WAM Capital Limited (WAM) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for dialing in to today's call. My name is Oscar Oberg, to my right is Tobias Yao, and we're the portfolio managers for the 4 small mid-cap funds that we manage at Wilson Asset Management being WAM Capital, WAM Microcap, WAM Research and WAM Active. Now today, Tobias, don't have to pick up the kids from school. So we can stay to the death. So please feel free to ask any questions that you'd like across the stocks or anything around the share prices, NTA, anything and we'll endeavor to answer them all. So look, the purpose of today's call is really just to talk about the 4 funds that we manage and the outlook and to address, I guess, the share price underperformance that we've really seen since October following the payment of the dividends across the 4 funds. Now when we were here in August, we talked about our positive expectations for the year ahead in small mid-cap companies. Now I'm pleased to say that this has only been strengthened through the performance of the 4 funds over this period, and all 4 funds are outperforming very strongly in the first 5 months to the end of November. The team believes that this is probably the best period that we've seen in stock picking for some time, even better than the COVID period. And some of the highlights through the 5 months period has been the acquisition of SG Fleet, which is a big position in WAM Capital and WAM Microcap, that was private equity that happened a few weeks ago. We also had the completion of the Chemist Warehouse and Sigma Pharmaceutical deal, which is fantastic for the funds. And we've also had stellar results from Gentrack, TPG, Singapore, Catapult and also Gentrack. Now it's only 5 months in the financial year, but I'm pleased to report that WAM Capital, WAM Microcap are outperforming by over 6%. If we look at WAM Research and WAM Active, they're outperforming by over 12%. So this is a fantastic performance. It follows on from what was a great year in 2024 and it's worth acknowledging that this is through a period where small-cap companies have continued to underperform large-cap companies. That's 3.5 years now. and equity capital markets at all-time lows. So Tobias, how good would it be if we got on a call one day, and we could say that we've had a benefit. And look, to be perfectly honest, we do think we're very close to that now. We've said in the United States and New Zealand. Following the first rate cut, small-cap companies have outperformed quite extensively, and we do think rate cuts are going to come in Australia in the first half of the next -- of the 2025 calendar year, probably in March and April. So we can talk about that further, if people have questions. Now despite the strong performance of the funds, it would be remiss of me not to talk about the share prices, which have clearly been weak and underperformed the broader market over a period of time. Now if you look at WAM Capital, WAM Capital is currently trading at a 7% discount to its net tangible assets. The last time that we saw that was in 2013. So 11 to 12 years ago. So in terms of value, this is the best time we've seen in 11 to 12 years to buy WAM Capital. And I think it's worth pointing out that on a 12-year month basis, we have -- the gross performance achieved by the fund is well over 40%. The last time performance was better than that was in 2002. So we're talking the performance has been -- is the best performance we've seen in 22 years. Now it's fair to say myself, Tobias and the wider investment team, looking at small and mid-cap companies are feeling pretty good at the moment and see strong momentum. If we turn to the other funds, WAM Microcap, we launched a WAM Microcap mid-2017. And to this point, we have outperformed every single year since we IPO-ed. WAM Microcap is never traded at a discount towards net tangible assets. Well, today, it's trading at a 2% discount. If we look at WAM Active, WAM Active, similar to WAM has had a tight profit reserve. Well, today, we've got 3 years of visibility in the profit reserve in terms of dividends. It's just come off one of its best years ever, outperforming their index by over 40% and is currently trading at a 9% discount. And finally, if we look at WAM Research, WAM Research has outperformed the market by massive -- by well over 30% in the last 12 months. It's got great momentum, it's continued its strong performance, yet is currently trading at a small discount to its net tangible assets. So all in all, we see great value across the funds at this point in time. So turning to the profit reserve. And look, we've both been on these calls for the last really 3.5 years, I'd say, talking about the WAM Capital profit reserve and the fact that it was quite tight in terms of being able to fund the future dividends going forward. And obviously, for our investors that know us well, we pay quite a high dividend and pay quite a high dividend yield. Now I'm pleased to say, we currently have $0.22 in the profit reserve at the end of November. This represents close to 3 semiannual dividends of the $0.0775. Now you might wonder, okay, why is that so great? Well, in the period where WAM Capital -- in the 10-year period where WAM Capital traded at a premium, the average profit reserve we had was $0.18. So today, WAM Capital is trading at a 7% discount and we've got $0.22 in the profit reserves. We actually have 20% higher in the profit reserve yet a trading at a discount. So we've got great visibility, much more improved than we were a year ago. Now finally, when we talk about listed investment companies and unfortunately, Jeff isn't on the call, but Jeff will always say, you should be selling a listed investment company at a premium and should be buying a listed investment company at a discount. If you type in WAM on the ASX, you will see on the director holdings in the last 2 weeks that Jeff has started buying shares. Kate, who's also on the board, our CEO, has also started buying shares. I'm not on the board, I bought shares last week, and the team has been buying shares and own substantial holdings across all the funds and in pertaining to WAM Capital. And us, as a team, believe it's the best time to buy WAM Capital that we've seen in 11 or 12 years. And finally, this is my ninth year in WAM, in Wilson Asset Management, it's Tobias' 10th year. Now over that journey, WAM, up until the last few months, has always traded at a premium. And so for that reason, Wilson Asset Management as a business hasn't been pushing or marketing or communicating the value that we see in the share prices because it trades at a premium. Now as you can see from the tone of my presentation today, that has completely flipped in the last few months. And certainly, we're going to be working as hard as we can to get the share price back to firstly, net tangible assets. and back over a premium, which is where we think we deserve to trade at given the strong performance that we've seen over the last few years. So look, how about I leave it at that. We'll throw out -- let's go to questions. I've probably been talking too much, so let Tobias talk now. But thank you, April, if you can open them up. Thanks.

Thanks, Oscar, and thanks Tobias. And thank you to those that have been setting in questions. We'll start off by reading out the questions for those that submitted them ahead of time. So the first one comes from Olivia, Oscar and Tobias, which are your 2 highest conviction stock picks as we go into 2025?

Do you want me to go first? Good afternoon, everyone. So my 2 highest conviction ideas are 2 of the largest positions in the fund. The first one, you've heard me talk about this in the past, which is TUA, TBG Singapore. Now one of the reasons why we I think it's very exciting at this particular juncture is because they've recently just launched a new product, which is targeting the global market, so outside of Singapore. And with great execution, over the next few years, the total addressable market for this product is actually globally rather than being historically constricted to just the Singapore market, and that's the ESM product. So we're very excited on the new journey that they're on. And we're really backing a management and a founding team that has continued to delivered upgrades every single time they've reported. The other large company -- a large position that we like is a company called A2 Milk. We've done an incredible amount of work on A2. They had a hiccup during August where the supply chain issues -- but the underlying momentum has continued from a demand perspective. We visited China 3x over the last 18 months and have done a lot of on-the-ground due diligence, that we believe their brand is premium in the market, we believe they continue to win market share. And going forward, they're entering a few other regions such as Vietnam, and the Middle East as well as growing their business in the United States. Has a very, very strong balance sheet with a lot of optionalities. And so A2 milk, we think, over the next 12 months looks very exciting as well. So those are my 2 high-conviction ideas. Do you want to sell?

Yes. Okay. I'll do, Okay. Because you did 2. So, I thought it was 1 each.

