at a premium. And by issuing that script at a premium, we'll get an annualized return as we get the money back from Amaysim of close -- around the 12% per annum. So that's obviously significantly better than what we can get with our cash at the moment. And also, for every dollar of -- that people accept into the takeover bid, then effectively, WAM Capital shareholders, for every dollar, get $0.371 of franking that can be paid -- well, the ability to get $0.371 of fully franked dividend paid back to them. So to me, it's just a cracking deal, another -- a very good deal for shareholders. And that's why we're taking these opportunities as they present themselves. In terms of just going through the other entities, WAM Microcap has had a stunning result, and I can't thank the team that I introduced earlier for all the hard work in that area. Really, a solid result for the 6-month period, up 36.4%. That was the actual portfolio. And in terms of -- which led to a nearly $70 million pretax profit that allowed the dividend, which we announced earlier today, to be increase to $0.04 fully franked. We've got a lot of profit reserve up our sleeve there. So the full year -- the annual dividend is well and truly covered for the next 4-plus years. And the total shareholder return for that 6-month period to June, because the share price was trading at a bit of a discount and has gone to a premium, it was actually over 60% for that 6-month period. The WAM Research, again, we've announced a very solid result there. The portfolio -- this morning, the portfolio up a little over 27%, leading to a pretax profit of about $44 million, a little over that, allowed us to fractionally increase our dividend. And we're already paying a very high, fully franked dividend here. So the Board thought just a fractional increase because we've nearly got 4 years of profit reserve up our sleeve. The -- and the total shareholder return, because WAM Research is trading at a very high premium NTA, the total shareholder return was a little under 22% for that 6-month period. WAM Active, the fourth of the LICs that we're going to be talking about today and open up for any questions, had a solid 6-month period. The portfolio is up a little over 18% over that period. Yes, obviously, WAM Active is a lot smaller than all the others, a little over $50 million. So that led to a pretax profit of about $6 million. The interim dividend was maintained, the same interim dividend was paid 12 months ago, and that really was a function of the fact that we've just got 2 years' profit reserve up our sleeve. And as the profit reserve grows, assuming we can perform going forward, then the plan will be to if we can gently increase that dividend over time. That's just a little bit of a summary. There's a lot of information there. Some of those results have only been announced this morning. So as people digest it, please, when we get to Q&A later on today, come back to us or feel free to ring the office or email us. We're very open to communicate with you. As I mentioned earlier, you guys own the company, so we're very -- we're here because of you guys allowing us to do what we really enjoy doing. And just on that, I wouldn't mind just throwing to Oscar, who's the Lead PM for those 4 companies I mentioned, and the mid and small capital undervalued growth company strategy. And as you know, what we're trying to do, we're trying to buy undervalued growth companies when we can see a catalyst that is going to change the valuation, otherwise we'll sit in cash. And that's trying to get the maximum return for taking the minimum amount of risk. But let me now throw to Oscar, who will just take us through sort of what's happened in the last 6 months. And then maybe, yes, you can take us back, and then possibly, Oscar, I don't know how clear your crystal ball is to take us forward for the next 6 months or what you're focusing on and what you're seeing. So now I'd like to pass you over to Oscar. Thank you.

