WAM Capital Limited ($WAM)

Good morning, everyone, and thank you all for dialing in to this morning's presentation. With me to my right is portfolio manager Tobias Yao; and investment specialists, April Lowis. And together, we're going to talk about our listed investment companies, the current environment for small caps, and then Tobias will conclude and talk about some interesting stock ideas that we see. So turning to Slide 2, and this is our disclaimer. And obviously, this is, as we always have in every presentation, this is just for general advice and not financial advice. And then we'll just turn to Slide 3. And this slide is giving a snapshot of our interim results for the 4 funds that we manage. I might just kick off talking about WAM Active first and it's on the far right. And myself and Shaun Weick were here for a conference call back in January. Performance of that fund has been very, very strong. And of course, we raised some money in a placement and a rights issue, completed about 2 weeks ago, and we're very thankful for our shareholder support for that fund. And that fund has done very, very well, has been investing in the resources sector, and Shaun has done a tremendous job on that portfolio. But for the purposes of this conference call, we're going to talk about the 3 listed investment companies on the left there, which is WAM Capital, WAM MicroCapital, WAM Research. So we'll just turn to Slide 3 -- sorry, Slide 4, which is we wanted to show this chart, and we're using WAM Capital as an example here. And this is to largely show the premium to NTA or net tangible assets at the current share price is trading at. Now on your left is a snapshot of the financial year 2022. Now what you can see is in July, there was the premium was trading about 16%. This is in July of 2021. Now as you can see in the blue bars that started to fall from around October 2021. And that was largely because of rising inflation and then culminated in the Russia and Ukraine conflict around sort of January, February of '22. So you can see that decline in the net tangible assets over that 1-year period. But what happened was, was the share price disconnected from the net tangible asset for. And you can see that its peak around March 2022. The share price was trading at around, I think, it's a 30% premium to its net tangible assets, which is extremely high. And then as you can see, as the year finished up, we got to June, that premium had shortened from 30% to just over 20%. And I think as we got to Christmas, that premium has actually shrunk all the way to net tangible assets. Now if we look on the chart on the right, and this is what we're seeing so far in the '26 financial year. Now we started off in July of 2025 at a slight discount in terms of their net tangible assets versus the share price. Now in the first 4 months of the financial years, small cap companies were going very well. There was no conflict in Iran. There was interest rate cuts forecast, not interest rate hikes and our performance was very strong across all the funds. Now that lid on its head in October. And as you can see, the net tangible assets of WAM Capital have declined from that point in time as there's -- there've been a shift back to large caps versus small caps and a number of the sectors, which we'll talk about in the call have really struggled. Now this has only been exacerbated by war and artificial intelligence in the last few months. But despite all that and the net tangible assets declining consistently over that period, you can see that the premium to net tangible assets is extremely high now at 30% as at the end of February. Now we're trying to show a comparison of the 2026 financial year to 2022, and we see similarities. And we think that premium from what we've experienced over the years will hold until the dividend is paid. And then we do envisage a similar scenario that we saw back in May, June 2022 and then towards the end of 2022, when perhaps the premium may shrink even further. So look, we obviously can't give you advice. But one thing I can say if Jeff was here. He always lost by $1 of assets at $0.80, and you'll see that he's been buying shares in one of our other listed investment companies WAM Alternatives, WMA, and that's currently trading at a 20% discount. So I'll leave it at that, and we'll move it to the next slide, Slide 5, which is around what's been happening at the moment. And the 5 factors that are really impacted small cap companies really since October. And before I start, I think this is fair enough to us. And I think this is the hardest period that both of us have ever experienced in investing. We've been doing this for 16, 17 years. Jeff -- if Jeff was here, there's no doubt he would say this is the hardest period he'd seen since probably the global financial crisis. So it has been very rapid since October. And yes, some of the things like artificial intelligence have really taken us by surprise. So I'll quickly go through the 5 impacts. The first one is the interest rate outlook, which I touched on earlier. At the end of around October, market was forecasting 2 interest rate cuts. That flipped on its head, I think, around Melbourne Cup time the Consumer Price Index report, which had higher-than-anticipated inflation. And now all of a sudden, economists are looking at 3 interest rate hikes. So that 5 rate hike move has really hit small cap companies hard because there's a big proportion of companies that we invest in exposed to the economy. So that was the first, let's call it, downside that we saw in the companies that we invest in. The next one came from the resources sector. So in periods when we see higher inflation, and resources tends to go up quite well. And that has certainly been the case. And to put this into context, the small resources index has outperformed the small industrials index, which is what we invest in by close to 90% in the last 12 months. Now we don't invest largely in small resources companies, but when that occurs, it takes money away from the small industrials that we invest in into small resources has done very, very well. Now the positive there is as a lot of our investors will know, is that resources markets are cyclical. Now in time, we will get a great benefit for when resources stocks falls. Is that going to happen in the near term? Probably not. But it will happen -- and we saw that period happen from around 2012 to 2016, which was some great years for the business. The third is rising geopolitical risk. Now this doesn't even talk about the Middle East. This is things like Venezuela, which we've probably long forgotten about. But when as soon as that these things were happening, and this has been consistent really for a very long time since COVID. What you see is when investors see risk, they tend to go up the liquidity and up the market cap curve. And we've seen a transition into the top 20 companies in Australia and to the extent where small cap industrials since October, have underperformed the broader market by well over 20%. That's a big number. So and this was exacerbated really through the reporting season of February. The fourth impact that we've seen is artificial intelligence. Now artificial intelligence, we ultimately think as a business will be very positive for the Australian listed companies that we invest in. However, it is changing very, very rapidly. And the extent that we saw this change over the last few months from Christmas to today has been extraordinary. And what's been happening is we've seen announcements by Claude and Anthropic. And this has been impacting some of the technology companies globally, and this has been happening for some time. But around the end of January, early February, there was a number of products that they released that really impacted service-based companies. I'm thinking insurance brokers. I'm thinking engineering companies. I'm thinking travel agents. And that really hurt us in that early February because that's a lot of what we invest in. And then finally, of course, the Middle East conflict in terms of what happens with oil prices and consumers' discretionary companies and so forth. So I think that hopefully gives you a summary of the difficulties that we've had over the last 4 months. It's been extremely tough. Now on to the positive. So we've got to move on to the next slide to Slide 6. This is showing a very simple table and it's just showing our performance in 2022, which was, as I talked about previously, came off the back of high inflation, Russia-Ukraine war, and it was a tough period, a very tough period for the fund. We underperformed the market by 11%. Now I always remember being in the think it was the April roadshow, and Geoff made a comment in his opening remarks saying, look, it's been a tough period, but what matters is how you get out of these tough periods. And the team worked extraordinarily hard through that 2022 period like we are right now. We did a lot of travel. We found a lot of new ideas. And then on the subsequent 3 years, we outperformed the market by 3%, 14% and 9%. We bounced out harder and effectively added more value to the net tangible assets of our fund and that 11% drawdown. So look, I'll conclude with that. We're seeing a lot of opportunities in the market. Valuations as depressed as we've ever seen them, the fundamentals of the companies we're investing in are as strong as ever. balance sheet of a very, very strong. We think our listed companies that we invest in will weather the storm. So we're seeing a lot of opportunities to invest. We just need to ride it out and get some stability back into the markets. And when that occurs, the investment process will start working again and investing in catalysts, we'll see a re-rating of the share prices of the companies we look at. So look, I'll leave it in that. It's a big opening, but I'll pass on to Tobias to talk about more exciting things, which is up some stock picks.