I thought it was 2 each. I've got to make 1 up.

No, just joking. No G8 Education's mine. I'll go on the value plays or the cheaper plays, but G8 Education is largest child-care operator in Australia. Management team is 2 years into the job, done a fantastic job in a really hard environment given sort of cost of leaving pressures and so forth. But effectively taking costs out of the business. But thankfully and a lot of our listeners will know that 2 of our successful holdings over the years have been in aged care with Estia and Regis. And really the catalyst to buy shares that -- for both those companies was the government actually funding the award wage increase in the aged care sector. Well, the exact same thing has happened here in child care, -- there's been a 15% increase in the award wage and the government has effectively funded it. So what that means is we think the sector can now generate real strong operating leverage to the bottom line. The company itself has very low debt. It's buying back shares. It's getting rid of its loss-making centers. But as I'm sure. But as I'm sure a lot of you are aware, the Albanese government has said quite openly that childcare is a real talking point for this election. So we think childcare, the liberals at some point will effectively give some sort of a better-than-expected childcare policy, whether or not it's equivalent of labor, who knows. But investors effectively get a free option on that. So we do think that the sector is -- it's similar to aged care. And if you look at the metrics of G8 Education, it trades at a price earnings multiple valuation of around 12x earnings, growing at 15%. So that's a great stock for us. So we like that one. Look, AMP, I've got to talk about. I think it's back. I think it's back in growth. Listeners will know that we've been there on the journey over the last few years. It's had some ups, it's had some downs. But there's net flows coming back into the business. There's cost savings, stronger markets, and we think that will drive substantial earnings upgrades when we go into that February result. It's still not discovered by the market. I think most people think there's still problems there. But no, we really like the stock, and we think it will have a decent re-rating at the February result.

Thanks, guys. I'm sure Olivia won't mind getting 4 stock tips instead of 2. The next question is for Tobias from Ethan. Ethan has asked, with central banks globally maintaining high interest rates and the RBA signaling a longer-than-expected tightening cycle, how are small to mid-cap companies navigating these pressures?

Yes. Thank you for the question. Look, the most obvious answer to the question is around the impact to companies with high levels of debt. At Wilson Asset Management, as you know, with our investment process, analyzing the balance sheet is quite core. And so over the last few years, many of the companies in the small to mid-cap space have deleveraged and have pretty strong balance sheets. And so that's key for us looking at the balance sheet of these businesses. That sort of shields them from potential left field shocks to the system. So for us, looking at the potential improvements in the debt levels and how quickly they pay down debt is key for us and a catalyst for potential earning upgrades.

Thanks, Tobias. Another one for you from Wendy. The global AI boom is creating ripple effects across multiple industries. Are there any Australian small to mid-cap tech companies leading innovation in this space? And what excites you most about their potential?

Yes. So we do have a couple of exciting stories in the fund. The first one is a company we've talked about in the past, which is Temple & Webster. They've been very ahead in the space in terms of using AI and ChatGPT to automate and streamline the back end and the customer-facing functions of their business that drives efficiency and that drives cost out as well as delivering a better overall customer satisfaction. So we're seeing that live, that's live in the market. Another company we have in the Microcap fund is a company called AI-Media. Now about 12 months ago, for the first time, transcribing. So this is think about, I guess, the Olympics and having live TV events transcribed. The AI ability to transcribe live has, for the first time 12 months ago, exceeded the accuracy of humans. And so for them, the benefit from here on in is applying the AI technology across all of the media customers that they have to be able to deliver that offer at a much cheaper price and therefore, disrupting the market and effectively winning a lot of market share. So those are the 2 exciting companies, Temple & Webster and AI-Media.

Thanks, Tobias. And the next question is for Oscar from Margaret. Margaret asked, during the last conference call, you talked about 3 problem stocks in the portfolio that have been detractors and they were EML payments, ticker EML, SmartPay, ticker SMP and Close The Loop, which is CLG. Can you please give an update on each stock?

Okay. So we've had some positive news, I guess, since we last spoke to you. So EML had their Investor Day, an AGM, which effectively they gave long-term guidance. So in terms of their earnings per share that they expect, I think it was $0.13 a share. Does that sound right?

Yes.

$0.13 a share in the 2027 financial year and also a firm guidance. So the shares were actually at the time -- they've shot up, I think, around well over 50%. They were trading at about $0.60. Now they're back at $1. So we're square on the investment there. So it's been fantastic, and we're still very positive on the stock. Close The Loop was a win, but we will find out. I think it's tonight. So they had a takeover bid by Adamantem, a private equity fund, but they're under sort of a non-binding or they're under due diligence, let's call it, at the moment. So we won't really know until tonight. But assuming that goes ahead, that will be a win as well. And then Smartpay, probably more on the negative side, I'd say, look, we're probably -- shares have probably gone down a little bit since we last spoke, but not too much. And look, the balance sheet is there is fine. We just got to wait. There's an overhang on the stock until the RBA Reserve Bank comes out and says what they're going to do on surcharging. But ultimately, so we won't see the shares increase anytime soon until that happens. But on the positive side is they're changing the economics of their New Zealand business, in terms of their terminals over there. And that was the big reason why we own the stock in the first place. And if you have a look at these long-term incentives that the company has, we're looking at an increase in earnings from, call it, $20 million to like $90 million in the next 2 or 3 years off the base of the New Zealand business just solely. So -- and that's just starting to kick off now, which is great. But ultimately, there's an overhang on the stock until the Reserve Bank lets the market know, let the country know, I guess, what they're going to do on surcharging, which won't happen until the end of the next calendar year. But look, at $0.50-odd where it is now, look, honestly, we can't really see much downside from here. We just got to be patient. And I should add a fourth actually. Nexted, NXD, which was -- look, it wasn't -- it's not an issue stock at the moment because it's so small, but it impacted us in the 2024 financial year. They actually -- this is basically an education provider for offshore students coming into Australia for vocational courses and so forth. As I'm sure a lot of the shareholders are aware, the government has come out and really regulated that given the cost of living crisis, housing crisis and so forth. But the interesting thing is they just bought a business out of receivership effectively and took all their students 2 weeks ago. And we own 10% of shares. It hasn't been a good investment. However, if there's more opportunities for the company to do this in the next few years, we could see it come out of this a much stronger and a better business. So we're actually quite excited for the opportunity for Nexted. And so I'd say 3 out of the 4 were square on EML, potentially square on Close The Loop. SmartPay was still unders. Nexted was still unders, but it's had a much better -- it's up about 50% this financial year. But again, it's a very small weighting in all the portfolios now. So it's not going to really make a difference until for the next few years.

Thanks, Oscar. The next one is for Tobias from Steve, and it's about the IPO market. He said -- he has asked what the small to mid-caps have been -- IPO market has been subdued globally, but there are signs of a rebound. What trends are you seeing in the Australian IPO market?