Yes. Thanks, Geoff, and good afternoon, everyone. Well, look, we started the half very well actually. And we actually had the best reporting season, I think, we've had in the last 20 years. And that was largely driven by sectors such as discretionary retail and also the e-commerce sector with companies such as Templeton & Webster, Redbubble and Adairs performing very strongly as we saw the structural shift to online and also a redirection of consumer budgets from international tourism into the retail sector. Then through September and October, we began selling these companies, and this is largely due to our anticipation that we thought that the vaccine announcement was coming very soon, and it would actually be a good one. Now as is always the case in these situations, your gut feel is generally right, but of course, we didn't sell enough. And when the vaccine announcement came in early November, it was a lot better than what we had thought. So clearly, the efficacy levels of the Pfizer vaccine. And for these reasons, we saw a number of the stay-at-home beneficiaries in sectors such as retail, healthcare and agriculture underperform some of the more value and cheaper stocks in the market in sectors such as resources and financials. And these are companies that we largely didn't own in the portfolio. So it was a tough month for us in November. Now despite the fact that value companies have performed very strongly over the last few months, I think it's worth pointing out that the difference of the valuation gap between value and growth is still the highest it's been in the last 50 years. So we do actually think this trend towards value in cyclical companies will continue over the coming months and as we -- over this year as well. So I guess the team has been really busy over the last few months really repositioning the portfolio into reporting season. Tobias will you sort of a summary of how we're thinking of things going into 2021. But we are very -- feeling very bullish around the market. Our cash is quite low relative to history. We're sitting at around 6.5%. That's after you exclude the acquisitions or the takeouts that we're doing for CLF and CIE. But it's actually worth pointing out that our liquidity is very, very high. And we've done that on purpose. We're investing in much larger companies than what we're used to, given the volatility that we're seeing in the market. So if things do weaken, as we saw last year with coronavirus through February, March, we can liquidate the portfolio. And we can actually sell around 80% of the portfolio within 10 days if we need to. So yes, towards the -- at the end of January, look, we're very happy with how the portfolio is going. We're outperforming in WAM Capital by just around 7%. I mean WAM Microcap is just -- had over 19%. But we're certainly not resting on our laurels. Things can change pretty quickly in this market, as we've seen, but look, very happy with how the team is going. And the last thing I'll say as well as we've made a promotion through this period. So Cooper Rogers, who was our Equities Dealer, has been promoted to Senior Equities Dealer, and this is a reflection of Cooper's performance ever since he started really with us about 4 years ago but, in particular, over the last 12 months. And I think it's fair to say, Geoff, it's probably some of the most turbulent times we've seen in the share market but certainly in our careers, and I think Cooper as our Dealer has done a fantastic job. And supporting Cooper is -- we've made a new hire, Will Thompson, from another fund. Will comes on as an Assistant Dealer and Analyst assisting the wider team. So very happy with, firstly, Cooper's promotion and Will coming into the team. So I'll leave it at that. I guess, while I'm speaking, I'd like to thank everyone online and also all our shareholders for their support over the periods. We really appreciate it. But I'll hand it back over to you, Geoff, and we'll get on to how we're seeing things and some interesting stocks.

Look, thank you very much, Oscar. And I just had it on mute for a second, then I started speaking. And then, I saw you looking strangely at me. With technology, that's right, I just got to make sure I take it off mute. I don't want to hear any background noises. Look, on behalf of all shareholders and, obviously, shareholders of these entities, look, well done guys. Great job. The -- in terms of -- and just in terms of looking forward, where do you see the opportunities, like how -- I know it's a very difficult question. The tough thing about being in funds management, your job is to identify trends, create opportunities and, as we talked about earlier, buy those undervalued growth companies. What areas do you think we'll be seeing them in over the next 12 months?

Yes. Thanks, Geoff, and good afternoon, everyone. Look, we've positioned our portfolio to take advantage of 3 themes, which we believe will outperform over the next 6 to 12 months. The first theme is around companies exposed to the pickup in construction activity in sectors such as building materials, civil engineering and mining services. So if you look at the building materials sector first, the record-low interest rates, in addition to the accommodated policies such as the Home Builder's Grant, we believe will drive new housing starts. To put it into context, the $60,000 homebuilders grant is equivalent to around half -- 6 months of new housing starts in Australia. And we've actually seen some of the stats coming through now with the latest ABS stats showing -- it's 130% increase in terms of loans for new housing construction. So companies exposed in the building materials sector that we have in the portfolios include Fletcher Building, CSR, Brickworks and Australian Finance Group, which is a mortgage aggregator. Moving to civil engineering. Over the next 4 to 5 years, there's an unprecedented amount of infrastructure spending by both federal and state governments, which will flow through to suppliers and contractors. So our exposure there includes Downer, Maas Group, which is a recent IPO, and Seven Group, which has the Coates Hire Division. And finally, in mining services, the elevated commodity prices, particularly with iron ore and gold, will drive a pickup in mining activities. Greenfield, brownfield projects will come online. And in terms, of our mining services exposure, we have Parenti Index and in the WAM Microcap Fund, the MACA. The other theme which we really like is what we believe going to be the outperformance of companies exposed to the U.K. Now the United Kingdom has been one of the most COVID-impacted countries. I think the latest that I saw is 18% of the population has had COVID. So companies that had operations in the U.K. have been disrupted and have underperformed. Our view is given the fact that the U.K. now has one of the most aggressive vaccine rollout plans with over 10% of its population already receiving a dose of vaccine, in fact, the government wants to vaccinate 45% of its population by March. And if you couple that with very accommodative fiscal and monetary policies, and we've finally got a resolution around Brexit, we believe many of these U.K. exposed companies will rebound out of COVID a lot faster. So companies we have in the portfolio includes Virgin Money UK, Link Administration and Ramsay Health Care. And finally, the last theme which we like is around companies that's poised to make acquisitions. So typically, we like companies with either a net cash balance sheet or quite a lot of debt headroom. We believe right now is the perfect time for these companies to leapfrog their competitors through acquisitions and supercharge their earnings growth. Companies we have include are Infomedia, Viva Leisure and Healius, which is the old Primary Health Care. But to summarize, these are the 3 themes we're playing, and to what Oscar was saying earlier, we think the value names and cyclical names will outperform the growth names, given the much lower expectations in the market.

