WAM Capital Limited (WAM) Earnings Call Transcript & Summary

Hello, and welcome shareholders and investors. My name is Geoff Wilson. And I'm the Chairman of Wilson Asset Management, also the Chairman of WAM Capital. Thank you for dialing in to the webinar today. This myself and Oscar Oberg and Olivia Harris, who will be taking questions -- answering your questions and trying to give you as much feedback as we can. In terms of the number of people that have registered for this webinar, it is a very large number -- it's a little over 1,000. So there'll be a lot of questions. Will -- The presentation will go for, say, probably 10, 15 minutes, and we'll try to have the rest of the time open for questions. If we do miss you, please, you're there because you're our shareholders. please, email us or contact us. Obviously, there'll be some of the people on the call that actually may be our competitors. So we won't be answering your questions. But no, look, thank you very much, everyone. In terms of the results, we announced the result yesterday. You can read it in detail. as we try to be in contact with as many of you as we can, we try to get a bit of an idea of what you're feeling and what you're thinking. And in the announcement, we tried to give you really as much detail as you could -- as we could. For you to put the pieces of the puzzle together. In terms of probably what I would like to do is just focus on some of the questions people have asked me, obviously, people have made some very -- some positive comments about the continued out-performance of the portfolio over the last 4 years. But there's been -- also there's been a number of questions about -- well, let me just put them into various categories. There's a lot of shareholders, I suppose, including myself being one feeling some pain because we say we bought our shares in the $2-plus range and then where they're trading at now. And I'll address that. Also, there's been a number of shareholders questioning about dividends and the ability to continue to pay high fully franked dividends. I'll talk about that. obviously, about where the share price actually is trading out at the moment. We -- as it was trading at quite a large premium to NTA, now tiny, a lot smaller premium NTA and I'll cover off on that. And as you -- as I mentioned, there's been a number of people that have talked about performance. Now that's performance of the underlying portfolio. And you'll see, we'll send the slides out to you all after this presentation, and we'll announce them on the ASX, tomorrow. So they'll all be available there. I suppose the first thing is when people invest. Well, actually, I think [ Olivia ], do I need -- I probably need to do a disclaimer. We've got a disclaimer slide. So basically, if you can -- we'll just flip it up on the screen. If you can all read that. Is it the somewhere?

Yes. Yes, it's on [there].

Perfect okay. And so that means we can't give you a specific advice. The advice we will give you is only general revise. If now, if you look at -- we'll put up the slide where it shows you where the portfolio has invested. And that's the slide showing you just where the weightings of various categories of companies where the all odds, if you bought the all odds. Where you'd be, what companies you'd be weighted to, if you bought a small launch, what companies you'd be waited to or have exposure to and then where WAM capital is invested. And to me, it's very important that shareholders understand that. So, yet you can see by that slide where the bulk of the money of WAM Capital is invested in smaller companies, a very high weighting -- it's really smaller microcap -- so a higher weighting to those categories than even the small orders. So what -- as a shareholder, what we're expecting there is. Yes, the smaller you go companies, you expect higher risk, but you also would like high returns. And I'll come back to that, and Oscar probably talk to that a little bit later. But in terms of the various concerns that people have been having, when the Board of WAM Capital made a decision when COVID started then we were paying a [ $15.5 ] fully franked dividend for the 12-month period. And this is going back to the 2000. But then the 2020 year. And the Board made a decision that a lot of companies were cutting their dividends, and the Board made a decision then saying, okay, we might be going through a rocky period. But we're very comfortable in keeping that dividend -- we have retained earnings and we have franking credits. We prefer those franking credits to be in shareholders' hands. So we're very happy to keep the dividend at that level. Over the following 4 years, and we'll show you -- I mean, there's a slide in the pack. I don't think we need to put it up now, which just shows you how the portfolio performed over those 4 years. And there was quite a bit of volatility. There was a year where the portfolio was down [ 8 and odd ] percent. And of course, we're also -- we're paying to your shareholders. We're giving you $15.5 fully franked. Which on the current asset backing is over 10% fully franked. So we have to make 15% pretax, pay that [ 4 and a bit percent ]tax. And then so we can pay out that 10.5% fully franked. So we've been -- and that the first year -- the first full year of COVID, the portfolio was down 8 and odd percent. So we lost $0.35, $0.36 of NTA plus we paid you a $15.5 fully franked dividend. And we've been paying you that yield of, say, that the -- after tax level, fully franked of 10.5%, but at the pretax level, close to 15% for the last 4 years. And when you're -- in terms of its fund managers, what we're trying to do is on your behalf is outperform with the capital you give us -- and we're hoping to do the market plus a little bit better. Over that 4-year period, the yield on the market was about 3.7%, 3.8%. And I think it was 60% franked. So we're giving you a significantly higher fully franked deal. And in terms of return, some shareholders are saying, well, look, why I bought in the $2 level. It's now trading significantly lower than that. What's happened? Well, I mean, if you look at the last 12 months, 12 months ago, we were trading at a 22% premium to NTA at June last year and now WAM is only a 5% premium NTA. And Olivia, did you want to put that slide up just shows you the cyclicality of the premium and discount to NTA. So that's been one factor. The other factor, the reason why the share price has come down is because we've actually been paying you super profits in terms of -- normally, you expect say to get a 9% or 10% return pretax from investing in the market. If we're good fund managers, we're going to do a bit better than that. But we've been giving you effectively 15% pretax. Now that was a board decision to keep the dividend high. And so if the portfolio is down, say, the first year of the GFC, the portfolio is down 18% then also you've got a situation where you're paying effectively 15% pretax. So that's 20% -- so you're about -- the portfolio is down 35%. And then even if the portfolio bounce back, it's that the additional fully franked dividend that we've been paying you every year that at a pretax level is taking -- pushing the capital. So to me, you've got to add that dividend back and you've got to add that franking benefit back for you to get to fully understand than what's happened. So that's -- to me, that's very important. And the plan is from the Board's perspective is while we can keep paying you these high dividends, then we'll keep delivering them to you. Now you'll see in terms of -- in the announcement, we talked about if we can deliver -- really, we need to deliver a 15%, 16% pretax return to give you -- to provide those dividends to you. One of the positive things is in July when capital did it. Oscar and his team did a great job. The portfolio was up a little over 3.5% beating the market. And so far this month, even though it's been a tough month for the market, the portfolio is a couple of percent ahead of the market, which is positive. And we'll talk to that a little later. So to me, that sort of covers off a little bit and going from that premium to discount. And will we get back to a premium? We've always said what we like to do is by $1 of assets at $0.80. We like to buy discounts to NTA, and that's what we'd encourage you to do. Wood WAM capital go back to the premium it was one day. You'll see from the chart, the probability is if we continue to do what we're doing and continue to deliver, then that will occur. Now what I'd probably touched on -- well, I haven't touched in detail on performance. Actually, Olivia, if we go to -- I've touched on discount, obviously, the discount to end -- sorry, the premium to NTA has reduced significantly, and that's been a negative impact. I've touched on the fact that we've been paying a very high fully franked dividend, really nearly a super dividend in terms of if you look at it -- and what we need to do to continue to deliver that to you. And our plan is we'd like to continue to do that. And I've touched on a little bit is why the share price has gone from that high -- from those $2 levels to where it is now. It's a twofold. One is contraction of premium to NTA. And the second one is we've actually -- even though it's been a tough period, and we have had some really good performance. We've been paying out a significant dividend compared to what the market does or any other, most of our peers in a fully franked basis. So Olivia, if you just want to -- we have shown that premium to discount chart.

Yes.

But people get a little bit of an idea about that. What I'd like to do now is I'd like to pass over to Oscar. There has been a lot of questions at a point -- and where initially, where Olivia will go back and Olivia will start asking Oscar and myself some of those questions. So to me, actually, the one slide I'd like to finish on before I go to Oscar, Olivia, it's just the performance slide, where we put the performance of the -- and this is since COVID, where we put the performance of the WAM capital portfolio. And then we've shown you the performance of the all odds. And also, we've shown you the performance of the small odds. And you'll see that by the -- the slide we showed you earlier is how the portfolio is positioned. It really has more skewed to the microcap part of the portfolio. And then if you look at how the portfolio is positioned and the performance of all those periods and there's 8 periods of 4 years for each of the indexes that Oscar and his team have outperformed the smaller odds or the all odds in 9 of those sorry, in 7 of those 8 periods. So to me, I think the Oscar and his team have done an exceptional job. I think the reason why the share price is where it is, it's been the contraction of the premium [ 20 ], and it's been the fact that or decided to keep paying those very high dividends. And so we're -- because those dividends are paid out of -- the profit reserve is a combination of retained profits, realized profits and unrealized profits. And because we decided to keep at that level, we ended up paying out a number of the unrealized profits. So you as investors have got your capital back at a fully, franked on a fully franked basis. So that's where -- like if we had halved the dividend, if we have a dividend at the start of the GFC, then the NTA would be nearly 30% higher and the share price would nearly be 30% higher. And we still would have been providing you with a dividend of about 60% higher than the market was giving you on a fully franked basis. So I'd like to now pass over to Oscar, who will talk to you about what's -- what are you doing with your money. Thank you very much.

Yes. Thanks, Geoff, and good afternoon, everyone. Look, before I start, I'd like to reiterate Geoff's comments -- as a team, we take great pride and responsibility in managing your money within WAN Capital. And I guess as fellow shareholders, we're too disappointed about how the share price has performed over the last 12 months. So as a reminder, the WAM capital investment process is focused on identifying undervalued growth companies with a catalyst. The six of us within the WAM Capital team see over 4,000 companies a year. But the vast majority of these companies focused in the small-cap space, as Geoff pointed out. Over the past 25 years, we've chosen to invest in small caps, because these companies tend to be under research and generally have a catalyst that can drive the share price higher going forward. As Geoff pointed out, as it stands today, within WAM Capital, we have 0 -- effectively 0 exposure to large cap companies, which we define as the top 50 companies within the market. And as you can see in that slide, I think it's Slide 5. The top 50 companies within the ASX actually make up around 70% of the Australian market. So despite a challenging 12 months, we're pleased to report that the portfolio outperformed over the 2023 financial year, but just say that by around 3.5%. And this is a great effort given small caps underperformed for the second consecutive year running with the headwind being just over 5% for the year. Our contributors to the portfolio included age care operator SCA Health which had a takeover bid in late March. And thankfully, that takeover looks like is about to complete. And also vessel operated Mermaid Marine, which upgraded earnings several times throughout the year. As is common every year, we do have a lot of detractors. And one of the largest detractors was Mars Group, which is a building materials company focused in regional Australia. The reason why that was a detractor had a number of earnings downgrades largely due to the bad weather in the first half of the financial year. But we still own the business. We think the market value of Miles Group's property is actually well above the share price, which means we're getting the operating business for free. And we actually see a very positive outlook for the company over the next 2 years. Now over the last 25 years, we've had many periods where small cap companies have either underperformed or outperformed the broader market. Now unfortunately, over the last 2 years, it's been a very tough period where small cap companies have underperformed the market extensively. And you can see this in Slide 7 of the presentation. And you can see that most of this underperformance began in the March 2022 quarter, which was the start of the Russia, Ukraine war and also the start really when inflation started kicking off. Furthermore, capital markets activity has been really, really slow in the last 2 years. And we have really haven't done many deals at all. And this impacts the market-driven side of WAM capital And so if you have a look at the 2023 financial year, we only participated in 20 deals. In 2021, I think it was close to -- so it was about 65. And in 2020, it was over 70. So it's a big contraction in that part of the portfolio. Now pleasingly, we're starting to see light at the end of the tunnel for small caps. And the most important thing that we've seen in some time was actually in the June quarter of 2023 was actually the first quarter that small-cap industrial companies, which is largely what WAM Capital invest in, actually outperformed the market for the quarter. So it's a really positive sign. And this has continued on into the 2023 financial year. And the sectors that we think look very interesting at the moment of those sectors exposed to the economy and that sectors such as retail, automotive, media and building materials. And it's because these sectors have been hit really hard in terms of the share prices over the last few years. And valuations look very attractive. These sectors are very important for the small-cap market because these sectors actually contribute around 30% of the small cap benchmark. So for small caps to outperform do well, you need these sectors to go well. So an example of the value and the opportunities we're seeing, I thought it would be good to talk about Harvey Norman, which is a company we'll all know to retail in household goods. Now in June, the share price of Harvey Norman reached lows that were actually below the value of their property. And in fact, we've only actually seen this happen only -- this is the third time we've seen this happen over the last 15 years. Now what this means was when we were buying shares at Harvey Norman at around $3.20 a share, we're actually getting Harvey Norman's retail business, which does over $400 million of profit for free. Now what's more we need a catalyst to invest in WAM Capital, and if you look at Harvey Norman, the analysts that cover the stock have -- in their forecast for the company. If we look at 2025, which we think is probably the most normal period, we can benchmark to. The numbers there are actually lower than what they were before COVID in 2019. Now in our view, the current environment and as we go into 2025, we feel it's a lot better now than what it was in 2019. We actually think Harvey Norman has taken a lot of market share over that period. So in our view, we think we're going to enter a pretty good time for Harvey Norman and for a number of the other retailers because earnings are too pessimistic. They're too negative. So we think we're going to enter into an earnings upgrade cycle, and this should fuel the share price. So as Geoff touched on, there is a while to go in the August reporting session. So I'm not getting too excited. But pleasingly, it does feel like the market is turning towards small caps and in particular, those stocks exposed to the consumer. So companies such as Nick Scali, Babpo, GUD Holdings, Baby Bunting have all performed above expectations, which were negative and actually now slightly better and seeing the share prices go up as a result. And as Geoff said out, the we've outperformed over the first 6, 7 weeks of the financial year and also the portfolio was up just a tad over to 3.5% for the month of July. So in conclusion, we're very positive, the outlook for small caps, and we're seeing a lot of opportunities that fit our investment process. And look, I'd love to obviously take the opportunity to thank all the shareholders, those on the call, not the call for all your support. Over the last few years, the team really appreciates it. So I'll now pass it on to Olivia and will guess get rolling on the Q&A.