Yes. I think, look, the good news is there is demand for IPOs. I think the aftermarket trading has been mixed. You've seen ones where like GYG has done very well after they've traded. Overall, I think it's -- we're progressing. In our view, the next 12 months could be very exciting for potential IPOs. I think the IPO door is now open. I think there's demand for quality IPOs to come to the market. And investors are looking for opportunities, again, looking for these new businesses that could drive growth over the next 10 years. So we believe versus this time last year, it's a lot better, and we're actually looking forward to 2025. In terms of the meetings we've had, we've had probably the most pre-IPO type meetings we've had in a very long time. These are visiting businesses that's thinking about an IPO, they're not sure whether getting listed is the right move for them and having those conversations with management and giving our view on the benefits of being listed on the ASX. So we're having a lot of those conversations in the background. We're seeing some of those business come to the market, and there is demand for them. And so we believe it's going to continue and continue into 2025.

The next question comes from Sofia who's asked, why do you think small cap companies continue to underperform large caps? I think you said this, it has been for about 3.5 years. So what changes from here Tobias?

Yes. Yes. I think as Oscar mentioned, I think we've sound like broken records in terms of -- we've had that headwind in terms of where we invest in our investable universe. However, I think the key for us is that's not an excuse. We've been able to deliver outperformance versus the overall market despite the small cap headwind. Our investment process is quite simple. It's been the same since the inception of the fund, which is to look for catalysts. And we believe that over the long term, the catalyst investing will deliver strong alpha for us. So in terms of what we think could change, as Oscar mentioned earlier, we think an interest rate cut next year could change the market as we've seen in the U.S. and New Zealand. However, we're not holding our breath, and we're not expecting that to be the tailwind for us to outperform.

And so for context, if you go on our website and look at WAM Capital and you compare the All Ordinaries Index versus the small ordinaries index, effectively the outperformance of the All ordinaries Index, which is large cap companies such as big banks and the iron ore guys, we don't own shares. The outperformance every year has been 9.1% per annum, 9.1%. So every time we walk in the door, July 1, we're down 9.1% on the market. Now we've been able to outperform over that period. So that shows you the strength of the investment process, the quality of the team. So imagine, as I said in my opening comments, if that reversed, and we think we're close. I think all our shareholders know Commonwealth Bank has gone up a lot. It's very expensive. Its dividend yield, I think, is only 3% -- it's trading at 27x earnings. It's the most expensive bank in the world. I'm not saying Commonwealth Bank goes down, but if there has a period where it's flat and small caps go up, that will be extremely positive for us. Yet, we just -- we haven't seen it. And look, even our strong performance that we talked about at the start of this financial year, I think small caps are underperforming large caps by about 2% already. So as Tobias said, it's not an excuse for us. We're still working as hard as we can to find those undervalued growth companies, and we're seeing plenty of them at cheap valuations. But again, at some point, we're going to have a benefit, and it will be a great day when we can tell you all that on one of these conference calls.

Thanks, Oscar. The next question comes from Eden, who's asked, when applying your investment process, is the intrinsic value or target price of a target company estimated? If not, why not?

100%, so it's part of our investment process. So how it works internally is once we've done the work on a company which we like, one of the guys in the team will send out an investment thesis with a target price with a model which we've modeled out future earnings, future revenue as well as the WAM rating system, which Jeff put in 25 years ago. So putting all of this together, the investment process gets read by everyone in the team, and we debate the target price. We have base case, bull case, bear case scenarios and the various likely outcomes. And obviously, ultimately, we talk about a catalyst. So as part of the investment thesis, it needs to have a target price, it needs to have a catalyst to occur for the share price to reach the target price. And so we use that entire investment process across all the companies.

The next question comes from Jamie. Oscar, with fluctuating commodity prices, which resources do you believe will drive the next phase of growth for the mining sector?

Yes. Thanks for the question, Jamie. So as I'm sure you're aware, sort of mining is not generally our expertise. So when we play the mining sector, it's generally mining services, and we do have quite a few mining services across the portfolio being NRW, ALS, Seven Group, which has been there for -- hold on, how long have we own Seven Group for? 12 years, like a long, long time, keep delivering great company. In the micro portfolios, we've got SRG, GenusPlus. So we do -- we probably have an overweight position, let's call it, in mining services, and we were certainly over in Perth recently is very bullish. Look, just on the resources side, I think, look, the mining services sector in Australia is generally -- it's driven by iron ore. And iron ore prices have fallen quite a lot, but it's still around that, call it, $90 to $100 level. And I think it's worth putting into context that BHP, Rio Tinto and Fortescue are still making -- and Roy Hill, I should say, with Hancock, are still making incredible margins and incredible returns at those levels. And certainly, what we've seen when we've gone over to Perth is these are massive mines that need to be replenished every year. And so irrespective of the commodity price falls that we've seen, these companies are still spending money on maintenance CapEx, capital expenditure and so forth, which benefits the service companies. Now if I look at the macro, look, it feels to us that we've seen evidence that China is trying to stimulate the economy. The data is certainly weak over there. So in our eyes, the commodity that probably looks the most interesting as we go into 2025 is probably iron ore. Whether or not that's sustained or not is another story. So you might get the big bounce in iron ore for a few months post the big stimulus, but then the proof has got to be in the pudding. So which having Tobias been over there numerous times, it is very tough over there in China. So it's going to need a huge stimulus boost for iron ore prices to say, go back to $140, $150 again. So look, I think short term, probably -- and I'm speaking for WAM leaders here, they certainly overweight the iron ore sector. Iron ore is probably that looks good. I think longer term, lithium is probably the most interesting, but you still got to get through this oversupply of electric cars that's happening globally at the moment. And certainly, copper as well to play that sort of electrification angle. And I think copper is very strong too at the moment. But we play -- generally play copper through exploration stocks like ALS.

Thanks Oscar.

Are you there April?

Sorry, I think there was just some Internet problems, but hopefully, you can hear me now. The next one is for Tobias, and it's on TechnologyOne. I think it looks like there might still be some Internet troubles. But TechnologyOne, ASX code T&E, used stocks. Do you still hold it? And if not, why not?

We do. TechnologyOne has fallen just outside of the top 20 for us. It's a core holding longer term for us. It has done an amazing job, obviously, in Australia with the software and went through the SaaS transition very successfully. The reason why we first invested in TechnologyOne is for the growth in the U.K., which has shown actually an amazing amount of growth over the very short term. So TechnologyOne is still a core position, particularly in our tech space, and we still hold it in the fund.

Thank you. I think hopefully the internet is working a little bit better now. So Tobias, the next question is from Emmanuel who's asked, could you please give a detailed breakdown on what happened with GQG Partners position, ASX code is GQG, in the portfolio dating back to June 2024?

Thank you for the question. I think June 2024, if I remember correctly, we probably had something along the lines of, I think, 1.3%, 1.4% of the fund in GQG. That was based on a catalyst, which we identified, which was around index inclusion at the time. For many of you that followed GQG recently, they've had a bit of an issue with one of their investments. The share price had quite a sharp fall. Prior to the sharp fall because we didn't think the catalyst was playing ahead, we actually sold a lot of the stock. So on the day when it fell, we -- I think we had about 20 -- 0.2% to 0.25% of the fund was what was left in GQG. So the -- fortunately, for us, the impact was very minimal. And this goes back to the way we manage risk when we sell the position if we don't think that the catalyst is going to play out. And luckily, in this case, we were able to exit over -- I think, 1.1%, 1.2% of the fund and only with -- so I think we're left with 0.25% into the fall.

The next question is for Oscar from Joel. I noticed that Jeff has been buying WAM Capital shares recently. Why is that?