Thanks, Tobias. We appreciate that. And in terms of -- so that's sort of -- what the areas you're focusing on If you want to drill a bit further, like are there any particular stocks? I know, when investors come to our 6 monthly presentation, they did a little showbag. They usually want to get an idea of what's going to happen to the market, and then one or two stocks they should follow or potentially buy. Now I know we can't give advice, and this is -- any advice we give us general, I think not specific. But yes, are there any specific stocks that you guys would like -- are confident enough to mention?

Oscar, you want to go first?

Yes. Definitely. Thanks, Geoff. Our first high-conviction stock idea is Fletcher Building. Its ticker, FBU. Fletcher Building manufacturers building products such as cement [indiscernible]. but it also builds homes, commercial buildings and infrastructure. Now Fletcher Building has been plagued by a number of issues over the last couple of years, margin pressures in Australia, but also legacy construction contract issues in New Zealand. As a result, it's not well held or liked by the institutional community, and that's where we see the opportunity. The catalyst for us to invest in Fletcher Building was the belief that analysts’ estimates of 10% to 15% are too low and should increase over time. Fletcher Building has done an incredible job at taking cost out of the business. They're also benefiting from an increasing housing market, as Tobias mentioned earlier. And in our belief, we should see supercharged earnings growth as a result over the short to medium term. Now Fletcher Building is at a 30% discount to its Australian-listed peers. We believe that valuation gap should close over time as long as they continue to deliver sustainable growth and margin improvement.

What about -- yes ,Tobias, you got anything up my sleeve or Oscar?

Yes. So there's another mid-cap one. So my high-conviction pick is Link Administration. It's a superannuation administration business. There's really two-fold reasons why we like this business. Firstly, it's the core business, which has faced headwinds from both a regulatory perspective and COVID more recently. Now we think that's coming to an end. So growth will come back over the next 2 to 3 years. On the other hand, we really -- we feel like the PEXA business, which they own 44%, is currently undervalued by the market. Now PEXA is the electronic land title transfer company with over 80% market share in Australia. Currently, we believe that 44% is being valued by the market at around $500 million. It's on their balance sheet at $700 million, and we believe they could sell this business or partially sell or either demerge this business for over $1 billion. So if you put the two together, we think there's at least a 30% upside to the share price of Link Administration over the next 6 months.