Thanks, Oscar, and thanks, Geoff, and thanks to everybody who is sending your questions through. Please keep sending them. We all work including them in the background. Geoff, I know that you've touched on the share price, but we are getting quite a few questions through from Matthew Ian, Geoff Swan, Daryl, just to name a few. I thought you could perhaps discuss that contraction in the premium that we've seen. Could you maybe talk through how [indiscernible] can trade at a premium in a discount to NTA and what you've seen with WAM capital.

And can we put that slide up WAP, the premium and discount [indiscernible] and if you look at that slide, when we flow to WAM Capital 24 years ago, for the first couple of years, we traded at a discount to NTA. Then when people sort of -- and that's when the people are putting me in the start, weren't quite sure whether we'd perform or not. We ended up performing really well for the first couple of years. And then we started paying reasonable-sized dividends, then the share price moved up to NTA and then went to a premium to NTA. And over the last -- and then you'll see that we got up to -- I think at the highest premium to NTA was 3 or so years ago, and it was a little over 30%. So we're managing $1 of assets, trying to get a performance on a $1 of assets. And that $1 assets, if you understand the premium is trading at $1.30. And what's happened in the last 12 months. You'll see on the actually, do you want to put the slide up the slide that shows the various performance, the total shareholder return, et cetera, et cetera. The performance of the portfolio you sold. You're talking about how good the portfolio has performed. And then you look at the title shareholder returns see on that slide where it says for the 12 months, that's June to June. Were down 4.5%. Now that is we're paying a 15.5% fully franked dividend. And that's not -- like a lot of people -- I know 60-odd 60%, 65% of our shareholders are [self-managed] super. And they get the franking credits back -- but that isn't saying -- that isn't putting a value of sort of $0.06 or $0.07 on those franking credits. I'd say probably, if you probably put the value of the franking credits in then you're probably down over that period, 1% or 2%. But you're saying [ How ] am I down. when the portfolio is up and the markets is up. Even then you're telling me the portfolio performed better than the market. It's actually the fact that we were at a 22% premium to NTA, and that premium has declined to about 5%. Now why do you trade at premiums and discounts. I mean it is the market. It's really supply and demand. And from various points in time, we have traded at discounts in various points in time and premium. Now will we go to a discount at some point in time, the odds are, we will. Now will we be trading at a higher premium to NTA at some point in time and the odds are, we will. What does the company need to do and needs to perform. It needs to provide a good dividend, fully franked dividend stream because the marginal buy tends to be self-managed super funds. And it needs to treat shareholders failing and I suppose that's all companies need to do that. And the fourth thing is it needs to have a really detailed shareholder engagement, communication strategy. And that's where a lot of listed investment companies that floated over the last sort of 5 or 6 years, has tended to go by the wayside because they really haven't committed the resources. And we have in the shareholder engagement, communication, marketing strategy, we probably -- we've got 11 or 12 people in that area. So yes, that's a reasonable dollar commitment. So that's broadly what you need to do. And the -- why is the share price, the total shareholder return not been good. It's because we were at a very high premium and now we're at a very small premium. Now if the premium had stayed the same, then you would have got the -- just the performance of the underlying portfolio minus the fully franked dividends because a lot of people -- and I know even some sort of professional investors that I know, not stock market investors but professional property investors, et cetera. don't realize that when you pay a distribution or a dividend, it has to come from somewhere. And I think we've got some questions a little bit later about the sustainability of that. But I'll leave it there and I'll wait for those, Olivia.

Thanks, Geoff. Given that we do have quite a few questions on the sustainability of the dividend. We've got some from Roslin, Lyles, Sterling, Bruce, Michael and a couple of others. So I might stick with you and ask you just to talk through the profit reserve. Maybe you can talk about how that works, what the proper reserve actually is? I know you touched on that earlier, but just to reiterate, and what the outlook is for future debt.

Yes. And what we do is on our monthly NTA. I mean we've had profit reserves since when the capital has started. And when we're -- before COVID when we're doing our 6 monthly road shows, -- now it's -- sorry, now it's once a year. We were communicating to shareholders what the profit reserves are. And then we thought, look, we just -- let's just make it very simple and let's announce the profit reserves with our monthly NTA. So all shareholders know exactly how much is the profit reserve. What the profit reserve is broadly, say, if we start with -- the company floated starts with $100 million -- the value of that $100 million goes to $110 million after tax, so increased by $10 million. Then what the company -- what we do is we put that $10 million and may be realized or unrealized if it's in a -- we look at it monthly and then the Board decides to put that in a special reserve. And that's where the profit reserve comes from. So our ability to pay a dividend, you need -- it needs to be retained earnings or comes from a reserve, and that's why we've created the profit reserve. And then to that fully franked -- for the dividend to be fully franked. We need to have franking credits. And then -- and we get them by paying tax or getting fully franked dividends. But the bulk of the franking we get is by paying tax. And we have been fortunate that we've done a number of takeovers over the years and some of the companies we've taken over, the primary benefit we make the primary reason for the takeovers as best we get a better return than just being in cash and they've always delivered for NTA, increase the NTA of WAM capital. And if we haven't done any of those takeovers, the NTA for WAM capital will be lower than it currently is. And also, in some of those takeovers, the secondary benefit has been -- there's been franking credits there as well, we would've been able to pass on to shareholders. So that's the profit reserve. And then our ability to continue paying the dividend because the Board decided to start of COVID, not to cut the dividend when people were. And then because the portfolio fell then, then -- the yield we're paying out is a lot higher. Now -- some people might ask the question, well, and the question is how sustainable is that? If you go back to 2022, for that year, that was a tough year in the market. And you'll see that on the performance data we're down that 80-odd percent. And so that was $0.35 -- the $0.356 the NTA drop. So even if the premium to NTA stayed the same, that's what the NTA dropped by. Then we paid out $15.5 fully franked. So to pay that $15.5 fully franked, we would have needed probably another $0.06 of tax we would have had to pay. So that's where all of a sudden, there's $0.56 of NTA that's the performance. But if you look at the -- in 2021, the year before, when -- I think at the start of -- at the end of 2020, the NTA was about $1.59 -- but in 2021, Oscar and his team just had an extremely good year. And the portfolio increased by $0.54. So all of a sudden, the NTA has gone from $1.60 to $2. What we $2 [indiscernible]. So then obviously, then the dividend you're paying out, say, the $15.5 on $1.59 versus $2 -- a little over the $2 level, the yield drops down. So our ability to continue to pay fully franked dividends is our ability to continue to grow that profit reserve back in 2000, we thought like we might be going to have to cut that dividend. But we've been able to continue to make profits. And to me, I take my hat off to Oscar and his team because if that only performed in line with the market, then we wouldn't be -- we wouldn't have the profit reserve or the ability to pay the dividends we currently have. So that's I think that covers that off, Olivia. And like there might be -- there's been a number of people that have sent these questions in. There might be nuances in that answer that you want more clarification Island. Or you'd like to ask an additional question, please feel free to send them in because this is -- we're here -- we're reporting to you. It's your company, you own the company, -- and we'd like to allow you to fully understand what's happening and how it's operating.

Thanks very much, Geoff. Oscar, we're going to turn to you now for a couple of questions. We'll stick with you for a bit. The first one that's come through is from David. Do you have any views on AMO, I think that's Embratec.

Yes. Thanks, David. Look, we came across it a few years ago. I think it had a good year sort of coming out of COVID. I think it was a distributor of AV products from memory. It was very, very small for us. We haven't seen them for a long time. So I must admit I don't have a view on them at the moment, but always happy to learn about some new companies if you'd like to have a chat at some point. So Yes. So sorry, I can't really give you a good answer, but yes, unfortunately, I haven't seen them for a long time.

Thanks, Oscar. And the next one is from Graham. Will you be investing in the private company Egros, who are in competition to CSL?

Yes. So the answer there is no. We only really focus on listed companies. And as we sort of discussed before, we focus on small cap companies. So -- certainly my time at Wilson Asset Management has never been in the portfolio. So that's probably more WAM leaders domain is a company like that so.

Thanks very much, Oscar. And the next one, this is from Steve. Is Citishik a company you would consider for the portfolio at the current prices.

Yes. And it's been a funny on this one. It was our best stock for about -- I've got 2 or 3 years in a row really across WAM Microcap and WAM Capital and obviously, had a huge COVID bump, and we got it wrong, one of our worst stocks really last year. It'll be in top 5 best stocks last year. They're interesting enough, they sold their troubled European business recently over the last few weeks, and they're conducting a strategic review. Which is always code for we're selling assets and reducing debt off the balance sheet and reducing inventory. So we bought a small position in WAM Microcap. It's really too small now for WAM Capital. It's -- the Microcap has fallen a lot. Or the share price has fallen a lot, I should say. So yes, we've got it in there is a small weighting within the Microcap portfolio. So we'll wait and see what the management and the Board come up with, with the strategic review at the result, which I assume is our next week some time.

Thanks, Oscar. That's great. Geoff, we've got one for you from Warren. What are your thoughts on Magellan?

Magellan, there's probably two listed Magellan vehicles on the stock market. There's Magellan the fund manager and then there's a listed investment trust that Magellan has. In terms of Magellan, the funds manager, obviously, it had a very difficult period with significant outflows. We actually don't own it in -- probably where it would fit would be more likely in WAM Capital. I know Oscar and his team went to -- did a company visit recently. And we -- obviously, what we're looking for is undervalued growth companies with a catalyst that's going to change the valuation. I'd assume -- well, Magellan is probably doesn't come into that category and undervalued growth company. And then whether there's more a trading opportunity with the catalyst or change the valuation. There has been a bit of noise reactor -- reactivists giving the company a bit of a hard time. So to me, we don't own it. Could there be an opportunity? Yes, it could. In terms of the listed investment trust, which trades at a discount the NTA. We actually bought that in WAM strategic value is a shareholder in that. It makes up about 5% or 6% of WAM strategic bales portfolio. And WAM strategic value started buying that at about a 20% -- was buying it around the 21%, 22% discount to NTA. And now it's trading at about a 12% discount to NTA and haven't been buying any recently. The catalyst from WAM strategic values perspective is they think that at some point in time, there'll be -- it will trade to very close to NTA. So it's already been a good investment. And the WAM strategic value shareholders hope it becomes an even better investment. Thank you.