Joel, because they're cheap. They're trading at a discount to net tangible assets. And sort of as I said before, Jeff has shown over history that he will sell when shares are at a premium to net tangible assets, and he's actually buying at the moment. And Kate is buying as well. And certainly, myself and the team are buying too. So that gives you a sense of how the team is feeling about WAM Capital at the moment.

Makes sense. Sounds like a good opportunity. So the next question is on franking dividends and the profit reserve, and it's from [indiscernible], Michael, Anthony, Christopher, Sonja and Sam. So there are a few questions on this. How many years of profits reserve are required before restoring franking credits to fully franked? And what factors might impact this?

Okay. Thanks for the question, guys. Look, when we were here this time last year, things -- when we look -- we were looking forward in the profit reserve, things were looking pretty like green to be frank, as we went into that February result. And certainly, the Board -- having had meetings with the Board, the feeling was we were going to cut the dividend. This is sort of November 2023. Now at that time, there was a big shift in the market. U.S. Federal Reserve said they weren't going to increase interest rates anymore. Market took off, but probably more importantly, our performance really took off, because we've materially outperformed over that period. It's been close to 20%. So we've been able to add quite a lot of profit reserve over that period. Now that's great to pay your dividends. But to pay -- to effectively pay franked dividends, you need to physically sell shares and create a tax event. In other words, pay tax to the tax office. Once we do that, we can pass that on to our shareholders, and that's effectively the franking credit. Now there is often a mismatch between franking and the profit reserve. Why? Because if there wasn't a mismatch, it would mean we'd have to sell our shares all the time just to generate the franking, which we're not going to do because that would be negative for shareholders. So you do get a mismatch between your franking and your profit reserve. And that was the big reason why in February of this year, even though the performance took off and the profit reserve increased that we had to cut the franking to 60%. Now we could have kept -- and when I say we, it's the Board, and just remember, I'm not on the Board, so I shouldn't be saying we, but the Board cut the franking to 60%. Now the Board could have kept it at 100% at that point in time, right? But then as we went into the next dividend, which is one just paid the October dividend, it was possible it was 0. And we didn't -- and the Board didn't want to do that. So they chose to hold it at 60%. The last dividend you just received was at 60%. So the question is, how do we get it back to 100%? It's very simple. We just need the performance to keep occurring. Now we -- last year, I think the gross performance was 26%. So far this year, it's around 16%. If we got it to 26%, and we're selling more stocks at a profit, generating more tax, it's very possible that we could potentially get it to 100% again because we've generated franking. Now until that happens, there's still a mismatch. So if the market was flat from here on in and our performance was flat, from my perspective, it's probably unlikely that we would go back to 100%. But if we put on another 10% in performance, that's certainly possible. So yes, it's just trying to understand the difference between the profit reserve, which is unrealized gains in the portfolio and the franking, which is generated by realized gains. In other words, when you sell the shares. That's why there's a mismatch. But you just monitor our performance. If we keep going well, then yes, it will be up to the Board. And if we have -- if they can see visibility to keep paying 100% franked, then they probably will and probably increase it. But at this juncture, it's too early to make a call.

Thanks, Oscar. The next question is on share price performance and NTA. So a few people asked very similar questions, Cameron, Abul, David, Stuart, Sam and Graham. So they've asked, why has the share price underperformed to the market? A high dividend yield is of little benefit if a capital loss threat hangs over my investment.

Yes, that's a fair comment. And we've said numerous times in presentations. The Board had an opportunity to cut the dividend in COVID, and they didn't. This is in 2020. We're very close to -- we didn't have any profit reserve after COVID, which was a huge sell-off as we all know, in the market. Now the market rallied very strongly after that. And Jeff was -- had commentary at the time saying if we've got the franking and we've got the profit reserve, we'll pay it all out. The market rallied at that point in time, gave us all this profit reserve. We outperformed in that period of time, and that gave us a really good buffer for a number of years. Then unfortunately, we saw the 2022 sell-off occur. We kept paying your dividends. We kept paying your franking through that period despite the fact the portfolio fell away. And then 2023 was a good year, but the market didn't really go up that much. So all we did was the profit reserve that we achieved basically allowed us to pay our dividend. Now 2024 and 2025 so far have been really, really good years. So we've actually got more of a buffer today. So I guess, in summary, why -- so why am I telling you that? Because we think that the reason why the shares have traded at a discount we're trading at a discount now and have faded away from where they were was because we think that -- and certainly, our commentary, to be fair, over the last 3.5 years has probably been on the negative side. Like I think if you compare my opening spill compared to previous conference calls, it's been entirely different, right? So we now have great visibility over the profit reserve. As I said in my opening spill, we had less profit reserve yet traded at a premium than what we do today. We have more profit reserve and are trading at a discount. So we have good visibility at the moment. And that's one of the reasons why we think the premium has shrunk over that time. Now for context, -- when the 20 -- before the 2022 sell-off occurred, our shares were trading at $2.20 and $2.30. The market had fallen, but the share price hadn't. And so at that point in time, unfortunately, the premium to its net tangible asset was over 30%. And it's interesting before the call looking -- that was at the period Jeff was selling stock, which should have been a message to shareholders that he thought the shares were expensive. Now from that 30% premium has now gone to a 7% discount. That's a 37% move, unfortunately, through that period. Now today, we're at $1.53, I think it is. If you added back that premium, that gap, which is about, call it, just over 40%, you'd be back at $2.15, $2.20. And if you added back the dividends, we would have actually outperformed the market. So the issue -- what I'm trying to say to you all is that the issue has been the premium. The premium has shrunk in a large way. And as I said at the end of my opening spill before is that it's up to us within Wilson Asset Management to really -- like we haven't communicated positively on WAM really ever since I've been at WAM, it's close to 10 years. That's changing now, and we're really fixated on getting the share price back to first step NTA and then to a small premium.

Thanks, Oscar. Further to that, how do you propose to increase the NTA?

That's simple. we've got to perform. And that's what we've done. So last 2 -- 3 years, really, we had a bad year in 2022, which was a very hard year with Russia-Ukraine war, COVID and then interest rates starting to increase. That's a terrible market for small-cap companies, undervalued small-cap companies, which is what we do. But 2023, 2024 and so far in 2025 have been great years, and we've more than offset where the NTA was, notwithstanding we still paid you great dividends and paid you out franking. So look, we just got to keep performing. It's pretty simple. We could increase the -- if we cut the dividend, we would increase the NTA, it's as simple as that. But a lot of our shareholders would be unhappy with us because they'd get less of a dividend. So at the moment, we have an imbalance. We're more -- there's a high preference to the dividend versus capital growth of the NTA. That's not ideal. We'll be the first to say that. But unfortunately, that's where we're at right now. And as I said earlier, Jeff has always said that we got the franking and then we've got the profit reserve, we'll pay it out as a dividend. So unfortunately, if we have -- we need decent markets and our performance more importantly, to be very good to keep adding on to that NTA. And look, we've certainly done that over the last few years, and we'll keep endeavoring to do that.

The next question comes from Des and Adrian who've asked, what is the current relativity between the WAM share price and the weighted average value of those shares? And secondly, how do you respond to Motley Fool's negative outlook for WAM?