All right. I've got two because, unfortunately, Shaun isn't with us today because he's got a stomach bug. We've got a no sniffles policy at the office. So he can't be here, but I'll give you -- I've got some two, what I call, spicier ones. First one is Inghams Chicken, which is quite topical at the moment, given what we've seen overseas with GameStop and what's happening with the hedge funds and shorters alike because this -- Inghams Chicken is the largest chicken processor in Australia, but it's also one of the most heavily shorted stocks in Australia. It's got about 10% of its register short. It's the third most shorted stock in the ASX. Now that wasn't the reason why we bought it initially. Why we bought it initially was that we did a whole heap of industry feedback over the last 6 months. And we -- all the feedback has been telling us that volumes of or demand for chicken is actually increasing very, very strongly. And that's largely because red meat has become so expensive, so you might notice that when you go to your local supermarket. And then, the other benefit that we see with Inghams is I think we've talked previously about GrainCorp and Elders on these calls. And as we've seen, there's been a record crop in Australia. So when we're going to see a whole huge amount of volume of grain, that will bring feed costs down. So that's going to benefit Inghams. So we think Inghams is going to generate quite substantial earnings upgrades over the next 12 months, and the fact that it's shorted as well is a nice little bonus too. So I think there's about 30% upside in that one, Geoff. I might give one more. This is a good one. This is in WAM Capital and WAM Microcap. Seven West Media, the ticker is SWM, so quite bullish on this one. So Seven West Media, as I'm sure the listeners will know, is the owner of Seven Network, the largest newspaper in Western Australia and also owns production studios that does Home and Away and the like. So we own this stock for three catalysts. The first one is at Seven West has new CEO, James Warburton, who was previously CEO of APN Outdoor, which we actually made a lot of money out of because they got taken over by the largest outdoor media player in the world. So we quite rate Jack -- we rate James quite highly. Second reason is they took out a lot of costs at the worst of COVID back in April and May. And what we've seen since then is that TV advertising budgets have improved quite a lot, and that's emphasized by its competitive, Channel Nine, upgrading earnings over the last few months. And then, lastly, is Seven West has too much leverage on their balance sheet. So they're looking to make asset sales or divestments. The first one that they're looking to do is AirTasker, which is looking to -- it was in the press today, should IPO in the next couple of months. But if we put that all together, the most attractive part of Seven West Media is its valuation. It's currently trading at a price earnings multiple of 7x, and that compares to Nine Network, which is trading on a price earnings multiple of 19x. So -- but if we get this one right, we do see considerable upside here.

No. Well, let's hope -- as all shareholders say, let's hope you get them all right.

I think we've got 3 out of 4 right last time.

Well done. Thanks guys. Thanks for that. And look, why don't we now go over to James McNamara, our Head of our Corporate Affairs, who will just take us through any questions. Yes, the questions that have been sent in and an

Y questions that shareholders would like to ask us now. James, can we flip over to you now? We're just waiting for James to -- I think he's called in as he's just got to join the call.

Sorry, Geoff. Can you hear me now?

Yes. Perfect.

Thank you. Thanks, Geoff, and thanks, guys. So a good place to start is the question from Phil who's asked if we can cover off on the companies that were listed last time. So to refresh memories, that's Healius, Infomedia, SeaLink, Tyro, Bega, AMA Group and the Buy Now Pay Later names. So if you could just provide an update on those. Oscar, do you want to kick that off?

All right. I think I made a joke before saying that we got, I think, 3 out of the 4 right. But unfortunately, I got one of them badly wrong. But I'll quickly touch on each of those. So firstly, Healius, Tobias touched on it briefly as well before, the old Primary Health Care, very positive on this name. The balance sheet is very strong. It's actually benefiting from a whole -- the COVID testing that it's undertaking across Australia at the moment. So we actually think there's room for this business to make acquisitions going forward. The second one was SeaLink.

Infomedia.

Infomedia. So we think that outlook for Infomedia has gotten a lot stronger over the last few months. The issues that they had previously was getting access to -- in the United States and Europe to selling new work. We think this has been solved, and we actually see a very strong balance sheet for acquisitions going forward. SeaLink. We like this company. I think it's misunderstood by the market. It's got a very defensive bus business. It's come off -- it's done very well, but it's come off in the last couple of months because of its tourism business. We actually think it's much more of an interstate business. So it runs ferries and buses and so forth, but we think it will have a very strong result. Unfortunately, we got Tyro wrong. One of the joys of funds management, particularly investing in small caps, is random things can happen. And unfortunately, they never had an issue in 18 years, and I think it was around 10% of their terminals. This is the tap and go terminals that you use for EFTPOS, broke down. And this was in early January. So we sold out of Tyro since then. Next one was Bega, very positive on this brand. It's made an earnings accretive acquisition. And also, the commodity prices around skim milk has actually improved to the business. So we actually see more synergies to come through from the acquisition as well. So we like that one. AMA. Never short of an issue, AMA. And we've seen some issues in the press around their CEO, who is having a bit of a bust up with the Board. Look, it was a small position, we've actually exited AMA. And then, maybe, do you want to touch on Buy Now Pay Later?

Yes. So the Buy Now Pay Later names, Afterpay, Sezzle and Laybuy, we still have in the portfolios. There's obviously quite a few more of the Buy Now Pay Later names. They've generally done pretty well, given the growth has been maintained over the last few months, and we continue to hold these names in the current portfolios.