Thanks, Geoff. And Geoff will speak with you for the next one, which is from Connor. He has stated that WAM does form a large part of his retirement this day. Like you said, we have a lot of self-funded retirees shareholders. He's asked -- is it time to jump ship to a low-cost ETF. So maybe you could touch on your thoughts on ETFs for[indiscernible].

Yes. The really the -- it could well be. Like to me, we're not -- we manage the company on your behalf. We're not going to tell you to buy or sell. That has to be your decision, and you've got to weigh up the pros and cons of the two. One is, as I mentioned, the WAM Capital is now trading at about a 5% premium to NTA. So if you buy an ETF, you're actually getting in to the NTA. Now the ETF, you'd assume and when you'd hope that the ETF would give you the performance or whatever market you decided to invest in -- so -- and the dividends you get would be -- well, if you did an index ETF, then you get a yield of about -- was at 3.7-odd percent, which the market is giving you at the moment. And that would be, I think it's 56% franked. And so if you want a really small amount of franking and you want that market risk, yes, then that's then an ETF. It gives you that. You still get market risk with WAM Capital. As I said, you are paying a 5% premium. You're getting a severely high yield at the moment. The question is, can we continue to deliver that. And like if I had a clear crystal ball, which we could tell me exactly what we're going to do, then I would tell you, the performance just depends -- the dividend we deliver to you will depend on that performance. So to me, it's just -- it's not a black and white decision. That's probably the factors that if I was you, I'd take into consideration.

Thanks, Geoff. The next question that we have is from Roderick. Roderick has two parts to his question. One is on the economy, which I'll give to Oscar and then next is for Geoff, which is back to the dividends. Oscar Roger has asked in a recent business meeting, it was said that we are currently in a stage of the business cycle, which is why the share price has declined. Can you maybe comment on where you think we are now in the economic cycle and maybe what your outlook is for the Australian economy?

Yes. I'll talk about sort of the economy and how that relates to the fund, which I think the question is. So yes, I mean I was just talking then about 5 minutes ago about how we're really bullish on sectors exposed to the economy such as automotive, retail, et cetera. Now clearly, that seems a bit odd given all the negativity we're seeing in the papers and on the TV and so forth about the upcoming recession costs, the switch from fixed rate mortgages to variable, et cetera. And that's right. We think it's -- we're going to enter a very hard period for companies. There's no doubt about that. And we're seeing that in the current results. Now the beauty about what we do for our job is the market always looks 12 to 18 months in advance. And the example I gave for say, Harvey Norman, for instance, this year, I think they'll do around $400 million of profit. I think it is. The year before, they were doing well over $600. So -- and if we look for the analysts that cover the stock, we've got profits declining for the next 2 years. Now -- what we've seen in this reporting season is actually a number of the companies, the REIT that are exposed to the economy, the numbers haven't been as bad as expected. And because these companies are very cheap and their share prices have already fallen quite a lot we're seeing the share prices recover because effectively, people are looking through the cycle, looking forward and going, okay, well, yes, we understand this period is going to be very difficult. But maybe as we get to the new year 2024 and into 2025, things are going to get better, and we're going to see growth again. And that's sort of what we've been aiming for in the portfolio. And as I said before, that's exactly what's played out. So -- another example is Nick Scali, that -- they did a profit just over $100 million for the 2023 financial year. The analysts that cover this, follow the stock had profits falling to and then 70% then 70% the year after. Nick Scali had a great result. Synergies are coming through. It wasn't as bad as people feared. And those numbers have gone instead of 70%, they've gone up to 75% and now 85%. And as a consequence, the shares are up 20%, 25% over the last few weeks. So that's sort of the game. That's -- we're in the game looking forward. And certainly, Geoff talked about our performance versus the small cap benchmarks over the last 12 months. Stocks exposed to consumer have been a very low percentage of the portfolio. And that's one of the reasons why we actually outperformed the small ordinaries index. So we are now going to a period where we think those stocks are cheap. They've got catalysts, think the share prices are too low and are due for a rebound. So that's what we're positioning the portfolio into this reporting season. But don't get me wrong that the economy is going to have a very tough period. I think all the feedback and the last thing I said I've been talking too much. But -- last thing I'll say is all the feedback we get on the ground is we just need confidence, the consumer just sees confidence that rates are going to stabilize. So I think from our perspective, we're not even looking for rates to fall -- we just need them to stabilize and people can readjust their budgets and then sort of start again. So how about I leave it at that. I might draw out a few more questions, but I'll leave it at.

That was great, Oscar. Thank you. We appreciate all the detail. And yes, I will stick with you just for one more question before we get to that second part of Roger's question. You very quickly touched on interest rates. We've had questions from Gary and Vladimir. What do you expect the RBA to do next?

Good question. I must be. I thought that will be on pause back in April and I got that wrong. Look, I still think they're going to pause. I really do because I think there's just so many much uncertainty with what this fixed to variable shift in mortgage rates will happen. I mean it's interesting to see sort of the cohorts of, I guess, the demographics that are really being impacted now. And as younger people are getting really hurt with rental increases and obviously, mortgages and so forth. Actually older people do quite well through this period. So this is quite a divergence. But yes, overall, I think there's still too much uncertainty -- and I think as well, what we see on the ground as well is this come up this reporting season, there's a lot of the logistics and freight costs and sea freight and ocean freight, et cetera. which has been a big driver of the inflation over the last 2 years is now really starting to come off and it's actually now back to pre-COVID levels. So I think -- and we're starting to see, I think, yesterday with the jobs number with wage growth was slightly lower than expectations, 3.6%. So it's starting to normalize, which is great. And we think they've done enough at least at this stage in relation to cash rate. So look, we think that will be on hold.

Thanks, Oscar. And Geoff, back to you just for that second part of project's question. Can we continue to pay out such a high dividend? Or will it dilute the shares?

Thanks for the question. It actually -- say if we were -- let me give you an example. Say we've got $1 of assets yes, at the moment, saying we've got $1.45 of assets. and we're paying over a 12-month period, we're paying a $15.5 fully franked dividend. Then like that comes from the assets. So effectively, for us to pay that dividend, if it's fully franked, we would have had to pay either received $15.5 per share in franking credits for other companies, which we don't or pay tax, pay 6 or what is -- no, it's about $0.045 or $0.05 of tax to allow you to pay it as a fully franked dividend. So it would reduce your NTA by the amount of dividends that you pay. As I mentioned earlier, that if the Board decided. At the start of COVID everyone was cutting the dividends. If the Board halved the dividend, then the NTA would be -- it's a 27.9% higher now. Like the NTA instead of being $1.42 at the end of June would be $1.82. But you wouldn't have got -- you wouldn't have received $0.31 and fully franked dividend. So if you -- over those 4 years, you've received effectively $0.62 in fully franked dividends, which to pay out $0.62 fully franked is you've effectively got to pay another -- what is it about [3 by 6] -- about $0.18. We would have had to make about $0.80 at the pretax level to do that for shareholders. So if we didn't pay that out, the NTA would be $0.80 higher. But then you probably wouldn't be that happy.

Thanks for that, Geoff. Oscar, the next question is for you from Greg. In terms of agricultural companies in WAM Capital top 20, could you please explain why you hold readily in Select Harvests and not Elders or Nufarm?

Good question. I must admit I ask myself every day while we own Select Harvests. Anyway, the simple reason is, look, really in Select Harvests, we always want to own agri -- the starting point with agriculture is you want to own these companies when it's really dry, and you want to sell these companies when it's effectively really wet. Now I know that sounds very simple, but that's just a fact. And Elders and Nufarm went through an incredible period through COVID, both companies. There was a big shortage of chemicals and fertilizers and so forth, which drove a lot of price increases and both companies really benefited from that. And if you think about the East Coast of Australia effectively had an amazing conditions really for some time through La Nina or actually feels like we're entering into El Nino now. So both those companies particularly for focus on Australia, probably had profits that were probably -- that were super profits effectively. Now we did really well out of Elders through 2020 and 2021. We sold it. We like the business, nothing wrong with it. So then Nufarm. We just thought they were at peak earnings. Now on the flip side, Ridley and Select Harvests. So Ridley basically is a manufacturer of court feed for animals. They Clearly, there's been great conditions on the ag side. So there's less demand, let's call it for feed than what they would be in dry times. So that's a good starting point for that business. And in Select Harvests case, it's probably the only commodity globally that hasn't seen an increase over this period, which is almonds. And that's largely due to because California, which is a large almond producer, it will the largest almond producer in the world, it's about 70% of volume has -- had a record crop in 2021, it's just brought the price down. Now we're on Select Harvests. So Select Harvest, the value of their assets is around $6 a share, and it's currently $4.50 today. Now for us, we're happy to wait there with Select Harvest. We know at some point, we'll see an average almond price. They've had a lot of headwinds, this business. And once we see that, we think we're going to be effectively getting is about -- it's about a 25% -- 25%, 30% discount to its NTA right now, which is great. And then once the earnings come through, we think that will drive earnings upgrades at some point. We're not going to say it as yet, but at some point, we'll see it. And then on the Ridley side, this has been a turnaround. We've owned the business for just over 3 years. It's been a great turnaround with the new -- with its new CEO. It's got its results tomorrow. So fingers crossed, it's a good result. But effectively, if you look at the company, we think those earnings upgrades will continue some cheap valuation of around 12x earnings, and it has a net cash balance sheet. So we do actually think there will be acquisitions in due course. So long answer again, but hopefully, that gives you a flavor as why we own sort of Ridley and Select Harvests over the other two.

Thanks, Oscar. And Geoff, we'll go to you next. And this next question I think you actually had a whole another webinar on. But it's from Gary, could you discuss what is the legislation agenda for franking credits? And maybe you want to just on the advocacy that we've done recently?

Yes. And sorry, the exact question because I just want to make sure I answer the question.

So he said, what is the legislation agenda for [NTA] credit?

Yes, yes. Okay. So it's gone through -- it's waiting to go through the Senate. There's -- the bill -- there's two parts of the bill that we're -- we think the current government is making a big mistake with. And that's the chapter 4 and chapter 5. And please, if anyone is in -- well, it needs to go through the Senate. It looked like it was on the agenda to go through the Senate a couple of weeks ago. I didn't make it. So it will probably be up for debate and voting in September when the Senate next sit in September. Now we are trying to get it adjusted, that's chapter 4 and chapter 5. We were successful in getting the Senate inquiry. At the Senate inquiry, the conclusion was Chapter 5 needs some work. Unfortunately, they didn't -- unfortunately, that they didn't pay attention to Chapter 4, which means any company that's listed on the stock market that does a buyback, whether it's on market or off market will lose franking credits. Any company that's not listed on the stock market that does a buyback. Obviously, if you're not listed, it will just be an off-market buyback. If you're not listed, you will not lose franking credits. What we need -- if anyone is in David Pocock's electric or Jackie Lamb's electric, any of the -- those senators that we're talking to their advisers, we'll try to speak to them again when it gets up to the Senate because what we're trying to do is get the legislation changed. So there are no significant unintended consequences. So that's pretty much where it is. Whether we'll succeed or not, we'll try as hard as we can. This is a lot more nuanced than back in 2019. What we're really concerned about is it's sort of -- it's the thin edge of the wedge. Now if, is effectively the government gets away with changing this legislation, which will negatively impact companies with franking. And I'm not sure if anyone here as a shareholder in -- was it [indiscernible]. That was a listed investment company that decided to give its money, turn itself into a trust and wanted to pay out a fully franked dividend. And the tax office said they can't and because that will get caught up in Chapter 4 the legislation, which really is just incredibly unfair. So we'll make the stock market. Everyone here who's on the call likes investing in the stock market, it makes the stock market less attractive for companies to get list on. So you get less and less opportunities to invest. But yes, to me, it's very frustrating and very annoying. And we'll keep committing significant resources to do that. And a lot of people think that you got to remember in terms of the impact that it has on any of the pools of capital that are managed, any advocacy work we do has no impact on the various -- WAM capital or WAM Leaders any of those companies. Yes because the people that are managing the money, Oscar and his team continue to do that.

Thanks, Geoff. And we did have a follow-up question, which you've just touched on there. So maybe just going to reiterate, is there a specific impact? This is from Vladimir. Will there be a specific impact on WAM capital for the future ongoing growth story, profitability and ability to pay dividends with the franking legislation.