So I assume the weighted average shares is what you're referring to is the net tangible assets. So currently, we're at a negative 7% discount. Over the last 10 years, I think the average has probably been around a 15% to 20% premium. So -- and as we always said through that period, that was unsustainably high. And we feel terrible for all shareholders that have purchased shares through that period. Don't get me wrong. And we're going to try and fight as hard as we can to get it back there, so everyone's happy. But unfortunately, that's the fact. Now on Motley Fool's review of WAM Capital, look, what they said was right. I mean we are -- we have been eating into our capital growth, but that was before we've performed very -- that article was written before we performed very strongly in 2024, and it's performed very, very strongly in 2025. It's only the first 5 months. So effectively, we have more color on our profit reserve, which is what they were referring to that article. They thought we'd cut the dividend. They were right a year ago, 100%. But as it stands today, we've got 3 dividends in the tank. So we've got visibility really to the -- for the next, call it, 1.5 years, which is as good as we've ever had.

Thanks, Oscar. Now we've got a few stock-specific questions coming through. Debbie has asked, what is your view on the latest IPO, DigiCo?

It's been -- to be frank, it's been a terrible IPO, and it's very frustrating from our perspective because we really like the business. We've supported it. What I get frustrated with the most is some of our peers or other fund managers get larger holdings and then sell on day 1 from an IPO just because the market has fallen a week into it. And that's effectively what's happened. We knew before it started trading, we could see it there was 1 million shares on the offer at $5. So that's -- it's game over when that happens. And effectively, that's what's happened. Nothing has changed. The stock is 20% cheaper. We've been buying it. We really like it. I think we've been one of the biggest buyers over the last 3 days, which is frustrating to us because you sort of go, well, geez, it would have been nice to get a bigger position other than compared to some of the other funds that sold it. So look, we're -- as you can see in tone of my voice, I'm a bit frustrated. But yes, look, yes, I don't know, look, the thing about IPOs at the moment, the companies aren't the problem. It's the fund managers because they keep selling them on the first few days because there's a bit of market uncertainty. So hopefully, the investment banks that are listening on the call remembers that WAM doesn't sell on days at all with an IPO, we buy. And so when there's a hot IPO market, just remember who's a big supporter of those stocks. So that's all I'll say there, April.

Thank you. So Michael has asked, do you see more upside in Bravura, which is the ASX ticker BVS?

Yes, 100%, they upgraded recently. And I think what's surprising to us was they upgraded the topline revenue, which I think was the -- which was something that the market was worried about. And so the momentum seems very strong. And definitely, we think that there's more upside to it. Bravura is a very strategic asset, I think it fits very well with -- it's always being looked at potentially by other companies that's looking to enter the space. They have very long-term contracts and very locked in. So we think it looks very good and the intrinsic value is actually higher than the current share price.

Thanks, Tobias. The next question comes from Nedi, who has asked, in your 2023 August webinar, you were positive about Flight Centre, FLT. What is your current view on the company?

Thank you. So that would have been probably 1.5 years ago, we had quite a few travel names, including Flight Centre, Webjet, I think from memory, SiteMinder as well. We still have those names. It's the small positions. Obviously, the macro environment is a little bit more uncertain now. We exited or reduced the positions quite a bit towards the end of 2023. We still hold it for us, they have a very strong business. The B2B business is actually doing a great job winning share. We obviously have another part of the business, which is the consumer business. That's the part there's a bit of uncertainty and patchiness in the market in terms of demand given the high interest rates and the cost of living issues that we all see in the market. So we're looking for the catalyst to go harder into these names, and we're just waiting for the expectations for these businesses to come down a little bit before we would increase the stake in the [indiscernible] names.

We've had a few questions from Malcolm and Gary on SG Fleet. What are your thoughts on the company? What price do you think it might get taken out at? And is it a good deal for shareholders?

That's a good question. Look, was SG Fleet going to go up materially in the next sort of 1 to 2 years? Probably not. So for us, we were happy to take our money at, call it, $3.50, which was the bid and redeploy it into other stocks, which is effectively what we've done. And the timing has been fantastic because it's been a tough period in the market for us. Do I think it's -- do we think it's -- the price was fair? I don't know. We think it was undervaluing the business, to be perfectly honest. But it's binding. The Board has approved it. The major shareholders, 54% has approved it. So it will go ahead. But our view is we were very positive on that business. We've spoken about it on previous webinars. The big year for it was going to be next financial year. But unfortunately or fortunately, I don't know how you could probably talk about it, but PEP or the private equity fund will get all the benefit of that. But for us as fund managers, whenever we get a takeover like that, it's just gold. So for us, we were happy to part ways at $3.50. It's been a good investment finally for us, and we can redeploy the funds elsewhere.

Thanks, Oscar. Sanjay has asked, can you please share which stocks have been recently added to the WAM portfolio?

Yes. Look, a stock which we've actually bought quite a bit of over the last few months is a company called Catapult. It's a sports analytics business. It's being used by NBA teams, Premier League teams where the hardware goes on the back of these athletes and they will be training or sometimes in-game. The analytics gets used by the coaching team to reduce stress on the body, reduce injury times. And the business has done a great job transitioning to the Software-as-a-Service model, even with the hardware that they have. And they've been able to reposition just to the elite team. So these are the top teams in the world. They've done an incredible job under the new CEO, Will Lopes. He's Ex Audible from memory and has come in and really applied his DNA on the business, and they've been winning a lot of share and the growth has been very strong. So this is one that we've been buying over the last few months. The company is called Catapult, CAT is the ticker.

And maybe I'll add one, which is on the value side. It's been an of WAM favorite over the years. We have known it for a few years, but we've been buying back Event. Now Event has always been a very asset-heavy business. And always the catalyst for Event has been when are they going to sell assets effectively and realize the true value for the business. And there's been a noticeable shift in the management commentary following their AGM, Annual General Meeting, which is a couple of months ago, and it appears that might be starting to happen. So we like that one. And also the other catalyst for it is cinemas has always been post-COVID, I think there's been general -- people don't think cinemas will get back to where it was. So for instance, I think cinemas did about $110 million of earnings before COVID. I think this year, the market has got or the analysts have got them doing like $30 million. And I think going forward, they've got it doing $70 million. So I'm sure maybe some of you online have daughters or granddaughters or I should say, sons as well that have been to Moana 2 over the last few weeks. And certainly, Gladiator 2 has been very popular as well. So we do think cinemas is coming back as the writer strikes are coming off now. So we think the pipeline is very strong for that business going forward. And I think the market will get confidence that it can get back to what it was.

Thanks. The next question comes from Emmanuel who's asked, what is WAM's outlook on the real estate landscape in Australia, including commercial and office real estate? And secondly, how do you plan to take advantage of any opportunities in the sector?

So real estate investment trust isn't necessarily something that we look at across WAM. Like I'd say, mining and REITs are the 2 sectors that we don't generally do. However, in saying that, the 2 businesses that we like there is we like Ingenia, INA, which is focused on manufactured house estates and also tourism parks. That is a company that where HomeCo, which has obviously been involved as mentioned before, with Digico is a major shareholder. And certainly, we do see some shareholder activism that could benefit the business in selling some assets and really boosting their manufactured home business. So we like that one. The management team is excellent. So we like that cheap valuation. And the other one is actually another WAM favorite that actually, that's another stock we've been buying recently is Brickworks. With Brickworks, if you have a look at their release, and obviously, that's run or has a significant shareholder in Soul Pattinson with Rob Millner and Todd Barlow, who we respect very highly across the business. Now their building products business is really struggling at the moment. That's the reason to own it because we don't think it will get worse than where it is now. And then put simply, if we get a rate cut, that's very, very positive for their industrial property business in terms of how it's valued by the market. So if you look at the share price, current $25 a share, if we get 100 basis points of interest rate cuts at some point, that will actually add probably about $6 or $7 to the share price, just purely off that. So look, we like Brickworks. We're building a position there, and that's certainly on the property side of things is the reason to own that business.