And the next question is from Mark, and he's interested in -- given the elevated status of the market, what the price to earnings across the portfolio is.

So I think the question is around the price-to-earnings ratio. Now I thought before, yes, it might be a good idea to explain our price-to-earnings ratio because I can imagine a number of our shareholders get frustrated when we talk around acronyms like P/Es and EBITDA and so forth. So basically, a price-to-earnings ratio is what we always look as fund managers. Effectively, we look at the share price and divided by the net profit after tax per share. And we're looking at the net profit after tax per share in the next 12 months. So as an example, if we see a price earnings multiple ratio of, say, 10x earnings but this business is growing at 20%, that's a good business for us. Now if we look at our current portfolio at the moment, I'm just referring here to WAM Capital, it's trading at around 20x on a price-to-earnings ratio. Now that would be expensive compared to history. Now it's -- I'm comparing that to the ASX small industrials, which is the type of companies that we invest in, and that's currently trading at 23x earnings. So we are cheaper than what the small cap companies that we invest in or our peers. And I would say, why is that? COVID has depressed earnings across a lot of companies that we see. So as an example, we own shares in, say, Corporate Travel or Flight Center. Now these businesses are losing money this year and won't be profitable for some time, given what we're seeing with border closures and the international travel. So the share market is looking forward for companies like that. So that's why we're seeing price earnings multiple ratios that are quite high at the moment. So yes, that will be my answer, James.

That's great. Thanks very much. I'll stay with you, Oscar. From Ken, we've got a question on what's the road ahead for Australia. So I suppose that, what's your view on the Australian economy looking forward?

Yes. Thanks for the question, Ken. Bullish is my answer. I think iron ore prices well over $150 a tonne. It's just a huge boost to the Australian economy. And then couple that, as Tobias and Sam have been talking about, we have a very buoyant housing market as well, which should be a good environment for the banks. I think what has taken us by surprise probably since March and April when the worst of coronavirus occurred is just how much spare cash there is around from consumers alike. There was a lot of money that was spent on international travel, and that is all plowing into the economy. So I think once -- our view is that we get the vaccine rolled out, borders are no longer closed at some point, hopefully, later in the year. I think it's going to be a very positive environment for the Australian economy. And it's great to see that given where we were almost 12 months ago.

That's great. Thank you very much, Oscar. In the last briefing, we also covered off some of the pre-IPO opportunities you've been seeing and participating in through the WAM Microcap LIC. Can you give an update on some of those and perhaps the outlook for that segment as well?

Yes. Sure. I'll give you an update on the stocks, and then I'll pass it on to Tobias to sort of talk about what we were seeing in the pre-IPO market. But at the time when we raised the money for WAM Microcap back in July, a big portion of what we were raising the money for was for pre-IPO opportunities. And I think so far, we've had 2 that have come to market. The first one was Laybuy, which is a Buy Now Pay Later provider. It's done very, very well. I think, it's up about 40% since we invested it -- in it. And then there's Sovereign Cloud, which listed just before Christmas, which I think is up around 60% or 70% or so. So we have two other companies in the portfolio. One is basically a company that's sort of trading -- a trading platform for carbon credits, and the other is a company that's very similar to Templeton & Webster, which we know very well. But I'll pass over to Tobias to talk about sort of what we're seeing in the pre-IPO market at the moment.

Yes. We've actually seen quite a lot of opportunities come through to us. And I think we've spoken about this in the past. We are extremely selective in terms of the companies we are backing in the pre-IPO space. These companies are ones we intend -- if they deliver on their targets to participate in the IPO where -- when there's a larger liquidity event. So in terms of how those pre-IPO deals are structured, typically, there is quite a bit of downside protection and given many of those deals on the form of convertible bonds, which effectively gives us the opportunity to participate in these companies at a discount to the eventual IPO. So we do get a nice uplift if they do go through to the IPO. But otherwise, there's quite a lot of things coming through. And we're just assessing all of these opportunities in the B2B.

I think, I just might add as well. One of the -- for instance, last week, we caught up with a number of the -- with 2 guys from a private equity fund that invests in WMA. So we've actually been getting a lot of intel with private companies with Dania and the Alternatives Fund. So we do see a real opportunity to get greater access to information and perhaps future deals that are in the pipeline through the Alternatives Fund, which is fantastic.