What it does, well, effectively, it's pretty much like a -- it's like we are all ourselves and everyone who's on this call and every investor in the Australian market. Assuming this legislation goes through as is, isn't changed, then it will reduce -- it will just slowly reduce the pool of franking credits that it could get access to -- so there won't be any significant head pocket nerve. It will be -- you're just the frog sitting in the water that's getting hotter and hotter and hotter. And then eventually, the big thing that concerns me eventually the government will say, look, the franking system doesn't work like Paul Keating, one when it was put in, let's get rid of it. And that's what happened. There was a similar system in the U.K. and it lasted 26 years.

Thanks, Geoff. Oscar, we'll go back to you. This question is from David. What are your views on the direction of interest rates and economic growth in the U.S. and Australia? And also, if you could comment on your views for the direction of growth in China. -- as a two big question?

Very big question, a very big question for a small cap investor myself. But look, we do a lot of traveling and to get an idea of what's going on outside of Australia because a lot of the time what's going on in Europe and United States is a lead indicator for what happens in Australia. And I went to the U.K. and Geoff was actually there at the same time back in June. My colleague, Sean, who's on our calls within the WAM Capital team. He was in the United States for 2 weeks, as was John Au from the WAM Leaders team as well. And I think when we all came back, our feeling was. And that was a tough time in the market and the huge fees of recession in Australia. And I think when we went over to Europe and U.S. we came back thinking, it's probably not too bad. And particularly in the United States, new house, home construction and new house sales and so forth is extremely strong. At that period of time, which has been reflected into -- in some results, in James Hardie's result, which was a couple of weeks ago. So look, in summary, we think, look, will we go into recession -- I think the U.S. is probably in a better place than Australia right now. Time will tell. It's hard to know. It's very choppy. If you ask me [indiscernible] , I might have said no. But then again, retail sales came in slightly higher than expectations last night. So again, raises questions around where the rates are going to be increased or not. But I think for both U.S. and Australia, we think rates will stay flat. We think the hiking cycle is done enough -- but it will be a wait and see. And as we've seen over the last few years, it's a month-by-month proposition. And on the economic growth side, yes, I think economic growth will be stronger than what people think. Because it just feels that consumers just have more in their back pocket and are sort of and are more willing to spend. And we've seen that, in particular, we travel, how strong the travel market has been as well. So yes, look, in summary, we think it's probably -- I mean, economic growth side of things is probably better than what people originally thought. We think interest rates are holding for now, but it's watching group. On China, who knows? Look, China -- I mean, look, all the data and I guess the feedback is, we've had Country Garden, one of the largest property developers in the [indiscernible] in the last few weeks. Look, it's all driven by what the government decides to do around stimulus. And we don't really -- we don't focus at all on the iron ore majors within what we invest in with WAM Capital. And in fact, our portfolio really outside of a few consumer stocks doesn't really have that much of an exposure in China. But don't get me wrong, it impacts the Australian dollar, which impacts other companies we invested. But -- but yes, I think, look, the rhetoric is very negative. So -- but on the -- on the other hand, when it gets really negative, then people start talking about stimulus. So -- and that's what we think is happening now. So I wouldn't be surprised if the government launches a stimulus of some kind, and that will obviously be very good for the iron ore majors, which, as I said before, we don't necessarily own.

Thanks, Oscar. Geoff, we'll go back to you. This question is from Bruce. Is there any intention of having a share purchase plan in the future?

Look, obviously, that's a Board decision. There's no intention at the moment. The -- I think from the Board's perspective, that want the profit reserve to be a bit bigger before that was thought of. Yes, so to me, it would be not until pretty comfortable that we could see at least 1 year, 1.5 years of profit reserve and dividend. Even if that was -- even if it made sense to do a share purchase plan. And I don't know if that's on here, but I've had them before. The -- what we've done historically, we haven't done share purchase plans. We've used the share price premium and taken over other companies. And the -- when we do that, then it's -- we actually -- it actually boost the NTA because you're raising money at a premium to NTA and you also get a secondary benefit of picking up additional franking credits.

Thanks, Geoff. We've got a follow-up question to that from Caesar. Do you think the share price dropped after WAN Capital absorbed [ Westoz ] and Ausgrow?

Well, the -- I think the share price -- well, the share price dropped. Effectively, after we've made various takeovers and we've issued shares in those new companies, whether it's a [indiscernible] ,[ Westoz], any of the companies that we've taken over, there has been some softness in the share price. The unfortunate thing is the [ Westoz ] and Ausgrow they just -- they coincided with COVID and the pandemic and really that really tough year where the market fell significantly. So to me, there's usually some short-term weakness in share price, which then usually bounces back. And with the Westoz, Ausgrow, even though it increased the NTA and it increased the -- sorry, and it was positive. We picked up franking credits as a secondary benefit. The -- yes, I think the share price kept coming under pressure because of what was happening in the -- yes, in the mid and small sector and the overall stock market yes. Thanks, Olivia.

Thanks, Geoff. Oscar, back to you. This question is from Howard. Is there further upside in [indiscernible] Group?

Yes. We think it is. We own it. It's in the research part of the portfolio. Business has changed a lot over the last 5 years. It used to be effectively a ferry and tourism operator. It bought well, effectively had a reverse takeover of -- with the Australian bus and international bus business. So now about 75% of their earnings is now in sort of in buses. Which is more dependable less cyclical defensive style business, almost like an infrastructure asset. And the business recently purchased another bus business in the United States, which has got a strong exposure to all the gas markets. We think that business is doing particularly well. So we actually think the business reports next week, potentially could see some earnings upgrades around that acquisition. Very good management team, defensive business. So yes, we quite like it. It's in research. Yes, it's a good business.

Thanks, Oscar. And this next one, could be for you or Geoff, but John has asked TGP, I believe that's 360 Capital Group. He says they're currently trading well below their NTA. And it has cash on its balance sheet. Is this a company that WAM or [indiscernible] might look at as a takeover target?

We have owned TGP in the past, a long time ago, I think it was 2016, 2017. And yes, it was a difficult stop for us because as Geoff have often said, sometimes you can buy a company at a discount to NTA, but the discount actually widens and that's exactly what happened. And so potentially, I would answer for Geoff, he might jump in, but it could be an opportunity for [ Warwick ]. You need to see the management team actually want to do something about that discount to NTA. And back then, which is about 5 years ago, we didn't see evidence of that. So we sold that position.

Yes. And it's -- we've really got to try to identify catalysts that's going to change that valuation. That's the important thing from our perspective.

Thanks, Geoff and Oscar. Geoff, we'll stick with you. The next one. Given the state -- this is from Andrew given the state of funds management outflows across the sector, how are you finding cash flows and withdrawals from the funds? And do you think that higher interest rates are going to have an ongoing impact to funds managers moving forward?

The last part first, no doubt. Like if you can get on term deposits 5% or something around there, which we're getting at the moment for the cash that we have that it isn't invested in the market. then you're getting that without taking any risk in terms of the economy. It looks like in the last couple of months, the domestic economy in Australia has really slowed down, but we're seeing some really -- from retail to really good evidence to confirm all that. And it looks like there is a reasonable probability we'll have a recession whether that's -- whether we do have a recession or not or it's a significant slowdown in the next 6 to 9 months. I mean one of the things about the stock market. The stock market does move in advance of that. And I think Pascal was talking about that in terms of looking through that cycle and the other side of that will be like June next year, we're going to get the tax cuts. So that will be quite positive. In terms of just getting back to our position, we managed listed investment companies. One of the reasons -- I know the question before, there's earlier question about ETFs versus listed investment companies and also there's a question about managed funds versus listed investment companies. One of the reasons why I was very 24, 25 odd years ago, effectively, there's a choice. I could have set up an open-ended fund business. or I could have set up a listed investment, listed investment company business. Now we started with an open-ended fund, which is our first fund, and we've still got it, and then we develop listed investment companies. We actually think there is probably an opportunity for other open-ended funds. One of the interesting things is a list of investment company tends to have a competitive advantage over some of those open-ended funds. Because if you're investing in small and midsized companies, you're never going to have redemptions or money flowing in or money flowing out. Now you are saying there's quite a bit of money flowing out of fund managers at the moment was an observation you're making, in the cash. And that maybe that is one of the reasons why our premium NTA has declined from that 22% to where it is now. I think one of the reasons why our premium to NTA has declined is because we're paying at such a high fully franked dividend. People don't realize how valuable that fully franked dividend is and how we pay it. So the more people we can educate, and that's why we're having this call as well as we'll have another call with Oscar and his investment team later on this year, just talking more about stocks. So yes, so we don't get negatively impacted by inflows and outflows for the money we manage, but that does provide opportunities. There was a period a number of months ago where a lot of the big managers there was a lot of money coming out of small caps. And that's when the small-cap sector was getting sold down significantly, and that can provide some great opportunities. So that's sort of my answer to that, Olivia.

Thanks, Geoff, Oscar, the next question is for you. It's from Howard. Would you consider increasing the portfolio weighting to the ASX Top 100?

Thanks, Howard. No, is the answer. I mean we want to stick to our knitting and stick to the process that we've done for over 25 years. And Interestingly enough, if you actually looked at the portfolio today, and Geoff put up the slide where it showed that the vast majority of the companies we own is outside of the top 100 companies, right? Now if we went back in time to 2015 and 2016, we would have had a greater exposure to the micro cap part of the market. So we actually made a conscious decision which was in the back end of 2018, which was effectively the first bear market, we saw and coincided with Tomas and I starting up and running the portfolio together, which has been fortuitous given that we've seen three bear markets in 5 years. But we -- that was a tough period for us, and we made a conscious decision at that point to increase the liquidity of the portfolio. So -- so if you have a look at the average market capitalization within WAM capital, it's actually a lot higher now than it was 5 or 6 years ago. we actually envisage that going down in the next 12 to 24 months because we are optimistic small cap companies. So look, the answer is we don't want to get away from our knitting. We're good at finding undervalued companies with the catalyst that are under researched, that which no one is looking at, we think we can get in there before our competitors, and that's where we get most of the games. And as I said earlier, there's going to be some years the 2022 financial year was probably the hardest year we've ever experienced. And that March quarter of the Russia, Ukraine war, I remember coming on doing a call straight afterwards, and it was crazy. Look, we had -- we have a really good reporting season that February, and all of our stocks were going down 10%, 15% and you sort of couldn't do anything. And it's incredibly frustrating. Now that was a really hard period. And as I said, it's been a tough period for smalls over the last 2 years, but that could easily reverse. And we think we're about to enter that period in the next few years. So to answer your question, no, we're going to stick to what we're good at and focus on small caps.

Thanks very much, Oscar. The next question is again for you, Oscar, it's from Stefan. How much cash can you go to in cases of extreme market volatility?

Thanks, Stefan. We can go as high as we want. So in COVID, when COVID began February 2020. We're in the middle of the reporting season that period of time where we're very much exposed to the bucket because we see a lot of catalysts, and we were at 15% cash. we got on to, I call it, there was probably a few -- could have acted a little bit earlier, but relatively, we acted probably appropriately. And I remember that sort of the 20th of February or so, we made the decision to go to cash. And we went to over that 2-week period, we ended up at the peak levels, we were at 43% cash. And then the -- we got back into the market very, very quickly after that point where it became clear that those stimulus and so forth would improve a number of companies with in a number of sectors. So to answer your question, no, we can vary the cash. I've said on this call before, in the 2022 period, we had a decision, do we stay in the market or do we earn cash. We stayed in the market, and that was largely because all around -- I think it was about the time of 50% or 60% of the companies we invested in had net cash balance sheet. So it's more cash than the debt on their balance sheet. So we were of the view that the inflation that we were seeing was shorter term. We had no idea that the Russia and Ukraine war would linger on like it did. And so we took the view that we'll see through this over the next few months. Now unfortunately, it didn't happen that way. But in saying that, though, as we talked about earlier in the call, we've had a great year in the 2023 financial year. And if we had too much cash to close out the 2022 financial year, we wouldn't have had the performance that we've had in 2023. So -- looking back on it, look, we're happy with the decisions we made, although it doesn't look good on paper that 2022 financial year. But yes, as I said, depending on the app, what we think is -- if it's really -- we think the market is really, really negative, we will go to cash 100%.