Thanks, Oscar. Just on Slide 7, and I guess, given the uncertain economic and sort of macro backdrop, we thought we'd pick 4 companies that we like, that has more of a defensive nature. To them, I think the first one on the left is a company called GemLife Communities. Now they effectively -- a land lease communities for all the 5 retirement villages, particularly in Queensland and expanding into Victoria and New South Wales. Now GemLife listed on the ASX July of last year. What makes them quite special, I think, is they have a vertically integrated model. If you ask and I [indiscernible] over 10 of their communities visiting not only the residents, but also the facilities. And what really started out to us is the quality of the product, the cloud houses always 2 levels, there's indoor swimming pools, bowling, outdoor lawns, sometimes there's 2 to 3 clubhouses within each of these communities, so indoor cinemas. And so one of the reasons they can offer this is because they are a vertically integrated developer. So a lot of the margin they would otherwise have given a way to a third party. They've really reinvested that back into the quality of the product. Now GemLife has upgraded twice since they've listed. So once in August of last year and then earlier in February, they got around 10,000 lots, and they're currently only about 20% of the way through. So we think there's a significant pipeline of growth opportunities for them as they continue to develop these communities over time and obviously exposed to the aging population. We believe their products. It's very suitable for retirees. When they do want to crystallize the equity in their homes, often what we see is they sell their homes, they enter one of these communities, buy one of the the houses, the crystallization of the equity in the house, a regional home, they could buy a caravan, got travel around Australia. And so the opportunity in the product attractiveness is very high and we believe the growth and I guess now will be the catalyst for this one is that they could continue to exceed expectations in terms of the growth and the earnings that we can achieve across the business. Now the second company is called Event Hospitality or EVT. So EVT effectively run the event Cinemas. They have a pretty large hotels business. QT, we may have stayed in one of their hotels and also they own the Thredbo Resorts. Now the catalyst for Event is actually we believe they're on a multiyear journey to become a more capital-light business. So what they're doing right now is they're selling some of their noncore properties, like 55 Joy Street and reinvesting that into hotel management rights and really growing that part of the business. That's quite attractive to us because currently, EVT is trading below the value of the properties. So you're really getting the operational business for free. So to us, that's very attractive because we're getting really free optionality and free option value there. And so the catalyst, as they continue to sell the properties and reinvest into the hotels business will lead to earnings upgrades in our view over the next few years as to transform the business itself. The third company is a company called FINEOS, perhaps something that's perhaps not as familiar to most of our investors. Now FINEOS is a software provider to large insurance companies in the U.S. the software provides effectively an admin or back-office software suite for these large insurance companies that over the last probably 20 years have really modernized the front end or the user interface of their websites and their systems, but a lot of the back-end systems are still quite antiquated, and these are running on legacy systems, that's 20 or 30 years old. Now FINEOS have already won 5 of the top 10 largest U.S. insurance companies, the likes of the likes of Mila, Guardian Life, as an example. What makes them quite special is the fact that we believe there are really 2 winners in this space. There's themselves. It is another company called Guidewire listed in the U.S. To be able to use AI and really apply AI in real time, you need to have, I guess, a more modern back-end stack software systems, so to speak. And so one of the reasons and one of the drivers of why we see more customers or clients signing up with FINEOS is this is the first step for these insurance companies to be able to apply the efficiencies that AI systems can drive. But firstly, they need to put it on what is a modern software system. And so FINEOS has 5-year target in terms of revenue growth and margins. They're well on their way, upgraded recently in February, and so that's quite attractive to us, we believe, consensus doesn't have the long-term aspirational guidance in their numbers, and that would be the key catalyst that would drive the share price higher over the next few years. And finally, our company called Service Stream. They are provider of essential services, maintenance for an asset management services. Now we've owned this business for quite a long time. We've had a very long history with the management team, which we rate quite highly. So the Service Stream run does a lot of the nbn maintenance work. As an example, they are also pretty heavy utilities. Now what's quite exciting for us for Service Stream is the fact that around 6 months ago, they won a defense contract. That's going to be a big driver of their growth over the next few years in addition to the utilities business that we think will also drive the growth. However, the share price is now below when they've announced the defense contract business is trading on less than 15x price to earnings ratio for business that is effectively just all recurring revenue maintaining these essential infrastructure. And with the net cash balance sheet, we think the upside is quite attractive to us given and we believe they can continue to actually outdeliver on some of the growth aspirations they have. So these are just 4 companies that we call like in the fund.

Great. Thank you very much to us. I just wanted to flag quickly that we're traveling to Sydney, Melbourne, Canberra, Adelaide, Perth and Hobart in April to meet with shareholders so the event will include insights from the investment team and also an opportunity to learn more about the Future Generation companies, and you can register for the event using the QR code on the screen. So now time for questions.

Maybe we'll start with one from David. Could you provide an example on some stocks that maybe you've seen extreme valuation declines but the fundamentals are still holding up?

Yes, sure. I mean there's plenty that be the first thing I'd say. And yes, I mean, when we reviewed I touched on it before, our February reporting season was probably so it was extremely tough, the toughest we've ever had. We felt like we didn't really foot wrong. The actual numbers the companies were producing were really, really strong. A number of companies we think would have gone up 20%, 30%, 40%, but they've gone down 20%. And unfortunately, the investment process just doesn't work in markets like this. And it was very similar back in February 2022, but I'd say it's more magnified than that. But look, a good example, the stock that always comes to my mind. I'm probably [indiscernible] you've got the same stock, so I apologize. It's carsales. carsales is, obviously, it's a classified business in the auto industry. carsales has consistently grown earnings per share by 10% to 15% per annum. I'd say over the last decade, it's traded at probably between 26 and 30x earnings and it's got to 40x earnings at some point. Today, it's trading on a pricing multiple valuation of 20x earnings, lowest spend in more than a decade. And Commonwealth Bank trades at 27x earnings for context. So yes. So look, companies like there's plenty of companies that REA is another one that comes to mind. Lots of great growth companies that perhaps we probably weren't investing in because the valuations were quite high. But now certainly, we're looking at them now and very excited once we bounce out of this tough period.