Yes. And just so everyone is just on that, we've taken over the management of an entity, which has $210 million of assets. That's WAM Alternate Asset Fund, and Dania, who's the Portfolio Manager there, looks at investing in private equity unlisted opportunities. And, yes, like effectively each time we've sort of added another interesting area, we've tended to do it so it adds value to the rest of the business. And it's interesting already, as Oscar said, we're getting some good value out of that.

Thanks, Geoff. We'll start with you. Some -- a few shareholders have actually asked if WAM Active is too small.

The -- I mean, what is too small? It's a $50 million company. It's actually performed exceptionally well over a long period of time. We'd like to grow it. A year -- it was a year or so ago, we looked at doing a share purchase plan. WAM Active could easily be $200 million, $250 million. And we're looking at -- I mean, we've had discussions at Board level whether we do another share purchase plan, whether we do an option issue. All these things are on the table. So we'd like to continue to grow it. We think it is a -- it's a logical strategy. You're buying -- it's more -- it's on the trading side. So we're looking at that. It's interesting on that trading side. A few people have been talking about like does it make sense that we actually -- everyone would be aware that we like buying other LICs with our cash. We've got excess cash, then we're happy to -- for something that's worth $1, we're happy to pay $0.80 and try to sell them when they're worth $1 again or be part of the catalyst to get that dollar back. And one of the things that a few people have mentioned to us and we've been floating the idea of is whether we have that as a stand-alone vehicle, which just invest in other LIC. So it's a more pure play. And then we don't necessarily do it in the WAM Capital and WAM Active. in WAM Capital and WAM Active on the trading side, we just look at those trading -- more of those trading opportunities. So if anyone's got any thoughts, please e-mail us in or feed us back. We look, we might even send a survey out and collect people's feedback. So yes. So to me, it's a good strategy that's performing at small -- we still -- it still gets the same amount of love as the larger ones from our perspective. So it makes sense at this point in time.

Thank you, Geoff. We've also had a question on the difference between WAM Capital, WAM Research and WAM Active. If you could just briefly cover on that.

Okay. The simplest way is, well, I mean, first of all, in terms of the investment philosophy, it's sitting cash until we can find undervalued growth companies, company that have been growing to grow for a period of time, and then buy them when we're going to see a catalyst that's going to change the valuation. And those catalysts could be -- yes, we could be doing research on the company, we've talked to a competitor, we -- or some other people in the industry. We're pretty convinced there's going to be an earnings upgrade or there will be some positive catalysts that we believe will change the market's view of that stock, and the share price will go up. So that's what we're focusing on doing. And that is really -- and we call that, really, our research-driven investment strategy. And that's what WAM Capital started out as doing. But as time -- when we're doing that, what happened is at various points in time, we had 30%, 40%, 50%, 60% of the portfolio in cash. And because we operate in the market, and there's always opportunities, whether it's an IPO or a placement or a block of stock at a discount or some of the crazy stuff we've seen in last week or so in the U.S., yes, there's always opportunities to make money. And that's not on a -- from a research side but from a pure trading perspective. And that could be -- it could be a place that we get access to that retail investors don't. And we know we can pick up 3% or 4%. It could be an IPO. It could be a broker selling down a line of stock. It could be a stock that doesn't rate, but we're pretty sure there'll be a short-term trading opportunity to make money. So it's all those other opportunities that aren't research-based. That is -- and we call that the trading part of the portfolio. So effectively, what WAM Capital is, if you buy share of WAM Capital, you get half of its research and half of it's trading. And then the simplest way is if you owned one share in WAM -- and what WAM Research is, is that is the research, the pure play on the research investments. And what WAM Active is, is the pure play on the trading part of our investment philosophy. And so if you own one share of WAM Research and one share of WAM Active, in theory, that gives you exactly the same end result as owning two shares in WAM Capital. So that's how it fits in. And where does WAM Microcap is really looking at the same opportunities but on a much -- on -- at the smaller end, the micro-cap end of the market.

Thanks for that clarification, Geoff. We've also had a few -- a few questions on the recent events you mentioned in the U.S., particularly around recent volatility and GameStop, et cetera. Oscar, do you want to just give your take on that?