Thanks, Oscar.

So did you say you've got 100% cash?

I know about...

You got cash 100%...

Well. 100% as in -- we will go to cash context. But yes, don't interpret it as 100% cash...

You never got a 100%...

You would have been... 50, 70 or?

Yes. I'm just trying to think, yes, I'm trying to think of the probably 60%. The problem is you're only there for a little while because it's close to capitulation. -- when you know you're high on your cash, you know it's close to capitulation. So you want to start moving back pretty quickly. Don't you?

That's right. And that's what happened in Cove because I always remember where is a really hard time[indiscernible] And everything was really negative. And I remember Cochlear was the first company that raised money, and it was $1 billion. And we didn't own shares in Cochlear it was the sort of -- that was like literally the turning point. And we tried -- we bid into the capital raise, and we got 0. And I was like, "Oh, okay, that means everyone's catched up. They're ready to go now. So that was -- I think we were in a 43% cash belong.

Thanks for that, guys. Jeff, this next one is for you from David. David's asked from a dividend security aspect, why shouldn't I be selling WAM in reinvesting in Wa given that they operate similarly, but Wax has a big profit reserve and a good franked dividend yield.

We had more profit reserve ideally, what you want to do is buy a list of [ encumbered ] trading below NTA has profit reserves and franking and you're confident that the people managing it will be able to get it to trade at NTA, if not a premium. Thanks, Olivia.

Thanks, Geoff. Oscar, we'll go back to you. Joel has asked what about Strandline resources? Do you see any growth for that company?

Yes. We participated in the recent capital raising, just within WAM Microcap -- we think it's been through the difficult point of commissioning with their [ mine ], and they've had a few ramp-up issues there at Coburn. So we actually think the stock is looking really cheap. It's a small position in WAM Microcap Cooper and Will, our analysts are there are really, really like stock. So we've got a small weighting it's about 0.25%. We're going to meet management over the next reporting season and work out what we do with up that point.

Thanks, Oscar. We've got quite a few stocks coming through. Adrian has asked, there are some new additions to the WAM portfolio. Would you run through what DUG technology does?

Yes. So I mean, always through a reporting season, you're always looking for new ideas in the portfolio. One of them, which we really like and say a lot of upside is a company called Light & Wonder -- it's actually the #2 player or competitor to an ASX-listed company , well-known large-cap company called Aristocrat in Australia, and it's actually Aristocrat management. Actually upgraded earnings over a reporting season, seeing its balance sheet delever as well, is trading on a valuation that's 30% cheaper than Aristocrat. So we really like that. That's one of the larger positions in the portfolio now. As I touched on before, we've got a number of retailers in the portfolio that we've added -- that we bought through that June period when it was really weak. So Harvey Norman, Nick Scali is one that's done really well for us as well. So yes, always looking for ideas. But I'd say from the most part, the portfolio is pretty similar to what it was when you saw it at the annual report in June. DG Technology actually very excited about this company. It's done very well for us in the Microcap portfolio. It's got a strong exposure to oil and gas markets. So effectively, what it does is it's call it a supercomputer that sort of looks at seismic activity in offshore oil and gas deposits. And obviously, it's a very strong oil and gas market at the moment. The stock was very, very cheap when we bought it. I think it was on 10x earnings. And it's won a lot of work. And I think the share price has doubled over this point in time. So we're quite excited to see this company report its results in August. And we're setting sort of just over 4% of the company at the moment that potentially could go quite a lot higher. So yes, we really like this one, and it's definitely one to watch in August.

Thanks, Oscar. Another stock for you. This question is from Bill. What are your thoughts on best in Global Foods, which was past holding in [Indiscernible] .

Yes. Now we're out of that one, thankfully. Probably not our finest achievement over the last few years. Look, there was a turnaround story there, but it's a very difficult business. And dairy just generally has just been hammered with costs, higher costs and actually falling milk prices globally. So no, we're not there. And the structure of the corporate structure of the business just wasn't right. So yes, no, we're not their invested in food. You'd have to see a monumental change for us to go back there.

Thanks, Oscar. Geoff, we'll go back to you. Howard has asked, do you have any plans to expand your WAM Capital Board or investment team?

Well, the Board -- no, we're pretty happy with the Board and the quality of the Board. Yes, we've got some really good quality Board members. From our Chief Technology Officer at very senior levels to lawyers that do a lot of work within the Quito blockchain space. So plus the people with various other financial services expertise. So I'm pretty happy with the Board. In terms of the investment team, already, I think Oscar, I'll let you speak for that. But I would say you've got already a pretty big investment team compared to your competitors than what are your plans Oskar?

No, I think, I mean we've got the 6 of us, so myself to bis portfolio managers Shaun Weick and Sam Koch senior equity analyst and Cooper Rogers and Will Thompson as our dealers and equity analysts. So that is a big team, the 6 of us in charge of just over $2 billion in small caps and Microcaps, that's perfect number of people.

Thanks, Oscar, and Geoff. Also, the next one is for you from Andrew. He's interested to know your views on companies like Lovisa or Globe, which seemed to be market Darlings?

Yes. Lovisa is going to have a fascinating result this August. -- incredibly well. Rolling out a whole heap of stores globally. It's one of the best global growth stories probably within the ASX -- but yes, it's a challenging -- it's going to have a challenging period in the next 6 months. There's no doubt about it. The demographic is younger people call it, in their 20s -- which is really struggling at the moment. And they're coming up against some really strong comparable periods. So we still own the company. It's been sold off heavily. It was around $27. It fell to about $18. We bought some -- we actually lucky, it was one of our best stocks last year even though it was a small position. I mean lucky enough to be sold a lot at $27 and we're buying back at $18 -- so we do have a holding Stocks as big as what it was. But yes, we still think a very good management team, led by [ Brad Bumped ] one of the best retailers in Australia. So yes, we really like the one over the longer term. Globe, really, really good business. It doesn't trade. We've tried to buy it many times in the Microcap fund really, really well run. And it is a funny stock because it's sort of like -- I don't think -- know if anyone owns it really out of our peers in the funds management world because it's very tightly held, and so the stock doesn't really trade many shares on a year-to-year basis. But -- but we always look at their results, and they always performed very well. It's just so small for us. It's really hard. We can't really even get any stock even in the Microcap fund.

Olivia. I know we've been going for an hour and 25 minutes. Look, it could be you and me Oscar.

It could be...

Technology filings -- the -- so do we have any other questions?

Sorry, guys. I'm back. I was stuck on mute. Sorry about that. We have another question from Neils. Oscar, this is for you. He said, WAM has recently bought into Rumble Resources. Do you want to explain your rationale behind that?

That's not us. No, we haven't. That might be Wilsons Advisory, the stock broker because I think they raised money recently. No, we haven't -- we definitely haven't bought into that company.

Okay. Thanks for the clarity there. Dallas has asked Oscar, if you have any views on RFF?

Look, generally, REIT this Real Estate Investment Trust really isn't our domain. So I don't really have a view. All I can say is the REIT sector generally. -- is looking very, very cheap. There's a lot of companies trading at discounts to net tangible assets. So look, yes, again, you've got to find a catalyst to invest in these companies. And generally, in the way we invest within WAN capital, we're looking at industrial companies. So -- and when we look at sort of -- in the sort of, call it, the property sector, we tend to like fund managers. Because there's more sort of dependable earnings and more catalysts because you can see earnings upgrades. So the company that we really the only real call it REIT or property company we own is HomeCo. Which [ insecures ] HMC. It's a large holding in WAM Capital Lab Research. -- sorry, you probably don't -- I haven't seen RFF for a number of years, so I don't really have a view. I'm sorry.

Thanks, Oscar. Geoff, we've got one from Peter -- he says, how much duplication is there between shares held in WAM versus Wax? And what is the difference in those portfolio strategies?

Yes. So effectively, WAM Capital was the well, we started with an unlisted trust and then we decide -- that was just for high net worths. And then we decided to let retail investors get exposure to the same strategy, and that was WAM Capital. And that's buying undervalued growth companies with a catalyst and when we couldn't find those, then we'd set in cash. And when we set in cash with that cash, we'd look at more short-term trading opportunities. So WAM Capital is broadly half undervalued growth companies. That's -- we call that research. -- with the catalyst and the other half is short-term trading, we call that market-driven opportunities. Then later on, we created another company, which ended up becoming Wax, WAM research, which is purely those undervalued growth companies that we're buying with a catalyst. And WAM Active, we end up floating and that's purely the trading part of the portfolio. So yes, so if you buy one share in Wax or you might -- yes, actually, if you buy a share in Wax, then you get effectively half a share in WAM Capital because you get exposure to that research part of the portfolio. And just to complicate things more with WAM Active Yes. The part of that portfolio, 10% of that portfolio was buying LICs or discounted asset plays, which we decided to put on a time, and that's when we created WAM strategic value.

Thanks, Geoff. That was great. And Phil has a question, which follows on nicely from that. He's asked, can you run through what the WAM Capital pipeline looks like? And he's talking about this longer term. He says, can I stay invested for 10 to 20 years. I want to leave my current investment on set and forget. I don't care about the share price only just that WAM will be around in 20 years' time. Can you touch on succession planning?

Yes. Yes. I'll be -- I'm pretty confident. I'll make 20. So I'm 65 and then there is 85. So I thought probably -- I'm fit of my dad side though probably thought mid-90s does mean If the plan would be for all the listed investment companies to still be around in 20 years' time. And in terms of -- if you're looking for an undervalued -- sort of a fund manager is focused on that mid- and small growth sector, that does obviously have a high risk than the larger end of the market. And obviously, higher risk than having it in term deposits. Then we're pretty comfortable. And if you do the share purchase plan, then you'll have a lot of dividends -- sorry, you'll have a lot of shares by the -- in 20 years' time.

Thanks, Geoff. We'll flip back to Oscar for this next one. Oscar, Guy has asked what lithium in graphite stocks do you own? And maybe if you can't tell us the specific companies, your overview on lithium.

Thanks, Yes. Look, obviously, lithium is just -- will be an enormous beneficiary of electric vehicles, and it is an exciting space. I think what we've learned over the last few years is that there's a lot of pretenders in this space. And actually digging out of the ground and having it and producing is actually very, very difficult. We're seeing companies such as Core lithium, ASX ticker CXO has really struggle with that it's actually raising money today. Now we have Mining really isn't our sweet spot, let's call it, within WAM capital. We've only got a few holdings. It will only be about 3% or 4% of the portfolio. But with the company that we do like in that space is Pilbara Minerals. It's one of the largest producers in Australia. It's extremely cheap. It's a very high dividend yield -- Hype generates huge amounts of free cash flow -- and catalysts, while we hold a little bit in that company is we actually think it potentially is looking for an acquisition. So it's a small weighting within WAM capital. But that's probably -- we think that's probably the best play in lithium. If you're looking at their mineral resource is always a good company to have a look at, but they are expanding into iron ore and it feels like that's probably potentially at the wrong time of the cycle. Although it's got one of the best founders you could argue in the market. So if you're willing to look longer term and back in, then you tend to do well. So long answer again, but I'd say Pilbra Minerals, which is PLS is your best bet in lithium.

Thanks, Oscar. And Warren has asked, what do you think of the GRR -- ASX ticker GRR. I think that's...

Which one, sorry?

Grange resources.

Grange Resource. We got no view sorry. Apologies.

Oscar, the next one. Do you have -- what's the team's thesis regarding Comet Ridge?

So we own Comet Ridge in the Microcap portfolio. We actually were fortuitous and we inherited the stock within the Westoz takeover. We did a lot of work on the company, and we really like it. It's got very strategic assets in Southeast Queensland, which is very close to Santos, And they're developing a field there and they've signed an offtake agreement with Orica, which we think is going to formalize in the next few months, which is the key catalyst to own the stock. So -- and as I'm sure a number of listeners are aware, there's a shortage of gas on the East Coast of Australia. So we actually think it's one of the few producers that are listed on the ASX. So we do think it could be a takeover target at some point.

Thanks, Oscar. Sticking with you, what are your views on Premier Investments? Are your thoughts on PMB similar to Harvey Norman -- that's from Alex?