Anna Ketos has asked, can you recap on how WAM Capital has performed since 2017?

Yes. So we actually got the data here in front of us. So since 2017, WAM has increased by 121.6% versus the all odds, which increased by 101.2% in terms of performance.

Thank you. Very clear. John has asked, what are your thoughts on Embark Early Education? I know you mentioned G8 earlier as well.

Yes, big holding in the Microcap fund, very similar thesis to G8 that I mentioned earlier. We're a substantial shareholder there over 5%. The guys that are sort of running the business really started G8 coming out of the GFC. So they know what they're doing. But yes, a very simple story where small business that we think will use equity markets, raise a bit of money and keep doing earnings accretive acquisitions, so -- which is what they did at G8. So yes, we like that one. That's in the microcap fund.

We've got a few questions on interest rates from Peter and Darius. What impact do you think lower interest rate environment will have on investor yield expectations and share prices?

It's an interesting question because -- and one of the things we're sort of grappling with at the moment is with the way that Commonwealth Bank has traded over the past 2 years, these banks used to be yield stocks. But now effectively, term deposit you can get is actually higher than the yield on sort of the Commonwealth Bank. So look, you would think -- and if -- I'm assuming the tone of the question is how do we think that would play out for listed investment companies. Look, ultimately, we think it would be very positive for listed investment companies if we saw rates go down. I mean the current fully franked -- sorry, partially franked -- fully -- dividend yield for WAM, I think, is what, 10.5% at the moment. So any interest rate cut is going to make WAM look very attractive. And the others probably at that sort of 7%, 8% range. So ultimately, yes, we do think an interest rate cut will be positive for the LIC sector. However, in saying that, you would have thought that would hurt Commonwealth Bank. So that's the part we're grappling with. And certainly, if you look at the LIC sector just generally, it's going through a really, really tough time. And unfortunately, I don't have it on me, but I've quoted it previously, and apologies if I get it wrong, but like AFIC, which is the largest, is, I think, trading close to a 10% or 11% discount now. So it just means we've got to work harder as an industry to close that discount gap, I guess, you could say. So look, answer a long-winded way. We think interest rates will be coming down will be good for the LIC sector. But perhaps there's other issues as well that, as I said, we've got to work harder at to fix.

And the second part to that question was what -- like how do you see the stock market performance if inflation and interest rates actually stayed at these current levels next year?

Yes. Look, everything comes down to expectations. So all else equal, if interest rate doesn't get cut next year, which is the current expectation, and the share price -- the stock market performance will probably be weaker. In terms of our investment process, we still think there are opportunities and obviously finding quality companies with catalysts. And so it doesn't stop us from identifying businesses and investing even with a change in that macro narrative.

Thanks, Tobias. We've got a good but tough question from Walter. If you had to buy just one of your LICs discussed today, so Microcap, Active, more WAM, which would it be?

Well, I bought WAM last week on Thursday. So I've got to say WAM, Walter. No, I would say WAM actually. I think it's yielding the highest. It's -- as I said earlier in the overview, for 10 years, we traded at a big premium, and we only had $0.18 in the profit reserve. Well, we've got $0.22 today, and we're at a negative 7% discount. So look, we think we're very confident in our performance and the outlook. So I'm going to say WAM. I mean, worst-case scenarios, you're going to get $0.22 back from your initial investment in dividends, fully franked dividends. So it looks pretty good to us.

The next question comes from Mark. What's the percentage portfolio turnover in the past 12 months?

Think we have the numbers here. It's 250% or 2.5x over the last 12 months.

Which would be higher than normal, and that's a function of the fact we've probably been performing. So we went back in the 2022 year where it was a really tough year for us. We underperformed the market was down. We probably weren't trading as much because we're waiting for it to turn. It would have been lower than that. So yes, look, but that can swing around all the time.

We've got a few more stock-specific questions. Peter has asked, what are the prospects of mining services companies such as Emeco and Imdex?

Imdex, definitely positive on. We own ALS Limited, ALQ, which is -- does all the testing and so forth for environmental and mining sectors. So that's our preference at the moment. But we are seeing signs that exploration is improving. The gold price has been very high. Copper prices are strong. So the last couple of months of capital raisings for junior mining companies has been very strong. So it's usually a good 6- to 9-month lag before it comes into the driller, which is where Imdex plays. Emeco, look, the stock is very cheap. It's trading pretty close. I think it's trading at a discount to net tangible assets at the moment. It's got good management in there. Look, we've just got other options in the portfolio that we favor at the moment. So we're not -- we don't own it, but the stock is very cheap and run pretty well. So I mean, it probably looks interesting here.

Graham has asked, what is your peak in the aged care sector? And is this a good sector to invest in at the moment?

Yes. So it is. So we have a couple of stocks, Regis Healthcare, which is one we've talked about in the past and Somerset, we believe the trend of the aging population is here to stay over the next 10 years. So we believe demand is going to outstrip supply. And in Australia with the aged care reform recently and the extra funding that went into the industry really benefits existing players. So we are bullish the aged care space over the long term, given the visibility has improved significantly over the last 3 years.

James has asked, do you hold Praemium, PPS? And can you comment on the outlook for this stock?

We used to hold Praemium. Over The last few years, we've gravitated more towards Hub, which is the larger platforms business, winning share of the incumbents. So that's Hub24. And it has done incredibly well. It's gone into the ASX 100, which we continue to hold HUB as a stock in the portfolio. And so that's probably been our platform -- pure platform exposure.

I think if we were to own Praemium being the Microcap fund, and we've got a big position, as I'm sure some of the shareholders will know in Generation Development Group, which is playing sort of similar space. So if we were to buy Praemium, we're probably selling that, which is probably what we don't want to do. But look, we see the quarterly updates. They are turning a corner. So I would say it looks interesting. I think -- yes, I think it's something -- it's a company worth looking at.

Michael has asked, do you have a view on Southern Cross Electrical Engineering?

Yes, we do. Look, I saw them over in Perth. I think the company is doing very well. However, as we see some from time to time in mining services companies, when they have large contracts that they're completing at the moment, I think the market wants to wait and see how the company performs. So I think we think the share price will stay pretty stagnant until they can prove that they've performed well in the contract, which is called the Collie battery contract. It's a big part of their revenue and earnings this year. So I think that's a key contract for the business. They get through that. And then, yes, definitely, there's a lot of upside in the company because a net cash balance sheet and also they're looking to make acquisitions. We've got a good pipeline. As I said, mining services is looking really good at the moment and winning contracts. So you just got to get through that project. So what I'm saying there is short term, I think it might be a bit static, the share price, let's call it. So that's the key. watch that contract and watch how it performs.

Darius and George have asked, how do you see the outlook for HMC? And do you think it will recover from its sell off the last few days?