Yes. It's -- I mean it's been crazy, really. It's unprecedented. Yes, I mean I guess my view on one with the other costs, fundamentals will always win at some point. And clearly, the stocks that have gone up quite considerably had their own structural issues. So I guess, the interesting thing that we've seen in the Australian market over the past week or 2, some of those -- the heavily shorted companies, I gave an example of Inghams, which we quite like going to reporting sets have actually had a bounce as, I guess, some people might be short the stock or betting on its demise. I think the share price go down are actually covering their shorts and buying the stock in anticipation of maybe being forced to. So it will be a fascinating reporting season in Australia from that perspective. We get a stock like saying Inghams right it will be fascinating to see how the share price response because, as I said before, it's around 10% of the register is short. I mean, Tobias and Sam, do you guys have sort of anything to add?

Yes. So I think one of the flow-on effects you would have read, a lot of the hedge funds out there with large short positions, they are very nervous because it's not -- the downside isn't losing money on the trade. It's actually potentially having to close down their business. We've actually seen a few high-profile names. That's effectively had to be rescued. So it does change the game a bit. With social media, a lot of these messages or a lot of these movements can become very viral very quickly. So that's obviously something that we think about. And luckily, we haven't had any exposure, obviously, but hopefully, that works in our favor with something like Inghams.

Yes. I mean to me, the interesting thing is we are operating in a market. So there's always something new. There's always interesting opportunities. For those that will have hair or enough gray hair, back in 1987, there was a thing called portfolio insurance where you could ensure your portfolio. And part of the theory was that led to the '87 crash. So all these things tend to provide opportunities. It's really -- from my perspective, it's just being aware. And one of the books I remember enjoying reading was The Smartest Guys in the Street (sic) [ The Smartest Guys in the Room ]. There's -- everyone has these models. I like simple investing. Yes. You don't have these models. You go and meet management. You understand how the company makes money. And you work out what a fair value is, and you find a catalyst to change the valuation for the company. And the catalyst for us could be significant short in the stock, and there's a new factor. All it does is bring a new factor to the market. I know there was quite a bit of volatility, and there's a bit of a hiccup and there's a bit of a risk off-trade, and that could go on for a week or two. In the end, is it a problem with the system? I don't think it is. Does it provide opportunities for smart investors? And I think in the end, all it does is does provide opportunities. Because when everyone's running in one direction, you usually find there's an opportunity somewhere there. So yes, incredibly, bizarre how it's all occurred. And the great thing is, as investors, it's something for us to study and to learn and to work out how we can benefit from it. That's sort of my thoughts. James.

Thank you, everyone. The next question is from Michael. And Sam, I'll direct it to you. How are Australian companies positioned to take advantage of the shift to cloud computing?

Yes. Definitely. Thanks, Michael and James. Cloud computing is a long-term structural growth thematic, and it's playing out in a number of listed businesses. We actually own some shares in Sovereign Cloud. The ticker is SOV. And if you have to look at some of the presentations, you'll see that there is a massive ramp-up in demand for cloud services. So how are companies positioned to take advantage of that? Effectively, corporates and governments can variabilize their cost base or reduce their costs by taking on these cloud services. And that's what's really driving the spike in demand for cloud services. So we really like Sovereign Cloud. We have it in the portfolio. Other companies that we keep an eye on include NEXTDC, Megaport and Data#3, but we're very aware of the growth thematic in cloud.

Excellent. The next question is from George. Tobias, it's for you on e-commerce. Have they had their run?

Yes. So the -- I mean, the long-term thematic is still very strong, but we're still strong believers of it. In hindsight, it's 2020, and in hindsight, the short-term valuation got ahead of itself. So what we've done in the portfolio, Oscar sort of mentioned it earlier, during the September period, we actually reduced quite a bit of our exposure. We've become a lot more selective in which e-commerce companies we would invest in. So for example, Templeton & Webster is one that we still like. They are the leader in homewares and furnitures. So Wayfair, for example, does $13 billion of sales in the U.S. And so there's no reason why Australia, being 10% of the U.S. market size that they can't do over time in $1.3 billion of revenue. But however, the journey to getting there is sort of 3 to 5 years, but sometimes in the short term valuation could get ahead and/or it could come back. And that's sort of when we come in and try to buy Templeton Webster, for example, when we think it's being oversold and take profit when we think it's too overbought.

Thanks very much, Tobias. So as we're approaching 3:30, so we'll just [indiscernible] to the telephone lines and see if any callers have questions there.

[Operator Instructions] Speakers, I believe there is no question from the participant on the dial-in.