Yes. I mean Premiers currently, we've owned for a long time, obviously, led by who we consider one of the best or the best retailer in the country, which is Solomon Lee. The common the commonality with Harvey Norman is Premier has large amounts of cash, no debt. It's got property, it's got shareholdings in Myer and Breville. And if you strip that out from the market capitalization, actually paying very little for the global businesses in Smiggle, Peter Alexander. So yes, Premier, we bought more through that May and June period. It got -- we felt it got oversold went to from around $27 to $18 in the space of a couple of months. And similar to our views on Harvey Norman, yes, we think numbers have been cut too aggressively, and we think we'll actually get upgraded over the next couple of years. And I think broadly on retail, so there's the 2 things that we've really that are in the portfolio on retail. We've got those companies with property backing, like a Premier Nick Scali or a Harvey Norman. And you've also got those companies that we -- that are exposed to housing and companies such as obviously, Nick Scali and Harvey Norman, also on the MicroCap side, we own a DAS and Beacon Lighting. And we think it's actually going to be a very positive period for housing over the next few years, like we said in the United States, and even in the United Kingdom. And that's just simply driven by record levels of immigration. And the fact that we had low levels of housing turnover given the market uncertainty over the last 2 years. So we've seen great forward lead indicators. REA is close to realestate.com.au, a large-cap company, a great company. It's almost back at all-time highs. So generally, that's a good lead indicator for sectors in retail and also building materials. So yes, quite positive on housing, definitely, just generally in the portfolio over the next couple of years.

I mean to me, the fascinating thing is Oscar with Myer -- how -- we started buying a number of years ago before COVID around $0.40 and -- it's been -- it was a tough time, but we've made good money out of it. And then one of the other side benefits is we got to interact with [ Solulub ] very closely. -- and we probably made a lot more money out of Premiere.

Yes, that's true.

That's when we buy out of Myer -- isn't it?

It's been funny because we've owned both at the same time, really, so -- which is a bit odd. But I mean, I couple if I haven't had a question on Myer Yes, they're doing a -- had an update recently actually doing quite well, paying a really good dividend. Unfortunately, [ John's guys ] has done a tremendous job. But the business is actually in pretty good states. So we're fascinating to see where that plays out actually in the next 12 months.

Thanks, Geoff and Oscar. Oscar, you kind of touched on is the things that you're following in the market. Ian has a question that closed nicely from that. He says, what are the trends that WAM Capital is following in the market? Or is it more on a value-based individual approach to each company or both? So maybe can you talk about your processes of how you look at companies?

I wonder if this is Ian, my father in law who's actually a shareholder. But if it is, it's a good question, irrespective of that. But anyway, look, we invest on a stock-by-stock basis. Clearly, we want to see a catalyst, and it's got to fit our investment process. However, I will say that trends are always very nice to have in your back pocket. And Certainly, in the second half of the 2023 financial year, we benefited from a couple. It was just really through luck really, -- we owned 2 tech companies in the ASX called NextDC, which is a data set operator and Megaport, which provides services to data centers and when Nvidia in the United States had that huge result based on artificial intelligence, these companies ran very strongly through that period. So that was a trend where we saw with artificial intelligence. Other trends we've seen, electric vehicles -- we've played that nicely. And again, fortuitously, I would say, through SmartGroup and McMillan Shakespeare and SG Fleet. And this is because a lot of these fleet leasing and Novad leasing companies will get paid a lot more if they sell an electric vehicle than your traditional combustible engine vehicles. So what -- yes, trends always roll every like sort of 2 to 3 months. They're always nice to have. And certainly, the trend we think is happening right now in the market is those stocks exposed to the consumer, probably aren't as bad as people think. So they're having a nice little rally. So -- but it's always important to know when these sort of trends start to dissipate because that's when you should be selling the stock and taking some profit. So that's something we monitor all the time. So Yes. Hopefully, that answers the question. But I'd say always the starting point is the process. Does it have a catalyst? Does it fit the process all right, let's buy the company from that point.

Thanks, Oscar. And Ian has written in a second part of his question, which I think is more for Geoff, but Oscar, maybe you jump in here too. He says, how much of the WAM dividend is based on dividends from the companies in the portfolio? And how much is determined by investment returns? And does that change over time?

Well, I mean, I can start. The oil ores -- the yield on the [ore] is 3.7%, and it's 57.9% fracked. So Oscar, what would your guess be on the WAM portfolio, the yield on the WAM portfolio.

It's going to be lower than the all ores -- because it's focused on small cap companies because we've got a number of companies like those tech companies, for instance, I mentioned before, don't pay dividends.

So maybe 2.5%.

2.5%.

Yes, okay. Say 2.5%. And we're giving you -- so therefore, if you're getting a 10% fully franked yield on assets, so the other 7.5%. Now does that change over time? It obviously does. Like if the market dropped 50%, then obviously the yield doubles. If the market goes up 30%, then the yield drops by that amount. So I remember looking at the yield, I'm surprised how low the franking level is at the market. I remember back -- could have been 10 years ago, it was about a 4% yield to market. So it probably runs from that 3% to 4% and probably in small, it's probably that the 2% to 2.5% or 2% to 3% about that range. But back 10 years ago, it was 4% yield and it was 77% franked. But the franking has dropped to that 57.9%. And the tough thing is, and I hate to keep harping on it, but the government is trying to stop companies that have excess franking paying it out by raising capital. That's one of the things we're against. So that franking number will continue to decline, I would assume over time -- the percentage franking. Yes, but for WAM Capital, -- but all that means is we've got to make more money and pay tax because if you make the money and you pay the tax, then you have the franking -- but yes. So about 25% of our dividend, it looks like it comes through flow through 20% to 25%.

Thanks, Geoff. Oscar, we've got 2 questions on Flight Center. Marion has asked just for your views in general and Flight Center and Guy has asked how many shares does WAM Capital own in Flight Center.

Thanks, guys. I mean, look, flight Center's a very large position, how do I can't really give you the exact number of shares that we own, but call it a top 10 position in WAM Capital. So quite large. What are our views on the company. We bought it very well. We started buying it around $16 in November, December last year, and currently trading around $22. Yes. Look, the business has done very well. It's upgraded earnings twice since that point. It's made a little acquisition. I think one of the things people have forgotten about with Flight Center is that it generates a lot of cash. and it's building up a huge amount of cash at the moment. Then obviously, with interest rates a lot higher, you're going to see a lot more interest revenue come through for the business. But the real catalyst for us in buying the business is they've set a target in the 2025 financial year that they will have a profit margin of 2% based on all the tickets. So that's the profit that they generated in the business versus the total amount of tickets that they sell. And the analysts bought following the stock have a profit margin of 1.5%. So our view is that it doesn't even need to get to 2%, it could get to 1.75% or 1.8%, and you're going to see significant earnings upgrades. So -- that's the reason why we still own the company. We're backing management to get close to that 2% target. And if we do, we'll see quite strong earnings upgrade. So we got the results next week, so -- and they upgraded a few weeks ago. So it should be a very, very strong result. And certainly, our feedback on the travel market is still very strong at the moment.

Thanks, Oscar. Geoff, this next one is for you from Alan. He says he's been a shareholder in various WAM since 2012, and his observation is that issuing options and share purchase plans doesn't seem to have added value for shareholders, but has led to sustained periods of share price weakness. Compounded by takeovers with too much shares on issue growth. Can you provide a comment on that?

Yes. Just the latter part is the -- Flight the takeovers, obviously, you're issuing -- if you're issuing shares for the takeovers, then there's more takeovers that turn up. But the actual numbers are they do increase the NTA -- sorry, the ones we do, we only do them if we're going to make a good return on it. So -- even though there might be some short-term selling than it does in terms of the option or the share purchase plan, that just increases the size of the company. So there has to be a benefit to do that. The [indiscernible] thing is with options. Usually what happens is when you announce the options, you actually usually get the share price, depending on where they're priced. The share price probably usually outperforms. Until the option -- until it goes ex options, then it really -- it's a little bit of rush and [relet ] whether those options get exercised or not. I mean the reason why historically we've liked options because if we did a rights issue, then you have no choice. It's like holding a gun to the shareholders' head and saying, in the next 6 weeks, you've either got to put money in or you get diluted. Where options they last for 1.5 years, then the company has to perform well, the way we structure them I know Platinum had some options recently, which were in the money. But yes, below NTA, we don't do that. We try to do it at NTA, if not a premium. So then we have to perform to raise that money. And yes, I mean, there's no doubt and with the share purchase plan, you're issuing more shares. So if you're -- that's -- if you're increasing supply, then as you said, is usually a period of where the share price does nothing. Yes. So that's -- and then effectively, is the Board trying to weigh up -- and the classic example is, well, so WAM Capital. If we were still the size we were when we floated, which was we raised -- we had a prospectus to raise $20 million, and we're oversubscribed and we end up doing a placement that ended up at $21.5 million. Then we would have never made a take up a bit PROMESA. So to me, when you're increasing size, opportunities present themselves. And another example is like WAM leaders, when we fly to WAM leaders, that was 400 about $400 million. And now that's just a little under $2 billion of assets. And now all of a sudden, in that space, they get exposure to those big companies. We're at a size where we get incredibly -- incredible exposure to the company we would probably I think Oscar and his team probably get the best exposure to medium and small-sized Australian-listed companies or potentially is companies in Australia. And with leaders, we're trying to increase the size of leaders to get that to have that type of exposure. I know Matt, I think had the CEO of Commbank came into office the other day, we would have never had -- we would have never got that quality of information back then. And in investing, how I see it is the best quality of information tends to win. So if you have -- if you can get access to the best quality of information, then you can make the better decisions. That ends up giving you better performance over time. And sometimes, obviously, getting -- when you get larger, that's what it actually -- one of the things that does come to the table. So there might be some short-term might -- hold the share price back short term, but it actually might create some significant pay in medium and long term.

Thanks, Geoff. And following on from that, Neil has asked, I understand some of the takeovers of recent years, WAM has not only gained NTA growth in franking credits, but also realized capital losses embedded in the takeover target -- so to [Indiscernible] reduce taxes.

Yes. The I know when we -- I know there's something -- when we make a takeover, there's the way that it's treated for tax. If we're issuing shares at a Premium to NTA, we do get an embedded loss, which actually does reduce our tax payment. So there is a benefit. In terms of the tax that's in -- if the company has tax losses, then we usually can't use them. The company we're taking over. Franking credits just get -- they just get [ amalgamated ], it's put into the big pot. But tax losses, there has to be the certain requirements you need to meet continuity of ownership or continuity of business. And usually, that's very hard.

Thanks, Geoff. Oscar, back to you with some stocks. What are your thoughts on [ KZL ], Gentrack and the Symbio Superloop merger -- that's 3 different ones.

Yes, Cool. Thanks for the question. KZLs, a very, very small company. I think it could be running out of cash by some last quarterly. So that's -- we don't own that one. Gentrack, been a very successful turnaround in the technology space. These guys are focused in the utility space, but have strong business in the United Kingdom. Very strong organic growth profile for the business. Which doesn't include new contract wins. So we see this business is growing its top line around 15% a year. We hold this in the WAM Microcap portfolio. What was one of our best stocks last year is still very bullish on the company into this year. Symbio and Superloop. -- we owned Symbio. We just started buying it and then the takeover occurred. -- we just thought -- we had a look at it, looked interesting into reporting says we owned the Microcap portfolio. Look, it does -- the merger does make sense. There's definitely synergies between the 2 companies. We still own the company. We do think there might be some other interest in Symbio. It is a strategic asset, particularly list the company, our Aussie Broadband potentially could be interested in it to -- so we're still holding our Symbio shares here.

Thanks, Oscar. Geoff, the next one is for you from Robin. Is there any intention to move to a more regular dividend payment for WAM, i.e., a quarterly dividend?

Yes. I mean that is interesting, Robin. And if you look in the U.K., and Oscar said, we're both over there just recently. They do a lot more quarterly dividends over there. In Australia, some companies do quarterly dividends. The -- I mean we haven't seen any -- what is it anything to show us -- or we haven't seen anything that more regular payment of dividend actually helps your premium or discount to NTA. So at the moment, the plan is just to make -- to pay it on a 6 monthly basis. And yes, that's the current plan. I mean we do look at it, and we do consider it. The Board at the moment has decided to stay where we are.