Yes, it's been brutal and one of our best stocks, I guess, over the last 2 years. So hence my frustration for my answer to DigiCo. Look, the answer is that it's amazing how things can turn quickly in the market. It's one of the great levels, isn't it, Tobias, it's crazy. But anyway, David Di Pilla, everything he touched turned to gold about a week ago. Now he's like, it's all over. No, there's nothing wrong with HomeCo. DigiCo is very positive for it. They're going to get a lot of fees from it. There's a lot going on in the business at the moment. So look, we see these gyrations in share prices from time to time. And all that needs to happen is go back to fundamentals, and we'll see that at reporting season. So look, they guided for earnings per share growth to be greater than $0.70 this year, but analysts still haven't updated their numbers. I think they're sitting at like $0.40, I think, from memory. So you're going to get upgrades coming through in the results. So I guess why has it fallen is because people think, oh, DigiCo has been a failure. No one's going to -- like retail investors aren't going to give HomeCo any more money. Look, it's been 2 days. So let's judge how DigiCo goes when we see some numbers come out. And often what we see in IPOs, all it takes just one fund to start selling stock and it creates fear. And that's what we've seen over the last couple of days. So let's see how the results are before we make a judgment call on HMC because they've had a tremendous year. They led well. And certainly, we see a lot of upside. Buying -- we were buying heaps yesterday as an example, like 13.5% move was crazy.

Anthony has asked, what are your thoughts on Service Stream?

We're very bullish on Service Stream. The key for us is that they've -- I think over the last -- we've been in Service Stream for a very long time, but I think something that the market perhaps haven't fully grasped is the fact that the contracts they have now and sort of the exposures they have, it's a much lower risk profile versus back in the days where they take on a lot more risk on the margins or on the balance sheet. The business is run by Leigh and Linda. They've done an incredible job turning around the business and now actually going for growth and managing the various contracts, which they have delivered very well relative to their peers. Now the next short while, there's going to be a bit of news flow from the defense contract, which they've bid into. Obviously, we've seen some news flow from a couple of their peers on that. Now it's very difficult to see how that plays out. Service Stream doesn't have any exposure in defense. They're going into defense as a new space as a potential new driver of growth. So if that comes off, that will be additional growth to the current trajectory they're on. So very happy with the position of Service Stream and the management team is delivering really well.

George has asked, do you think Dicker Data will be a beneficiary of the AI trade?

I do. I think the million-dollar question is how much of a beneficiary. I think A key thing we're observing in the market are these AI-powered or empowered laptops. So these are laptops effectively that runs quicker for a lot of the AI applications that requires much higher compute needs or compute throughput. And so Dicker Data as someone sort of steps that's in the middle that does a lot of this will benefit. I guess the question is how quickly is the take-up of these type of laptops, as an example, by the broader market, by corporates, which really drives sort of how much they benefit. But on the forefront of IT that they're in and with a very large market share in Australia, they'll definitely be a beneficiary of AI.

Thanks, Tobias. Greg has asked, McMillan Shakespeare appear to be trading on a very good dividend yield. Do you currently hold it? And what is the reason for such a yield?

We don't own it.

Just got out, we just sold SG Fleet and that's probably the reason.

Okay. Yes. I mean, look, McMillan Shakespeare, look, it's a good business. It's been around for a very long time. I think, yes, the biggest issue the sector has, the fleet leasing sector at the moment and is where a used car price is going to go. And that was certainly something that was a big reason. As I said before, like SG Fleet was probably going nowhere in the next 1 to 2 years really because the market was uncertain as to where that was going to go. And McMillan Shakespeare has a fleet leasing business, and that's one of the big reasons. Now the second reason is the fact they are exposed to salary packaging and novated leasing. Now there's going to be some changes around the electric vehicles in terms of the tax credits you could get, which potentially might be happening, I think, March next year. And so there's some uncertainty in the market as to what that will do for electric vehicle demand because electric vehicles have been very strong from salary packaging businesses. And the third reason is McMillan Shakespeare has been growing its Plan Partners business in the NDIS. And I think all of our shareholders who are on the call today know how much spending has been going in the NDIS and probably be fair to say going to the wrong areas. Now I'm not saying Plan Partners is doing anything wrong. But ultimately, we do think there will be greater regulation and so forth. And to be fair to McMillan Shakespeare, they've been very good on that and been investing a lot in the space. But I think just until we get clarity on the NDIS, it's stopping new investors buy the stock. So that's probably why the dividend is so high. The dividend yield is so high. And it's consistent not only with McMillan Shakespeare's, it's consistent with SG Fleet, it's the same thing with FleetPartners and also Smartgroup. So it's just -- we see from time to time, sectors have various headwinds. That sector has got a headwind at the moment, which is why the dividend yield is so high.

Thanks, Oscar. Liz has asked, do you have a long-term assessment on LTR Pharma? And do any of the LICs hold these shares?

We don't. And I probably should have mentioned biotechs really aren't our thing either. So yes, we don't know the business probably at all, I'm sorry. So yes, so apologies for that.

No problem. Neil has asked, do you think Accensus shares will trade better now that they are more available after the placement?

Yes. So I think Acusensus is one which we participated in the capital raise recently. Sami, one of our colleagues has done a lot of work on it. It's quite bullish on the stock. They are going after what is effectively a global total addressable market, has great technology. For those of you who's known, it is the technology that effectively, if you're driving and on your mobile phone, while you're driving and it sort of picks up on it and you get a fine. So for that is -- that's what the company does and that unique technology is being used in Australia and potentially the opportunity is global. So that's something we're doing a bit more work on and the initial assessment is quite positive.

Thanks, Tobias. Now going a bit more macro. Anthony has asked, are you still finding opportunities in New Zealand?

Yes, definitely. We've been there 3 times, I think, this year. I made a joke to Jeff, I said, if you could launch a New Zealand-only small-cap fund, you would make a lot of money right now. So it's a funny market in New Zealand, isn't it? There's just so many opportunities there at the moment. It's all trading at depressed valuations. The economy is atrocious. It's -- I think Victoria is probably heading that way to be fair. But every time we go over there, it gets worse and worse. Now why does it look interesting then? Well, because the Central Bank is going to keep cutting interest rates. And we've seen 125 basis points of interest rate cuts so far. New government, the national government that's come in, will start spending next year, which will be positive. So you can see it in business sentiment and consumer sentiment surveys, it actually turned despite the fact that the economy is starting to get weaker. So look, ultimately, as we -- I think from March, April next year, we think you'll start seeing spending. The market will start looking forward, and that's the problem with New Zealand, we always find is we feel it's a very short-term market where it's here and now and everything is so terrible and it's bad, they never think forward to 12 to 24 months. So we've got a lot of companies across the portfolio exposed to that. We've got big positions in Mainfreight, A2 Milk, as Tobias talked about, Summerset, which we think is a cracker. On the property side, I should have mentioned that earlier. Vulcan Steel, we've got -- on the Microcap side, we've got New Zealand Stock Exchange, New Zealand Media, Steel & Tube, Turners Automotive. So we've got a lot. So yes, it is a big bet in the portfolio, certainly. And it's been a big bet for probably 1.5 years now. So it's actually -- those stocks have actually done quite well for us over the last 12 months. And we certainly think we're there before everyone else is. So yes, stay tuned for next year, really.