We have a few questions on the dividend. John has asked why the dividend hasn't increased in WAM Capital since 2018 while WAM Capital Research or MicroCap increases dividend given their respective current profit reserves?

Yes. Thanks for the question always comes up. Look, I'm not on the board, so I can't directly answer that question, other than to say you need to look at our profit reserve. The profit reserve dictates the Board in terms of how much dividend they can provide. And if we use the example of WAM Capital, there's $0.21 in the profit reserve. If we maintain current levels of dividends, that's $0.155 that in the next 12 months, so -- which means we've only got $0.06 after that $0.21 minus $0.155, call it $0.06. So what that means is that the portfolio needs to keep going up like the shares that we invested need to keep going up because if they go up, they generate a profit. If they generate a profit, it means we can use those profits to pay a dividend. And we got very close back in early 2023 after a tough year in 2022, where potentially we needed to cut the dividend, and our strong performance got us through and got us through to where we are today, to be frank. So clearly, when the market is down like it has been since October, we're not generating profits. So we're not adding to the profit reserve. So that's if we were to increase the dividend, we reduced the profit reserve. And if we if the market is down for, say, a year or so, we're not adding to it. So therefore, you take a risk that you cut it. So that's the WAM Capital example. In [indiscernible] and Microcap, yes, there is a lot of profit reserve there. But the Boards of both those funds don't want a situation like WAM Capital, where we increased the dividend quite high to 2018. And then we're pushing against the profit reserve barrier, I guess you call it, because we don't want to keep eating away at the proper reserve. We want to build the NTA, the net tangible assets over time. We don't want it to decline. So look, that's the conundrum that we're in at the moment. But Look, you saw with Microcap, there was a very, very slight increase in the dividend at the half WAM will kept the same ideas so what's going to happen? I get to say that given the current market, they probably be kept the same.

Yes. And it is a balance for the Board like with the decision to do the capital growth and the yes.

Yes. If we pay you more dividend, it means the net tangible assets come down, and so that will impact the share price. So it's weighing up what investors want. Do they want the share price going higher or they want more dividend. So we're trying to get that right balance.

We also have a question on WAM cap, what the profit reserve is after the interim dividend is paid, and that is $0.134 per share, so would be less than 1 year's dividends.

That's right, which means we've got coverage for the October 2026 dividend, and we've got around 70% coverage for the April 2027 dividend. So the financial year starts on July 1 so -- and that's very important. So if the market is positive and our performance is positive in July and August and September, that should give hopefully enough profit, then where we can add to the profit reserve and have confidence around that April 2027 dividend.

Elaine has also asked what the profit reserve of Waxman Research is and why it was published in the latest report. It is $0.468 per share. And it is in we publish them in our monthly NTAs every month. Dave has asked how do you generate franking?

Franking is very similar to what I talked about before. So basically, instead of the unrealized gain, right, it's actually the realized gain because we actually pay tax on the realized gain. So if we have a company and it's a $100 share price, it goes up 20%, and we sell it. We've made a 20% profit, which means we pay tax on that, and we use that tax to effectively give to our investors through a franking credit. Now that's around sort of 70% of the franking that you receive as an investor. The other 30%, let's call it, is the franking we receive from the dividends of the companies that we invest in and we pass them on. So sometimes there is a mismatch between the unrealized gains and the realized gains. We saw that in 2022 when you have a down market, and that's one of the reasons why we had to cut the franking from 100% to 60%, I think, it was about 2 years ago. So -- and that should have given you all an indication that if we're cutting the franking, we're pretty close to cutting the dividend as well. So we haven't thankfully and it's been maintained since, but that should have been a warning sign in essence to all shareholders that we will close on the dividend. So yes, franking for WAM Capital is at the moment is 60%. For it to go back to 100% -- it won't be any time soon. But for it to go back to 100%, we would need a very strong market, very strong performance, more trading to generate that tax, and I'm talking about the profits on sale and more tax that we can pass on to our investors. And the Board can have confidence that if we were to go back to 100%, we can maintain it for the foreseeable future.

We've also got we've got a question on AI stocks. What percentage of the portfolio is currently in AI stocks or companies that have or will be significantly impacted by AI?

Yes, great question. And something we I think debate about pretty much every day. I think in our fund, there are really 3 or 4 buckets. The first bucket are those that we believe are direct beneficiaries. The second bucket would be those software companies, which we believe will be beneficiaries, but time will tell. Then you have a bucket where there'd be, I guess, service providers to AI companies that perhaps are not in the software space. And then the fourth market are services companies that could get disrupted. So I mean, thinking back, I think 2 years ago, we talked about why we're bullish AI and the efficiencies AI could generate for a lot of these businesses, and that still stands. I guess what we've underestimated is that during this interim period of adoption, there's actually no real consensus by investors, both in Australia and the U.S., across all the tech companies who are the real beneficiaries and for the real other companies that will get disrupted. And so what's happened is outside of the large language learning models, the OpenAIs, the Anthropic, which are private businesses and very large, and obviously, you have your Googles and the Amazons of the world and [indiscernible], everyone is really just trying to debate and you probably all have read about all these, I guess, different research on who are the winners and losers and what are the frameworks to determine this. What from our perspective, and we've read probably gone down a rabbit hole on this for quite a while, our perspective is quite simple. So what would be the catalyst to change an investor's mindset that this company is an AI beneficiary. And in our view, it's to have real tangible evidence of the AI working and continuing to have this tangible evidence increase. And we believe the tangible evidence at this kind of juncture has to be top line revenue. I think 2 years ago, we thought about the potential benefit being on the earnings side with the cost-out. We've seen quite a lot of that across some of the companies, like I think Energy One in their presentation had they've written 1.6 million lines of code using AI. So that's really coming through. But for these businesses to be a real winner, it has to generate top line growth and then they have to announced contracts or demonstrate that revenue has accelerated. So going back to the original question, in the direct beneficiaries, we'll have companies like Fermic which is like a neo cloud. So they're just effectively think about them as a data center operator that just have with GPUs that's used for AI. We have Megaport, which does the connectivity, and there is seeing the volume of AI data going through their platform. Those will be the direct beneficiaries. We have quite a few technology companies. As an example, we obviously talked about FINEOS before. Pramerica's TechnologyOne, Energy One as an example. These are ones where we've done a lot of work on to try to understand whether they are or whether they'll be disrupted or whether they would benefit. Like just picking some of the common themes across the space, these are software businesses that's involved in industries where there's heavy regulation. So Pramerica is as an example, you need FDA approval for the software. And the regulation side obviously slows that down quite a bit. There's a network effect. And the most important thing is the management of these businesses are adopting AI at a pace that in our views quicker than many of their peers. So as an example, Pro Medicus, I think, 75 employees. They've been able to disrupt a lot of the larger competitors over many years. Well, AI has just given them more tools to disrupt at a faster pace with less headcount. So in our view, that DNA is quite important. And so these are the companies we want to back. Now in the short term, there's never going to be a consensus on whether all of these companies will come through as beneficiaries, but we believe over the medium to long term when that does occur and that they're actually benefiting from AI, the evaluation should go back up. And finally, the other bucket are companies like Mars Group, which does a lot of the build building of AI data centers, et cetera. So they also benefit from AI. In terms of, I guess, some of the industries Oscar has mentioned earlier, that could get disrupted, we don't really have a lot of exposure, if any, in travel anymore. But one of the things we do want to leave you with is the fact that with any new technology, the adoption curve flattens out as we've seen many times before. So the early adopters, obviously, are very early on the adoption curve. And so then the dotpoint initially shows an exponential growth in adoption. But over time, as they penetrate more industries, the adoption curve flattens out a little bit and it takes a bit of time to get there. And this leaves, I guess, it's a bit more time for these industries and businesses to reinvent themselves to take advantage of AI. And then again, it comes down to the management, comes down to the foresight that they have and the investments they're willing to put behind AI.