Just while we're waiting for any questions, and please feel free to ask us any questions you want, a number of shareholders have asked me about Amaysim, the takeover bid for Amaysim. And thinking that we're buying an operating business, it's just the -- and effectively, we were taking no risk on their operating business. The only way our takeover bid was going to go forward was once it was agreed that all the operating business have been sold. So effectively, from our perspective, there's about $0.70 of cash that's going to be given back to shareholders, and then the company was going to be wound up. And the exciting part from us was the fact that of that $0.70, a significant part of it was going to be paid back to shareholders as a fully franked dividend. And so it was just a very logical play for us. So we're not getting into the telephony business. What -- the business we're in is really investing for our shareholders and getting what we believe is a good return. If some of that is fully franked, then we can pass that on to investors as fully franked dividends, and that's a significant bonus. And with Amaysim, if effectively 50% of the people accept the takeover bid, then I think we get something like 50 -- the ability to pay a $50 million fully franked dividend, which what it does do is allow the profit reserve we've got, it allows us to pay that out as fully franked dividends over time. So that might just allow people to press whatever that number is for the question. Are there any questions from any of the people on the phone?

Look, we don't have any coming through on the telephone line, Geoff. Do you want to cover off CIE and CLF in a similar fashion to AYS?

Yes. I mean, they are exactly the same where they -- where -- I mean, combined, we -- I think both of them, we made a little -- I think it was 18 -- as of this point in time, we've made about $18.6 million. So -- for shareholders and -- which actually is actually one of the big times the annual management fee. So yes -- so they've been positive results for us.

Okay. Look, we -- as we don't have any coming through on the telephone line, we'll take another from the webinar set. So this one is from Melissa. What have been some of the most notable contributors and detractors in recent periods?

Thanks, Melissa, for your question. If I look at WAM Capital, let's start with the contributors. I'd say, basically, the e-commerce space in that first quarter, in the September quarter has just been -- really helped us. A number of the names, I think Redbubble was our best stop, but we actually sold out of Redbubble back in October. Templeton & Webster was also a very good stock, Adairs is another one. So we did very well out of retail and e-commerce. Another couple, we participated in the Nuix's IPO; that was very good for us, and a number of sort of construction companies such as Fletcher Building that Sam mentioned previously and Maas Group that Tobias talked about. Plenty of detractors, never short on them, really. I talked about Tyro earlier, that was one. Got hurt with AMA in January. I'm trying to give us -- we got hurt yesterday by Worley Parsons, good old Worley. They never cease to amaze us. That was -- they are the ones that come to mind, really. But I would say, to actually what really did hurt us actually, it wasn't necessarily -- it's a funny market at the moment because sometimes, our investment process, as Geoff talked about, we're looking largely for stocks that fulfill our research process for companies that upgrade earnings. Now there's plenty of stocks upgrading earnings at the moment, but a lot of them are COVID beneficiaries. So as I talked about before, so retail, agriculture, healthcare. So we actually owned a lot of those companies. They're very, very well for us up to the point in time when the vaccine was announced back in early November. Now those companies have continued to perform well, but their share prices have been sold off. A great example of that was Elders. It was $12.50, goes into the result, it upgraded earnings by 15%, and I think about a week later, it was $9.80. So that's an example of sort of what hurt us in November. Now we still own Elders and a number of these stocks, but at a lower weighting than what we previously had.

Thanks very much, Oscar, and thanks to all shareholders who have taken part in the call and sent in their questions. If you have any questions at any point in time, please don't hesitate to get in touch via phone or e-mail. And please join us for WAM Global on Thursday at 4:00 p.m. and WAM Leaders Friday, 11:30 a.m. Geoff, I'll pass back to you to close.

Look, thanks, James, and thanks, Oscar, Tobias and Sam. Look, thanks for all your sterling work over a period that has been very challenging, I think, challenging for everyone. As we've continually said, this is your company. So please, any ideas, feedback, communication, please come back to us. I know a shareholder, he always talking about our monthly updates. We were using blue inc. They -- he was saying it's very difficult to read. Can you try black ink? So we changed to black ink. And you own the company, so please give us any feedback you can. Obviously, shareholder engagement, we're very -- we want to be proactive in that area. Yes. Thanks very much. Let's hope that the next 12 months isn't as challenging as the last 12. Months, and see you all soon. Thanks.