Thanks, Oscar. Adrian has asked, if we see a cease fire and start of a resolution in Ukraine soon, what companies in the ASX could benefit?

Yes. I think, look, let's go back to 2022. So as soon as the war happened, and this was very -- we had a conference call on this, it was bad for our portfolio. What's the sectors we don't own? We don't own energy, so we don't own Woodside. We don't own Santos. We don't own iron ore. We don't own BHP, Rio, Fortescue, et cetera. And then as soon as the war happened, you took a whole heap of oil effectively and iron ore out of the market. So what happened was people sold all their other stocks to fund energy and iron ore, very simple. And that was -- that really hurt us through that. I always remember that February, March period where we had a great reporting season, shares would go up 10% the next day, it would be down 20%. So that really hurt our performance for that period. Now let's say tomorrow, there's a ceasefire. I'm not saying the reverse will happen. It will take time to play out. But the market always looks forward. And if the market got some sort of certainty that Ukraine and Russia potentially could be back in the market and selling freely. We all know that Russia has been selling oil and iron ore or whatever through China and other countries through this period. But like in terms of the market being, call it, more free than what it is now, potentially the market says, okay, well, if I bought those shares 3 years ago, it's possible I might sell them now. And ultimately, that should be good for small-cap companies. And even in that period, that '22 period, because it was so uncertain -- and as I said earlier, we talked about COVID, we talked about interest rates. It wasn't just the energy and the big miners that got people buying shares of, it was the banks because they were big, they were liquid, they were certain, paid a dividend. And at the time, all of these small-caps are very uncertain, illiquid, doesn't trade much, uncertain about the outlook, so they got sold off. So again, we're talking about how do small-cap companies outperform. That would be ceasefire, I think, will be very, very positive for small-caps. It just removes some uncertainty. It gives people more confidence to invest in the companies. Now if we look at our portfolio, there's probably one company that would be impacted from a ceasefire, and that is Codan. Codan has done incredibly well over this period with the Ukraine and Russia war, selling a lot of their equipment and so forth into that area. But then other parts of the business would also benefit like, for instance, they used to sell metal detectors into Russia and Ukraine, and they haven't been able to do that for 3 years. It was a big market for them. So Codan would get sold off in our portfolio, but certainly, we feel like other parts of our portfolio would go up. So anyway, that was a long-winded answer, but in short, we think it would be positive for small-caps.

Thanks, Oscar. Ashley has asked, if we see a pullback in the U.S. tech stocks and S&P generally, which looks super expensive, how do you see that playing out in the ASX, especially in small to mid-caps?

That's going to definitely have an impact on the tech stocks in Australia. So there's going to be perhaps not a one-to-one impact, but there will be an impact. In terms of how we invest, as you know, we look for catalysts. So we don't hold on to positions if we don't think there's a catalyst. And so the work we need to do and the investment process dictates us to effectively continue to find these catalysts to be able to hold the stock. So we -- as you can tell, we turn over the portfolio quite a bit throughout the year and manage and dynamically manage the position size for the business -- for these stocks. And we've obviously gone through various volatility periods over the last few years, and then we've been able to come out of it pretty well. So for us, continue to manage each position dynamically and continue to look for catalysts.

Thanks, Tobias. And we've got a few more stock-specific questions. Gary has asked, do you have a view on Rural Funds Group?

Yes, no view, sorry.

No worries. Next [indiscernible] has asked, do you have a view on Respiri?

No. But can you please e-mail through your thesis, that would be much appreciated. I never heard of it.

And David has asked, what do you think of mining services company GR Engineering Services?

Really good company, really good management, the best of what they do for processing plants in gold and copper and lithium. We've just got other companies in the portfolio at the moment. So yes, we'd buy it again. I haven't seen them for a while, to be frank as well. But yes, at the moment, we don't own it.

Ashley has asked, what is your view on Healthco, healthcare and wellness REIT?

So that's a HomeCo REIT, let's call it, our investment. So HCW has last year -- this year, I think it was, effectively is the landlord for Healthscope. And Healthscope is going -- like all private hospitals at the moment is going through a very tough time. And Healthscope is held by Brookfield in private equity, and there's been a lot of news reports saying that they're struggling on the financing side of things. So I guess that's impacted the share price. If you had a resolution about Healthscope and they got funding, I would have thought the share price goes up. But that is a big discount to NTA. I think they're buying back stock as well. It shows you how HomeCo are thinking about it. But we don't own HCW across the funds.

Thanks, Oscar. Felix has asked, do you have an opinion on Ventia after the recent announcement that ASIC is taking action on them and Downer?

It's potentially very good for Service Stream. There's no doubt about it. Service Stream is trying to get in the defense sector and Downer and Ventia are very large in the defense sector. Service Stream is also retendering its NBN contract, which is a big part of their business, which also Downer and Ventia are on. So look, I hate to -- like the news is not good for the sector, let's call it. But given they're in a tendering process, it can't hurt Service Stream, which is what we own. We don't own Ventia. We don't own Downer. However, what I will say is without just sitting here and just saying, how good Service Stream is and you should sell the other 2, look, I personally think, look, those businesses have been with the defense sector for a very, very long time. It's a big call for the defense sector to say, hey, what's gone on is no good. And I think it was only 2 individuals, I think, from memory that was in question. These are big contracts. So look, I think they'll get -- and the timing of it is a bit interesting, isn't it, when they're in a big contract negotiation at the moment. So look, they might -- I think they'll win the contract in some form, maybe that's reduced in some way. Maybe the margins are a bit lower, don't know. But I think they've been -- they're the incumbent there and been there for a long time. So I think it's a big call from defense just to say you're off.

Thank you. So Warren has asked, do you have a view on Moneyme?

We do. We are positive on Moneyme. They've actually done really well recently, just winning share in the non-bank financial space. We actually quite like that sector, particularly in an environment where the interest rate is potentially getting cut. So that's one that we are actually actively doing work on.

Thank you. And Ashley has asked, what are your thoughts on DGL Group?

Look, it's -- we had a lot of it a few years back. mistakenly, it wasn't a good investment for us. But look, we haven't looked at it for well over 12 months. So I think from memory, the last result was weaker than expected to and the cash flow was weak. So look, maybe we'll have a look at it again, but unlikely at this point in time.

Thanks, Oscar. And the last question comes from Steve. What happens to the franking credits that WAM receives from companies that it invests in?

That gets passed on to shareholders, but it's a small proportion of the franking that we generate. The most of the franking, and I think it is 2/3, don't quote me, but it's a larger amount, comes from the realized gains from the shares that we sell, which obviously generates a tax event. When we have a tax event, we pass on that tax through to you, shareholder as a franking credit. So yes, it's largely the realized gains. So if the portfolio is going up, chances are we are selling companies at various points in time. So that will create a franking event, let's call it.

Okay. That concludes the Q&A for today. I'll hand back over to Oscar to conclude.

Look, thanks, everyone, for dialing in and really appreciate it. We always appreciate the support. As you can see, we're sort of frustrated as well where the share prices are. We don't -- our performance, we feel, has been really, really strong. We've got a great outlook into 2025. So look, fingers crossed when we next talk to you, I think it will be in early March. We'll hopefully see some more positivity in the share price. But other than that, have a great Christmas and New Year. Have a good break, and I guess we'll see you in early March.

Thank you.