Thanks, Geoff. Oscar. The next one is for you, is kind of putting you on the spot. It's a question from Munraj. The current share price, what is the one stock that you hold that you're most excited about?

Good day Munraj how you doing? We should catch up. What's best -- what a question that is.

Question. Good question. I mean And then ask for the second best.

All I can see hair in my head is to [ staring ] at me saying, TUA -- so I'm going to say TUA, which is TPG Singapore. We've talked about many times here.

So [Indiscernible] is one. What's your one.

It probably is -- it's probably got the most upside. But I'm a value guy, he's the growth guy. He's more exciting to me.

What do you like value?

Okay. I could use the one. Look, I'm going to stick with the retail names. I really am. I think is Nick Scali, that was a really, really good result. I think the market's got it wrong on earnings this year and next. It's funny. It's always great to see conservative management teams. They've got properties on their balance sheet that they purchased 10 years ago in Alexandria that is on the balance sheet lower than what it was then they bought them. So clearly, the property is on this materially understated. So you got that as a nice backstop for the company. But yes, we've -- in terms of -- they've done this acquisition of their competitor plus taken out a whole heap of synergies. And I think what's really coming out of this reporting season is interesting in the retail sector, is that supplies -- so globally, there's a lot of regions globally that are really suffering at the moment. So a lot of the suppliers are certainly seeing these big Australian retailers are actually doing quite well, and again, better terms with their suppliers. Somebody looking at shopping centers as well, where landlords probably don't want that small independent retailer that has a bad balance sheet in there. They want the bigger retailers like and the stronger retailers like Nick Scali, -- so you've got that sort of thematic going for it. But yes, we are just generally as we look forward in the earnings side, we think they're probably 20% too low. And we think given the success of the Pasha acquisition is going to repeat it. So looking at that, stock's had a good run, but I think it can get to $20 in the next sort of 12 to 18 months. So yes, very bullish on that. And it's interesting, like, there's a lot of stocks like that, and that's why we're excited on smalls. So look, -- that will be my pick. That's probably the best thing I've seen in this reporting season. To buy us, I would say, TPG Singapore, which is TUA, it is a great story. It's effectively when David Teoh sold TPG to Vodafone. He was basically the rump, which was the Singapore business really fell out of favor in the market. David actually bought more stock at the low $0.50-- we followed mean around that point in time in the market cap portfolio. Today, it's about $1.80, $1.90. -- have come from nowhere to suddenly having 6% to 7% market share in Singapore in mobile they're about to launch broadband. It's a very similar story to TPG in a decade ago. So it's a great buy and hold company where you can see -- make up your valuation over the longer term in terms of execution. So there you go. There's a value play and there's a growth play. How is that?

Thanks, Oscar. Look, we are getting quite a few stock picks. So Oscar, I might just give them all to you. So your views on CSR.

Great company. Yes, it's probably a buy. Yes. [ change ] -- like -- and it feels like the worst in building materials, like we're going to have a good period of the next couple of years.

And -- we just do a buy hold sale, and we can't give advice. So this is an advice. We're just doing a little playing old games.

Unfortunately, we don't know it in the portfolio and a number of others.

Okay. Hello World. I think, look, it's very similar to Flight Center, what I talked about before, really the same business. I prefer Flight Center, but I think he can hold it.

Steadfast insurance SDF.

Well, we own it. I got to say I buy it. The result is probably going to come out in 20 minutes. But no, Rob Kelly, CEO is fantastic. I think they'll probably pull the trigger on an acquisition seen, -- but hopefully seen upgrade to earnings this year as well. So no, we still like it's a great company to buy.

GQG

GQG. So we -- I'm going to say, yes, I don't like it. So -- look, we struggled at the IPO. It's got a fabulous fund manager and has done incredibly well. It's just to me -- think smells of a stock that's got huge key-man risk, and we've all seen what's happened with Magellan. And so -- and his performance has been very, very strong, which sort of makes me think it may reverts at some point. So I'm going to say, yes, I will probably sell.

Okay. CYC that's Cyclopharm.

Cyclopharm. Look, we don't own it. It's got an FDA approval coming up in the end of September. We will look at the Microcap. -- with these things is so binary, -- they're very, very difficult. So often, you're off -- you're better just to watch it and see what happens and you're better off just buying them the day because they often -- as we saw with Neuron, they keep going higher and higher. So -- but we'll wait on the sidelines, but we'll certainly be watching it. As the answer I'd say that's hard. -- they will hold.

Great. DSE, Dropsuite.

Yes, we missed it, unfortunately. Looking at it again because it had to slip up at the result recently. There's a new product that's been launched by Microsoft. So I'm a hold. We're looking at it.

Okay. And ACE, that's Acusensus .

Yes. I think this is this recent IPO that I think it was a very early stage that monitors people in their mobile phones in the car. We didn't go into the IPOs, very early stage, very small, but we're having -- we're going to watch it closely at the August result. The answer probably, I'd say, hold give it a chance.

Okay. J.B. HiFi.

I think it's a buyer. So that was a really good result, best retailer in one of the best retailers in Australia, dominates its category -- and again, there's a lot of short sellers betting against its performance. I think they'll be wrong. I think earnings are too low. So yes, I really like the company. We would have bought it. It didn't fall enough, unfortunately, whereas Harvey Norman did. So yes, our preference would be Harvey's at this point in time. But definitely buy or hold you're fine.

Okay. Retail Food Group.

It's a hold. I'd love to say to buy we own it. Worst company, we add in MicroCap portfolio last year, but it's trading at a double-digit free cash flow yield. It's -- look, I feel sorry for the team there because they've been through -- not their issues. It's the past, and that's finally cleared now for the whole business. And then at a point in time it cleared, the market entered a recession effectively. So we haven't been able to see what this business can truly earn, but it's generating really strong cash flow. Balance sheet is good. There's got some bad brands within the portfolio. They've got some good brands. But yes, we think it's a hold. The reason why I'm saying it's sort of buys because it's a really small company. It's going to take some time for the market to get used to it. Before it starts rolling again. So I think it probably does some time down at these levels and then maybe in the second half of the financial year probably looks interesting. So I'll say a hold.

Thanks, Oscar. Cleanaway.

A tough one. Yes, it's a hold. A good company, not commit some management, though, we don't own it. Yes, just struggling for a catalyst on this one, and it's expensive. But if it has to sleep up, it's a massive acquisition target, very consolidated industry, not just in Australia, but globally. So -- and it's a good company. And -- and it's also got ESG credentials as well. So it means the valuation probably stays quite high. So I'd say hold.

Thanks, Oscar. Costa Group.

Currently in a takeover -- it was funny, we tried to buy it for about 2 weeks and then couldn't and low and behold has a takeover. Look, yes, so look, I want to look at it the takeover doesn't eventuate. Pain and partners already owned quite a significant amount of stock. So you would assume that it would happen. But -- similar to what I said before in Select Harvests, Costa has been really impacted by the weather over the last 2 or 3 years, hasn't really had a good run at it, but that was clearing up in the first half of this calendar year. Thankfully. And actually, it had a really good first half result. So we -- that was the real reason why we're looking at it as an idea into this reporting season. So I would say if the takeover doesn't go ahead, it's a buy -- and if you own the stock, yes, I can't tell you what to do. But generally, when we're in that position, obviously, getting a takeover is good, it's sometimes better to take some profits in my view.

Thanks, Oscar. In MAF, that's MA Financial Group.

Yes. So that's been in the press lately given Red Cape, which is one of the funds they manage, which is investor and basically pubs. -- has had some -- they basically paused redemptions from that fund. They're now in the process because they've got to fund some redemptions to sell some pubs -- that's why the share price has fallen quite a lot. Unfortunately, we own it. We got hit on that in the Microcap portfolio in July. Now our view is that share price has fallen more than -- than what that issue deserved, let's call it, and there hasn't been any impact into the Funds Management business within Moelis . So we've actually been buying the shares into the result. We actually think it could have quite a decent result. So -- and the shares are looking cheap right now. So yes, we think it's a buy.

Thanks, Oscar. And PAC, that specific current group.

Yes. So that's currently under takeover from Regal at the moment. So we actually do we own shares in RPL Regal. We actually think it will be a good acquisition for them. From a PAC perspective, I think I'd probably reiterate my previous comments on Costa. Look, it was a very full price. It was a big price. So -- and you never know what happens in those situations. But -- and clearly, GQG is the other party as well that's interested there. But I don't know if they're playing games or whatever. But look, hard to make a comment on POC. Their result was okay. I wouldn't say it was that great. But it was a good price to receive on the takeover. So for me, we owned it, I'd probably say sell.

Thanks, Oscar. And LKE that's Like Resources.

Like Resources, yes, again, sort of in the resources space, and it's in that sort of battery metals space and it's preproduction. So -- it's been all over the shop at share price in the last few weeks. So -- and as I said before, I think you want to stand with the producers, which would be Pilbara minerals. So from my perspective, we wouldn't own it WAM capital sales, so it's a sell.

AVZ Minerals.

The old AVZ -- God, you have to make a call on the Congolese government, I think, if you're going to own that company I'm serious.

This is a little benefit everyone gets. Normally, the economics the next call, isn't it? I suppose you've done all the main you keep going.

Yes. But I've got no real view on that. I mean the company was a huge company within small index. We never owned it. But yes, and obviously, the Congolese government, I think, tried to nationalize the mine. When was that sort of in early 2022. So look, it's got to -- I think by all accounts, it's got a huge lithium deposit -- but we've seen these companies come and go numerous times. So look, yes, I mean, for us, we would own it. So I have to say it's a sell.

Thanks, Oscar. And Worley, WOR.

Worly, so we own Worly, -- it was in our top 20. -- I reduced. We reduced it. It was just purely because the valuation was getting up there. Look, it's very expensive to company for what it does, which is an engineering contract at the oil and gas sector. But it is like -- it's got a great thematic. I think one of the questions earlier on was around trends. Well, -- this is one of the biggest trend in the world, really, and it's obviously moving to cleaner energy. And Worly has basically transitioned their business to be the leader in terms of engineering capabilities in this space. So I think at the moment, around 30% of their revenue is exposed to clean energy, and it's increasing at a rapid rate, and that's actually increasing margins. So Look, Worly, we reduced it into the result purely because it had a great run. Cash flow conversion, converting their earnings to cash has always been an issue for the business. And sometimes we seize volatility around reporting season. That was my reason to reduce it. If we saw the shares go back into the early -- if we went back to $15, $16, we'd probably be a buyer. So I'm going to say hold. -- long story.

Thanks, Oscar. Let's see FEniCS resources.

Sorry.

In Pro Medicus.

Pro medics, probably one of the best stocks in the ASX trade sort of ridiculous valuation and probably made one of the best acquisitions any company has really made in Australia of Visage a number of years ago. So look, had a great result. We own it within the portfolio. It is very, very expensive to stock but it's got an awesome management team. It's an awesome product. There's huge high -- very high margins, I think 60% margins, I think it does from my memory. And it keeps winning contracts through the United States. So globally. So for me, I think it's a hold. You've got to own it.

Thanks, Oscar. So that, I think, pretty much clears the stocks that we had coming through. Let's see. We've got one from Andrew. It's more about your investment process. He says, I'm wondering if you only invest into small caps with a view to profitability. -- or also in companies simply for capital value increase. There are miners like magnetite mines with great support from government and local companies in towns as well as agreements with Horizons -- are there any types of companies that you choose not to invest in and why?

Yes. Look, we never say no to any company, as long as it fits the process and whether it's a market-driven idea, with a catalyst or it's a research-driven idea with the catalyst. I think I've touched on this today is the sectors we generally avoid and it's probably mining, and this is a really strong catalyst, probably oil and gas producers, real estate investment trust and biotech, because a lot of those catalysts with biotech are very binary. So I think -- yes, and if we look at mining and oil and gas, very cyclical -- but for us, we don't view ourselves -- and this is the WAM capital team. Certainly, this is different for the WAM leaders team, but in terms of the WAM Capital team. We don't view ourselves as commodity experts or where the commodity price is going. We're generally very -- what we think is our sweet spot is really focusing on an industrial company. So in the mining space, for instance, we probably rather looking at a mining services company or an oil service company such as WorleyParsons,which I talked about just before. So never rule anything out, but we feel I call it our wheelhouse or our heading zone is in those sort of industrial companies. And generally, 9 times out of 10, the catalyst for us is generally an earnings upgrade. -- because, as Geoff will always say, it's often the earnings re-rate -- sorry, the share price re-rate is actually better for you than an earnings upgrade. So if investors think there's an earnings upgrade, generally, the share price will respond very, very positively. So I'd say that's generally the catalyst 9 times out of 10, and then there's often special situations there. As you think the company is going to make an acquisition, they can back a divestment. On the market-driven side, there could be a director selling stock at a discount. It could be an IPO, et cetera. So -- but yes, I think generally, 9x out of 10, we're looking for an earnings upgrade in the process.