I think maybe investors context as to how quickly this has changed. So there's a company that's listed in Australia called AUB Group or the old as brokers, it's an insurance broker. I think it was in November, they got a takeover bid for about $30, I think, just off the top of my head. So private equity fund came in and said, "I think I'll pay a 30% premium for the -- on the share price and pay $30 for loss brokers." So that was in November. Now that ended up not happening. Share price went back to sort of 23%, I think, $23. One of the AI, I don't remember which one it was. Claude came out basically saying that AI can compare insurance policies. And so in the U.S., all the insurance progress got smashed, and AUB Group, I think, has gone from $23 to about $15. I had their result. It was an upgrade. So nothing fundamentally a change in the business. And then you step you take a step back and you go, okay, what does AB Group do? Well, they provides they're an insurance broker for very, very small businesses. So a company in a small town with a factory or something like that. So you sort of go back and go, it's very particular. It's very unique, the insurance policies that they provide and the cover that they provide their clients. How can AI actually disrupt that? Like I get it from a we get it from a mainstream perspective, but that really micro end it's very difficult to see how that how it can be done when every business is incredibly diverse and different. Now the market at the moment doesn't care. So -- and this provides opportunities for us clearly. And look -- and around that, I'm going to the U.S. this Tuesday for 2 weeks, basically, just to try and understand AI and who the winners and losers will be. We're doing a similar strategy that we did in 2022 with the whole team will be doing a lot of travel in the next 6 months to really ramp up and get some new ideas in the portfolio. So yes, look, it's a evolving -- certainly evolving, but we've never seen something impact sectors so quickly. And without real thought, I think you would say, look, no one really knows how it will end up in the long term. It's just the market has just said that it's the long-term valuations of these companies are materially lower. So that will change over time, and it's up to the companies to prove to the market that they are indeed a beneficiary because at the moment, they've been defenseless. Sorry, that was a long answer.

No, very interesting fascinating. We have a few questions on Middle East and oil. What is the impact of the Middle East conflict on your strategies? And what can you do to reduce risk?

The only thing really we can reduce risk is our cash balance. So we invest in small and mid-cap industrial companies. We don't invest in oil and gas companies. We don't invest in iron ore. The WAM leaders team do. And of course, we've been having a very good year because of that. So we are -- it's very difficult for us to invest in anything that is, call it, a hedge against what's happening. All we can do is focus on the fundamentals of the companies and make sure that they're achieving the catalyst that we think they need to be, beating our earnings expectations. And most important thing for us, as I said earlier, is to be prepared when the market changes back into our favor to reward our shareholders effectively. So the cash balance at the moment is sitting at 20%. It's the highest it's been since COVID. It's -- and we feel that's the appropriate amount. If we go higher than that, it means that's fine. If the market keeps falling, yes, okay, we will do -- we will, I guess, outperform the market for, say, at 40% or 50% cash. But as we saw in the COVID and we saw in Liberation Day, we spent time and time again, this market can flip very quickly. Now if we go to 40% or 50% cash, it is very difficult for us to get back in the market and get back to, say, 15% cash. So we're weighing that up at the moment. We're comfortable where we're at. As I said, the quality of the companies we're invested in are very high. The reporting season was actually very strong. Balance sheets are good. We've got plenty of stocks with catalysts. So we're confident we just need to ride it out. So we're happy keeping it where we're at 20%. But that's not to say we wouldn't go higher. But we do obviously, it's a constant evolving issue at the moment. But look, again, like when we're catching up this time last year it was all about tariffs. And that ended pretty quickly in the market rallied hard. COVID, a great example. that. Who would have thought in middle of March of 2020, that the market would do what I was going to do after that? And even after the Russian-Ukraine war in March '22. So look, the market moves very quickly. And so yes, we want to make on the right side of that when that occurs.

Yes, I think the key thing is also is to stick to our investment process, and the investment process has actually helped us over, I mean, since when we first started WAM and obviously, even before when we first started, and we've gone through many of these cycles. It doesn't make it easy.

Quite a few in the last 5 years.

But in [indiscernible] process has been very consistent, and so we have a very high facing the investment process to be able to take ourselves of the current situation.

We have a few stock questions. What's your view on Telix Pharmaceuticals, TLX?

We do have a very strong view. It hasn't been something we've invested in the last couple of years. Again, we call like simple businesses. In terms of the biotech space, like we have a company called [indiscernible], so less on the drug side and more on the device side and have this really interesting technology platform technologies. including a software system called North Star, which has received the FDA approval, but that's our large position in the fund, but we typically try to find businesses where we sort of understand the drivers and obviously have expertise around it.

We've been well out of Telix a few years ago, it was in an earnings upgrade cycle, and we sold it just because we thought earnings have gotten too far ahead of itself and it's had a few slip-ups, and that's where that's why it's back to where it is today. So those wouldn't write it off, but yes, we're not looking at the moment.

And what about EML payments? Anything on that?

Yes. So EML Payments, you may have seen us reduce our substantial shareholder dollars recently. When we first bought the business, they're going through a significant transformation. So they were selling was a problematic business out of Europe and then he was trying to sell a problematic acquisition out of the U.S. They sold it, had new management come through. One of the reasons why we reduced subs, we tell our shareholders is because it was, I guess, a very large position in the fund. However, we think the integration process or the the process to turn on the business could take a little bit longer. Now the management is very good. But in terms of as portfolio managers or investors with the portfolio of companies, we need to often determine the attractiveness and the upside in the share price of each opportunity relative to the other opportunities we see in the market. And because there's been obviously a huge dislocation in the share price with a lot of companies falling, we're finding better value elsewhere. So that's one of the reasons why we reduced our position.

But that's a great point. That's exactly what we were talking about before. So EML, there's actually the company is doing a really good job. And so it was hard for us to sell it. And we spoke to them and it was almost like an apology. And the Chairman is buying shares and bought some shares this morning. But we've got a portfolio, and it was a big weight in the portfolio, and we're seeing companies like carsales that we talked about before in REA. And we've got a smaller way in those companies, a bigger weight in the EML. And it's will -- is the question we're asking ourselves is if the market changes, is EML going to go up at the same rate as REA and carsales? And the answer was no. And so we sold EML and we put it largely into carsales and REA. So that's sort of how the portfolio managers can think. It's nothing against the company. And we've still got to the micro capital for and still very happy with that weighting in the market cap portfolio. But unfortunately, it's you've got to make some hard decisions sometimes, and that was one of them we've made in the last few months.

Ross has asked what your views are on Qoria, QOR, and be half sold or completely sold.

That's another example EML. So they obviously did a large merger with a U.S. business. And one of the reasons why we reduced Qoria is to have a small stake it's because effectively, we are seeing a lot of the larger tech companies come off. To Oscar's point, if the market goes back up, we think the initial bit of money, and this is the trend we saw out of 2022 goes towards larger, more liquid tech companies first. And then as 12 to 24 months, then that money goes back into the smaller tech companies. And so the valuation rerate happens at the larger end first. And so again, that's an example of where we sort of redeployed that into the larger tech companies.

So in summary, it's out of WAM Capital, and again, like EML, it's in the microcap fund. And there's absolute what again, a hard decision because the company is actually doing well. Again, it was a portfolio decision.

Graham has asked, do you consider investing in 2 stocks 2, SX2, which is selling across gold, so probably not so much in your rate and at 4DX, which is 4DMedical?

Southern Cross Gold, so that's a no for us. It's probably WAM active [indiscernible]. I'm not sure that they're in at the moment. But yes, 4DX.

Yes. 4DX, I mean we have effective very small exposure through our holding in media which obviously holds a lot of the warrants for 4DX the technology, we haven't done a lot of work on it, but they've obviously had, I think, a couple of FDA approvals to share price has done really well. Again, it's something that's in a space that's not typically sort of the area we're looking at. But that's yes, our exposure will be very mined through the Pro Medicus Holding.

Michael has asked, are you actively trading the market to take advantage of the dips?

We are, but it's like in small cap companies, it's very difficult because we get periods like this, liquidity dries up. So the answer is yes. Look, I think when we left, it was looking like another day in small caps where we're grossly underperformed the market. So yes, we're buying, but small amounts. It's difficult -- when you're in a good market, there's liquidity around. So everyone is feeling a little bit more positive. So they take it a lot more -- when you see harder markets, they're more willing to buy. At the moment, everyone is sitting back on their hands. So yes, look, we -- of course, we're taking advantage of days when the market's down. Converse when the market is up, and we've seen some pretty big updates in the last few months. We're taking we're trimming our positions because there's a lot of uncertainty at the moment. So look, as I said before, the key for us is to bounce out of this as hard as we can, and the pruning we've been doing around the portfolios to try and make sure we're in the best companies for when that occurs.

Maybe a few more questions on dividends and profits reserve. Dave has asked if WAM Capital is low in spare cash to keep paying the same dividends, can the Board take some cash from other funds, which has more to lift the WAM cash reserves.

No. No, they can't, unfortunately. Well, I shouldn't say unfortunately, no, you just can't, so no.

Yes, there's a board for each of the...

I think the other funds would be a bit annoyed by that. So yes, you can't do that.

Someone has asked whether the money and the profit serves held somewhere else or is it embedded in the NTA?

Yes. So it's an accounting term. So again, the profit reserve is based off the unrealized gains that we achieved in the portfolio. So if our portfolio at the 1st of July is $100 and it goes to $120 by 31st of July, doesn't necessarily mean we sell every company in the portfolio. So we don't sell any of the companies in the portfolio. That's a 20% unrealized gain that we've made. So that 20% goes into the profit reserve. Our profit reserve, we can use to pay a dividend. So that's effectively it's an accounting term. But it's based -- it essentially means that you can the profit you make in the business can be book profits, not cash profits, think of it like that. And so what matters most for us is that, as I said, July, August, September of this year into the new financial year into the 2027 financial year, you see the market and our performance to be strong. That will give us profit reserve. That profit reserve we'll be able to use to top up effectively our ability to pay dividends in the future.

And that is still working for shareholders as well because it forms part of the NTA.

Correct. Because that is, we'd be forced to sell all the companies that we own, like to generate a realized profit, which wouldn't work. So that's why it is.

Bill's asked why are people buying WAM Capital shouldn't they be selling and buying another Wilson Asset Management, like at a discount, which you did cover off.

Well, was it Slide 3 of the presentation, I think, hopefully tells the story.

Yes, yes. Great. Stu has asked what your view is on Magellan and Barrenjoey merger. He's gone into some more detail by saying that Morningstar analysis that it was dilutive a dilutive acquisition.

Look, it was a dilutive acquisition to Magellan shareholders. I mean, conversely, the business that's effectively doing a reverse takeover than Barrenjoey. I would say it's got some of the smartest and brightest individuals in the Australian share market. We built that business from not from a standing start to where it is today, it's pretty extraordinary. So look, I think and Magellan, I think a lot of our investors know Barrenjoey quite well has had a number of issues over the years. So yes, as Magellan, technically, you diluted, but you could argue that the some of the parts now with Barrenjoey makes it in the future, a high valuation business anyway, to your benefit. I think look, it is the only thing I'd say there is that the merger is being done. Barrenjoey is obviously linked to equity markets, linked to capital raising, linked to initial public offerings, linked to companies doing acquisitions and so forth. And that part of the market is certainly in our space in industrials. And resources, it's fine. But in industrials, is nonexistent at the moment and has been for 6 months.

Sandeep has asked a very broad question. What's your outlook and where do we invest? If you have anything tied in addition to what you've already covered off.