Thanks, Oscar. Geoff, we might go back to you. We've got a question about the discounts again. Howard has said that the share price versus NTA slide, that one that we showed with the premium discount indicates a discount to NTA during periods of recession. With the global economy slowing, what strategies do you have in mind to manage the risk of a discount to NTA reemerging in the coming years?

The -- as I -- as we were talking about earlier, the shareholder engagement, the communication, it's really those 4 things: performance, dividend, treating shelves with respect and having a really detailed communication engagement marketing strategy. And the -- I mean, historically, the -- like WAM is a lot different vehicle now than it was back a number of years ago. How it works is really I remember first year economics where they show on the blackboard the supply and demand curve and they say where equilibrium is. That's exactly the same with listed investment companies. If there's more buyers and sellers, then a more demand then they'll trade at premiums to NTA. -- here's more selling than buying. And what happens is you tend to find that over time, your share register tightens up. There's always going to be movements. You look at, say, Africa Raga, which are the 2 biggest in this space. They have a very, I'd say, 80% or 90% of their share registry that 90, 80, 90, 100 years old. 80% or 90% of their share register is very, very secure, and there's only a very marginal amount of trades. And that's, I think, WAM Capital is now and is more in that category in terms of -- we're nearly through our [ 2023 ] year Yes. So I wouldn't think that the extreme -- it will be as extreme in terms of the discounts. Now what can we do to stop that? We can't. Like the markets to the market. it's sort of when the GFC is occurring, you're thinking and valuations are becoming ridiculously cheap. This is ridiculous. But that's -- unfortunately, that's the market. Yes, these things happen at various points in time. So what we can do is we can manage the money. We can really spend significant time communicating with shareholders, finding new shareholders and what we do. And then if there's anything specific, then we'll -- we're very happy to be flexible and pivot in terms of -- as we did during COVID -- when COVID started, the -- we like -- there's a high level of uncertainty. Let's -- and we had -- how many cores do we have in the early part of COVID?

Are they so close. I remember the one from...

And what we had thousands of people calling because there was a hard -- significant degree of uncertainty. So I mean, to me, you've got to pivot when you see -- effectively, it's what you see is occurring in front of you, how you should address. And during -- when we went to a discount last time, we actually did a buyback, which was at NTA, which ended up being at a Premium to a significant Premium of the share price. So company has got to look at all those. Unfortunately, as I said, if this legislation comes in, then in theory, if you do a buyback, you lose franking credit. So that mightn't be as palatable as it was back during the GFC.

Thanks, Geoff. Brett has asked a question just about the fees. What are the underlying fees charged on WAM?

1% management fee and a 20% performance fee. The performance fee is on the outperformance of the awards, and it's only on positive performance. So if the market -- it's not a relative performance, in terms of if the market is down 20%, and we're down 10%, even though if we outperform by 10%, we don't get a performance fee.

Thanks, Geoff. And [indiscernible] has asked if you might not consider cutting the dividend slightly to help the NTA?

Yes. That's possible. And yes, we could do that. And at the moment, the Board has decided and we just had the board meeting just recently because we just announced the dividend -- and that was one of the topics on the agenda. Do we cut the dividend then it means we've got the vendors, there's more assets there. There's less paid out -- but at this point in time, the Board has decided to pay the final dividend of that and go on with the strategy. Now obviously, a scenario that would work well is if there is -- if the portfolio performed well over the next couple of years, then the NTA increases and also the profit reserve increases, so that you get the yield you're paying is on a -- it's a less of a yield because the NTA has increased. So that's a positive scenario.

Thanks, Geoff. Oscar, back to you, Juliet has asked, if you plan to buy into a stock in stages, do you ever decide it's become too expensive? And if so, at what point?

That's a really good question. Thanks, Julia. Well, we actually did that. Funny thing with this going to this reporting season is -- previously, I've been talking about this afternoon just in terms of -- we made a bet on the consumer space in June, May, June, for instance, -- and -- it's funny to market these days. It just moves so fast. That's what we always find, ever since COVID, I don't know what it is, if it's a flow information or whatever. It just -- it happens really quickly. And Nick Scali is a great example of that, where we bought out -- we went into this reporting season, probably 2/3 of the waste set, which means we probably wanted to buy another 30% or 50% of our holding after this result. And my reason behind that was I thought the result would be terrible. To be honest with you, and there's funny on the day of the Nick Scali results. I was trying to bring around to the stock brokers is saying, "Oh, this is a terrible result hoping they're telling their clients that market shares go down. But instead, they went rocketing up -- so yes, it's a funny dynamic because -- and the reason why I say that is because Nick Scali we started buying May, June. And then through that July period, the stock went up about 15% or 20%. And it went up what I thought was too much, no, we actually sold a few shares going into the result. And in the end, the result was way better than what we thought it was, and there was additional catalysts. So we actually -- on the day of the results, stock went up about 12%. We actually bought on that day because it was actually a lot better than our numbers expected, but there was more catalysts, which is really important. So you've got to be willing sometimes we're not always right on companies. It was a mistake from my behalf to actually sell shares in Nick Scali going into that result. But because there was more catalysts, we were still comfortable buying at 10% higher. So hope that gives you a flavor of what we try and do. And we're always trying to look 12 to 18 months in advance. And what we saw sort of around -- in the small cap sector was this 30% of the small caps exposed to the economy are just so cheap and unloved that if there was a shift in the market to this sector, I would say the share prices really go up a lot. And so far, this reporting season, that's what's happened.

Thanks, Oscar. The next question is from Barrick. He's asked, what is the likely direction for the Australian dollar exchange rate -- and what is the consequent impact on WAM's revenue through asset return?

Okay. So -- I mean, I don't know if that's one for Geoff. But just on the -- I guess from a WAM capital perspective, I mean, clearly, you've just got to make a call on those companies that are -- are there offshore earners in the portfolio. The their earnings will be higher as you translate that into Australia. -- people that -- companies that buy goods from overseas and U.S. dollars are going to be disadvantaged. So -- we've got to make those calls all the time within sectors within the portfolio. And generally, if you've got the company that's got a headwind on the Australian dollar, but it's got pricing power within its chosen field. And generally, we've seen over time that concerns around the Australian dollar as long as not a sharp reduction or a sharp increase. They tend to be okay. So yes, we've got to make a call on the companies in the portfolio on an individual basis, which was always constantly doing. What do I think the Australian dollar is going to. I wish Matt was here, and he could give his view. The only thing I'll say, which is we probably all know it anyway. But yes, clearly, and I said it earlier, China is the data out of China is really weak. So it's generally -- the fortune of the Australian dollar is all in China. So -- and largely on commodity prices as well. So pretty stimulus, economic stimulus within China, then potentially that might see the Australian dollar rise over time. But yes, we think it probably is range bound between, call it, [ 62 ] and [ 67 ] for some time. Particularly given it looks like the RBA has paused interest rates as well. But I will -- I'm probably the worst person to talk to on the view on Australia on exchange rates to be bought.

Thanks, Oscar. Let's see -- I know you've talked about your views on the economy. Peter has just asked the financial media is predicting a recession in 2024. Do you agree? And how will that affect WAM Capital?

I don't know. It's hard. I still -- I've been saying this for a while. I don't think it will I just think Australia is just going to follow the U.S. largely because I just think the immigration that's going to come on here is just going to be so strong. And certainly, house prices have hardly fallen really. So I don't know. I still feel pretty confident that we won't go into recession, and we touch and go. There's no doubt about that. So I think it will largely play out a little bit better than what we all expected probably 6 months ago. That's sort of the feeling I have. How does it -- well the interestingly you asked how does it impact us? You've always going to look forward. And 6 to 12 months ago, look, as I said, look, if you have a look at our performance, we're actually quite well against the small-cap index. Why did we do quite well? Well, we didn't own companies exposed to the consumer 6, 12 months ago. And a lot of these companies have fallen extensively over the last 6 months because the market is anticipating a really tough time for earnings and probably a recession in the next 1 to 2 years. If you fast forward to today, and this is why we've been buying these companies, we feel that's too negative. And we actually think the earnings might get upgraded over time. So Look, whether we go in a recession or not, the market always looks forward. So I think from our perspective, there's always opportunities -- we saw that last year. Yes, we were very happy with our performance last year because it was really based off of a handful of stocks that did really, really well. So yes, you never know lever the exception of 2022, which was an extreme situation, it feels like from our perspective, there's always opportunities the investment process works and you can always find very interesting companies.

Thanks very much for that, Oscar. We are getting to the end of everybody's questions, but we do have 2 on the profit reserve, which Geoff, I'll get you to just clarify because they're both about unrealized profits. So -- let's see. Neil has asked -- you gave an example of starting -- of core starting $100 million and then making real and unrealized gains of $10 million -- so if $10 million was transferred to the profit reserve and then the market reverses and their unrealized losses of $2 million -- is that transferred to the profit reserve as a negative figure therefore, reducing the profit reserve.

Well -- it really is up to how you want to account to it. If [indiscernible] falls by $2 million, then how we account for it is then say the -- you started with $100 million. It went up -- the portfolio went up to, say, $113 million, paid $3 million all of those tax, there's $10 million profit. The profits put into the profit reserve, the portfolio then drops -- so it goes from $110 million after tax to $108 million after tax. That's the $2 million loss that you're talking about. The $10 million has already gone to the profit reserve. So the $2 million loss will stay as -- in retained earnings. So it will actually be retained losses. So that's why you'll see on the WAM Capital balance sheet, there'll be -- if there's -- if we've been topping up the profit reserve during the year and in the last couple of months, you reset the profit reserve at the start of each year. The last couple of months, if there's a loss, then that stays in as retained earnings, which will end up being a retained loss. So in that instance, I gave you or you used -- you could still pay a $10 million dividend. If you paid the tax or had the franking credits, it would be fully franked. Yes. Is that one, Olivia.

Yes. Yes, that's great. Thank you. Oscar -- if you're happy, we'll just go through the last -- the long-term stocks, Monadelphous BHP and Novati,and that's it for stocks.

Okay. All right. MonadelphousI think, is by, I think, they're through the worst of it in terms of labor cost pressures. So I think that looks good into next year. So I think that's a buy. BHP, that's on the stock we own. That's one for Matt. And he -- well, they're definitely own in their portfolio. I think they're overweight, here. But Matt generally, the view would be that, yes, it's really tough in China at the moment. Stocks been hit hard. -- which are for some stimulus and the stock looks cheap. Novati so I would say, a hold, Novati for me sell I think from memory, the cash burn is too high, but relative to the cash they have at the bank. So they need to take at some costs or sell their stake and recon -- so yes, I'd be a sell on that one.

Thanks, Oscar. And Geoff, we'll close with the stock pick from you from David. I don't know if you're going to like me asking this one, but David has asked which is the best Wilson Asset Management fund to buy?

Well, in theory, you go for the biggest discount and all the biggest discount at the moment, I think, is in more strategic value. So that's -- I'd be -- that's the one I'd be buying.

Had a good start to the year, too.

It did. So a very good start to the year. So we just got to get it to trade at NTA, if not a Premium, then you'll be happy. Why don't we -- so we -- that's the last question. So it doesn't look as though we'll have to go back to too many questions. Again, thank you all on behalf of Oscar all the Wilson Asset Management team, Olivia. Thank you for your support. We do this because we enjoy doing it. You've noticed over the last period, the various questions that you've thrown at us. I hope that's helped you more fully understand how the company operates. -- what the drivers are because by you understanding how we operate, then you can observe what happens and make your investment decisions. So thank you again. Thanks for your support and looking forward to seeing you at the -- maybe the AGMs or if not, the road shows early next year. Thank you.