Well, the embedded investor is to take a long-term view. And as Tobias said, like the investment process across all our funds has proved to outperform the market over the longer term. We've been through tough periods. 2022 was very difficult. I think obviously, the GFC, there was 2 years in the GFC period when the business was a lot small is very, very difficult. Obviously, we outperformed. I don't know how we did that, but we did. So look, yes, just taking a long-term view. I mean, the mistakes you can make as an investor in this period is looking at what's happening globally. So as an example, like it's funny how it shift the other way. Look back in 2022, when you had a disruption in oil, all the refining companies like Viva Energy and Ampol just went crazy because refining margins went up. And then the war stopped and a year later, like refining margins went down and they will get sold. So what's happening now, all the brokers are telling us to buy Viva Energy and Ampol again because the refining margins are going up. So the mistake we can make as an investor is go, "Oh, that looks interesting," we buy it now. And then with the assumption that you're buying shares today that are capitalizing refining margins very high into perpetuity. And then you buy that now because you view it as a hedge on your portfolio, the market then changes, the war stops and these stocks get hit hard. So again, you just got to go back to the fact like management, quality of the business and are they achieving the fundamentals that you expect them to in terms of earnings growth versus the valuation? And for us, that's our investment process, and we need a catalyst. As long as we've got that, we'll keep investing for the longer term.

Yes. And I think as Oscar said, I mean, the share price obviously, movements we look at it every day, but what's more important is the underlying performance. And so during reporting season, we're really looking at whether these companies are delivering. and whether they can continue to deliver because when we come out of, I guess, this current trough, the market will gravitate towards the company that continue to deliver through what is a tough period. We saw that quite a few times. And those are the companies that will have the largest increase in share price.

We have a question from Sydney, where our capital performance is published against 2 benchmarks. So you can see the all ordinaries and the small ordinaries. Which of these benchmarks is the one you place the greatest importance on?

The joys of a benchmark. Okay. So I might ask there's a bit in this. So unfortunately. And it's worth talking about. So the rise of passive money has been extraordinary over the last decade. And when the business started up with start-up years and years ago, ASX top 20 was nowhere near the same proportion it is today in the wider ASX, and it's gone up a lot. I think it's around 65%, I think off the top of my head, of the ASX top 20 of the wider ASX. Now our benchmark is the wider ASX, but we invest in small and mid-cap industrial companies. That's not resources and industrial companies. So we can have days where we do we have 5 earnings upgrades from our companies and an acquisition, but the big 4 banks got 2%, and we underperform. So as us running the fund, even though that's our benchmark to All Ordinaries Index, it's out of our control largely. So the small ordinaries index, we put in there, that's probably a better gauge. But in saying that, in periods like we've seen in the last 12 months, where resources do well, we do badly. Now conversely, that can change. So the key is for us, this dynamic with the shift to large caps and the shift to resources versus industrials has been going for a long, long time. It's been exacerbated in the last 12 months. That's been going on for really since around 2016. Now what's the positive there? It can change. And we saw it changing at about 6 months -- yes, about 6 months ago. Shareholders probably a lot of your own Commonwealth Bank had -- there's nothing rolling Commonwealth Bank, by the way. I don't mean to stand negative. It's a great business, one of the best in Australia, but it trades at a very high valuation and missed its results slightly in July and fell August, sorry, and fell quite a lot. And at the same time, rates interest rates are going down. And so the market when I sell the Commonwealth Bank, and I'll buy a small cap and mid-cap industrials, which is what we invest in. So from July to October, it was fantastic, and then it just changed really quickly. So look, in summary, Lou, it's very difficult to manage thing to [indiscernible] there's a lot of things out of your control versus your benchmark. Now what we can control is what we invest in and knowing that at some point that headwind we've had on the benchmark, we'll turn it to a tailwind. Now long heads up to your question. So the answer to your question is we look at the small ordinaries index, which is a better gauge of how we're performing. So sorry about that.

That's good context. We have another question on I think this was in reference to when you're talking about the downsides and where the market is at the moment. Why don't you short sell in that case?

Look, again, Look, the answer is we can. The -- but we like we haven't done it for a very long, long time, a long, long time, probably well over 10 years. Why don't we do it? Because it's not our expertise. But shorting stocks is very, very difficult. And just remember, if you get it wrong shorting, so it's the opposite of what we do. So if you get a wrong shorting, it means the share price goes up. The position your fund actually goes up. So you need to be doubly sure, triply sure like that your thesis is going to play out. So while the hedge funds are doing exceptionally well right now and good on them, like it's their market, let's call it, that again, that can change. So the last thing we want to do to our investors is -- I mean, we could buy Commonwealth Bank. We could buy BHP right now. We could buy Santos if we really wanted to, but it's not our expertise. And if we did that, and the market changes back to our stocks, then all of a sudden, we're scrambling because we need to get back into the stocks we know well. So look, we have periods like these where they're very, very tough and they're very painful. We're not sleeping as a team at all and haven't been for 4 months. But ultimately, you just got to follow the process, stick to what you've known for 30 years, and the market will come back to you and follow your investment process.

Do you have a view on Financial Services Company MA Financial?

Well, we do. We're not there. It's done very, very well. We think it's quite -- it's expensive. But again, like Barrenjoey said before, a full of great individuals, some of the brightest in Australia. They've done a very, very good job. We would look at it at a point in time, but not for us at this point in time.

Stu has asked about Bapcor. It's repeatedly disappointed with earnings and share price falling for years. With the Feb 2026 delayed results, there's a cap raising, what's your view on the outlook of that cause newish management to turn around the business?

So we didn't own Bapcor. However, we participated in the recapitalization of the business at $0.60. For context, I think it's hit a high of "$8". This used to be one of the best stocks in the small cap space in Australia. It's a good company. There's nothing wrong with that. It's just been managed badly. And the current -- the new CEO is ex Super Cheap Auto CFO, is ex Newcrest and Orica. So very high again, high-quality individuals. And what do we always look for in companies is management. So look, this isn't going to turn around in the next 6 months. But as I keep saying internally the team, if we can't make money out of Bapcor it's $0.60, and we might as well go home because it's like honestly, like that was a bargain basement price. There are things they can do internally in business such as sell a few assets, sell some under or close some underperforming businesses. If the business went back to being a trade business solely, I think it's a $3 stock every day the week. So look, I think this these are some of the opportunities to get in tough markets. So on a long-term view, actually were very, very positive. The stock noting that we got in at $0.60.

John has asked why is GemLife Superior to Ingenia?

Yes, it's great. We actually own Ingenia as well.

We talk about this every day.

And we own Aspen Group, all 3 companies are exposed to aging population and obviously, the retirees that it's going to be retirement age. I wouldn't say it's superior like Ingenia's a lot cheaper. I'd say, GemLife's growth prospects a bit high. So it really depends on whether you're paying for, I guess, a higher -- high valuation business with a bit of high growth or lower valuation business versus a slightly lower growth?

I'd say, look, we like founder-led businesses and definitely aging [indiscernible] who runs that business, has done a tremendous job. And it's very much exposed to Queensland GemLife with, as Tobias said, strong growth profile. So it's founder-led. Ingenia isn't founder-led. And I'd say and GemLife's growing largely organically, whereas Ingenia has grown really through acquisition. So we do think, ultimately, probably Ingenia's trade at a discount as terms it's valuation to GemLife, but the discount is crazy at the moment. And again, another example of an opportunity we're seeing. I think Ingenia is almost trading at net tangible assets. And last night, as an example, another company in the land lease space called lifestyle communities based in Victoria, a strategic investor, I think announced it, but it's in the press today called hometown, whether or not true or not some there's a strategic of some sort, bought shares at a premium to take a stake in the company. So look, they're very -- these assets, these land lease communities are in high demand in Australia from global peers. So look, we think Ingenia potentially is to take over target at the moment as well.

We have a question to get your view on health care stocks and another person has asked about Sonic Healthcare specifically.

Yes. In terms of our exposure in the funds, we've got IDX and Regis Healthcare, probably some of the largest they both had very good results again in February upgraded. So IDX is radiology. Regis Healthcare is aged care so that's more in our sort of in the small cap space. And we're obviously very positive on those 2 companies.

Hung has asked any chance to us stops buying M1 in Singapore by their IMDA?

Yes. So the Tuas, which is Singapore symbol, then they obviously 6 months ago, decided to M1. They're currently getting approved or the process is with the IMDA, which is like the ACCC equivalent of Australia in Singapore. And yes, we're very confident on the deal going ahead. We see a lot of industry work on it. So we're sort of just waiting for the regulator to just to go through their process for the deal. And I think on the Keppel Corp, so Keppel, which is a large Singaporean conglomerate, they are the seller the sellers of M1. And on their call in February, I think publicly, they've reiterated the confidence in the regulator approving the deal. So from our perspective, nothing has changed. The businesses are growing really strongly organically. And I guess we're just all sitting around waiting for the approval.

We've got a few stocks coming in. So maybe I'll fly through them if you want to do the buy, hold, sell. IEL, IDP education?

Yes, we own and we like it actually. It's on a price earnings multiple of 10x earnings. You used to trade at 50x earnings, but it all weight. I think management is doing a really good job there, but we just need volumes to see. I think on volumes, if they can get some volume growth, I think the operating leverage in this business will be massive. So again, another example, what we're talking about at basement on price.

GGG?

Yes, we've been buying. Nothing has changed yet the share price has 40%.

Bravura?

Yes, so our exposure there is through Iress. The CEO for Iress is the ex CEO for Bravura. Obviously, we've done extremely well while he was running Bravura and so we've sort of followed him into Iress as well.

NEXTDC?

We don't have NEXTDC in the fund. We obviously have firms, which is more exposed to neo clouds and the AI trend and Megaport. And that's sort of that's more capital-light version to play NEXTDC.

MGH. The question is specifically WAM was holding some MGH, which is selling much of the asset to HMA for more than market cap? Why would we not buy more of that?

We're still on MGH. So yes, I've never had a company get a takeover before a full 30% instead of go up 30%. So anyway, and they've got a great price. So it was a bizarre move that day. Another example of what we're talking about. But look, that whereas has shifted the business into electrical construction and they're a big beneficiary of the AI infrastructure build and, in particular, Neoclouds that Tobias is talking about. So yes, we've been buying the stock, and it's I think pretty much recovered that fall almost, so -- which has been a good effort. So I think it's a wait and see for contract announcements.

HCW, which is Healthcare Worker and wellness REIT?

Yes. So we've actually just started buying that recently. Obviously, it's part of the HMC capital cohort. We started buying that and when Microcap. Currently, I think a 50% discount to the NTA. We think potentially. Given what's happened, we're getting to the end of some of the issues and we think significantly undervalued, then like the margin of safety is quite high. They hold very good assets. So I just have to wait for them to sort out some of that issues.

IPH.

So them results. Another company that the market will think will be impacted by AI. I actually think they'll be a beneficiary because a huge amount of their work is procedural in nature. So we haven't owned it for 2 years, I think, own a year but, I think, but we've got a very small weighting because it's so cheap to stock. I think it's on a -- I think it's on a price multiple is 7, used to trade at 20. So anyway, we're doing the work on it. So we own a tiny bit.

Lindsay Australia, LAU. And the question is disregarding recent fuel supply and price issues, does it creep onto the investment radar?

No, not yet. Everything's got a price. It's a capital-heavy business. It's had periods where it's going well. I always sort of get nervous because it's got a big exposure to Coles and Woolies. So we're not there in the micro fund.

A question from Philip. How is the deployment of funds from the recent WAM Active placement been going?

It's been going really well. So I think it was from running the portfolio's perspective, I think it was very timely because effectively we've got extra cash in there, and so we can be patient and deploy it properly. But -- so I think cash levels are running around 25%, I think, at the moment, which has been helpful in the current markets. There's big positions in the plant in Forrestania and also Indian Resources Lending had a very good announcement 2 weeks ago. So yes, we're being patient. And yes, look, when the time is right for the market to turn, I mean, that 20% could go to 0 in the space of 10 minutes. So yes, no need to be hero at this point in time.

George has asked, is there a limit as to what percentage of your portfolio can be invested in 1 specific sector? I'm particularly interested if there is an upper limit to the proportion of resource stocks in WAM Active, actually?

The answer is no. Of course, we monitor it. And look, as I said just before, the WAM Active portfolio is very small at $150 million. And Shanti credit has done an amazing job shifting the portfolio to resources like he did around September, October. So that's the only reason why the fund has done what it's done. If it's stuck in industrial, so would have underperformed. So the answer is no, but like running -- that fund is very small. From our perspective, running a huge fund, we need to -- of course, we need to be cognizant of where our sector exposures are and it's something we talk about every day.

Stan has asked, if AI makes analyzing investment options to everyone, what does that mean for WAM?

It's a good question. Maybe I'll answer that question with how we are using AI. Internally, obviously, we have Copilot across the entire organization. Obviously, I also use ChatGPT. I think Shaun uses Grok. And so we will have our different choices. And it really helps condensing a lot of information that is probably just in the on the Internet down and helping that speed to the research. And I think from my personal experience, it's been a huge help in terms of being able to condense a lot of information and really putting together in a format that you would have probably take me a couple of days to do. And then with the sources. So if I really need to check, I get sort of going and have a lot in that's been really helpful. I mean obviously like -- so it's really how you use it. Can we use it better? I think the key is for us to continue to figure out how we can actually leverage that and having, I guess, more integration with some of the new tools that's coming out. And yes, it's pretty exciting times for us as investors to be able to have, I guess, more capacity to look at more companies and in more detail, thanks to AI.

As an example, the U.S. next Tuesday, and meeting a lot of companies I've never met before in the United States and you just go on Copilot or what's your ChatGPT what are the 10 questions you can ask Home Depot and bang, but what were the 10 questions, top 10 questions asked in the home detail. Home Depot quarterly call bank, there they are. And so like that time saving is enormous. And then I can just focus on the plane reading, being more detailed in my reading. Because often you're piping out questions if companies don't know. But if you've got to start by that, that's huge. So there's no question it can make our job more efficient.

Yes. Definitely on the back end as well. We use it.

Yes, that's huge.

Michael has asked, just going back to EML. Is it close to it is close to a 52-week low, are you considering buying back in?

We always look at like obviously the opportunities across the entire fund. And the I think from our perspective, as you know, with our investment process, it's identifying catalyst. So we only buy and sell based on the catalyst that we think could appear. And so for us, it's more about figuring out what's the next catalyst. And hopefully, you may see on back of that, obviously, very confident on that. close we can buy back in sorry, adding to our existing weight. So that would determine our sort of investment.

Well, I think from memory, they've got 2028 targets out there, and you've just seen the Chairman buy stock. So you would assume that he's pretty comfortable around that 2028 target. So yes. So I mean, look, it's a tough year for them this year, not just the macro, but just getting everything right in the business. We took also WAM Capital. As I said, we own a microcap but WAM Capital that the market changes we want to be in other stocks that will go higher. So but -- yes, we still like the company.

And what are your views on Helios, HLS?

Yes. Well, not too positive. I think they have a lot of issues. Obviously, balance sheet is one and some of the challenges that they've had, not something we'll be looking to invest any time soon.

We spoke about Telix. But as far as biotech are concern, do you have a holding in PYC, Therapeutics PYC?

No.

Question from Steve. How do you turn an on paper profit reserve number, which is not cash into actual cash for the dividend payments?

I think the comes on our cash balance. because we obviously we right now, we have 20% cash. So the dividends go can come from that effectively.

Across the WAM group of LICs, what is the strategy and type of assets and accounts used to invest in used to invest the cash reserves, for instance, bank bills, CMAs, overnight, lending, government bonds?

We'd have to get back to you on that. We used to do term deposits, but yes, I get back to you on that, finance team can get back.

Neil has asked, I assume after your explanation of the profit reserve being based on unrealized gains, do you adjust for some of the downward movements due to current market valuations?

So if okay, so again, using my example, if the portfolio is worth 100 on July 1, and it's negative -- so we go down 20%. So it's 80% at 31st of July, and we don't add anything to the profit reserve. So it's just as simple as that. We were adding to the profit reserve to the end of October. And we've been adding consistently from for the last 3.5 years. But since the tough market started from October and started to have fallen, we haven't been adding to it. And you've got to recapture those losses. So it's very unlikely by 30th of June, that will add to the profit reserve, but the positive is start to 0 from July 1. So hence, I'm saying, you've got to watch what we're doing how the pool is performing in July and August.

Have a question on GenusPlus Group, GNP. Do you have any views?

Yes. So very positive on GenusPlus. 2.5 years ago when we...

That was ages.

We bought at $0.80 to $0.80. So we've had a really good ride. Again, founded business, Dave Rich is the founder, Damian as the CFO, and they've done an incredible job and really diversify that business to be a lot larger. The guys have pretty, pretty strong aspirations for where this business could get to. And they are positively exposed to electrification and batteries, et cetera, et cetera, a lot of the structural growth investment that's occurring in Australia, and they would be one of, I think, 2 of the most 2 companies most exposed to the Rewind Nation Initiative, which is effectively connecting up all the renewable energy sites to the grid. The original grid that was connected to just coal-fired power plants was a future proof and then obviously, this investment in the electricity grid, which they benefit from. And the growth has been exceptional. I think the upgrade they did like in January was like a 30% upgrade on the consensus numbers, so they...

And where is the share price now? Down 10%.

So -- but again, like it's a good example of companies that are just doing incredibly well and the share price might not reflect this, but when the market comes back, very confident.

Bernard has asked, given the growth in electric vehicles and their simpler parts construction, has anyone thought -- has any thought been given to the effect on companies in the ASX that supply their parts?

Yes, the answer is yes. But I think those concerns have that was a, I'd say, a big concern almost 5 years on 6 or 7 years ago. And I think that was when I think the on the demand side, it was pure play EV. When it shifted to hybrid, I felt that, that sort of those concerns got longline pushed out. So look, it's -- it will be a structural consider consideration, but it's a long, long way away. There's that question. It's longer than what we all thought to give you back. Yes.

James has asked, given the rising cost of risk-free capital arguably permanently, would you agree that a peer of 15 is the new 25? And do you think and investors and portfolio managers have fully absolved this reality?

That's a very good question.

It's a good question. Yes, the answer is yes. I mean life gee, I mean, like gone are the days of EV to sales and things like that. So like all these companies are now trading at what they should trade on this price earnings multiple valuation. I think the reality is, is that, look, our investment process is looking for a valuation that is less than the earnings growth of the business. And that's a part of our investment process. And if we see that, and then we have added catalysts such as well, obviously, going to upgrade earnings, if they're going to buy a company, if they kind of divest a company, then that will dictate our weighting in the portfolio. But yes, in periods like this, a question. PE, price earnings multiple valuations decline very, very rapidly and like 100%. Like if you look at when we do our internal reviews of companies, the valuation we're using is probably 20% to 30% lower than what it was 6 to 12 months ago. So you've got to take that into account as that question.

And he's asked is NEC in Bogan territory?

NEC. Sorry. No, I don't think so. In like the outdoor acquisition. Everything's got to price. It's just hard in TV. It's still in structural in so yes, my answer is no, but everything's got to price. So I just wonder like it would be trading at a very cheap multiple. I don't know what it is, but it would be. So yes, I just want to have a look at it, I guess.

There's a few more stock. So I think there might be outside of your remit, do you hold green 60 technologies?

No.

Do you have any news on Lynas, LYC?

Not specifically on Lynas other than say that the rare industry is clearly are strategic importance, and they did a deal this week. I think with the Japanese on offtake. And the problem with rare earth has always been that it's quite uneconomic to produce. And so the Japanese have come in and basically put a price floor, I guess, you'd say, and what they buy, the commodity are. So there's a lot of good things happening in that space because it's strategically important. And Linde in which we own extensively and WAM Active is, I think, the third largest deposit globally, is that correct? Or maybe...

S Second.

Let's just say third so it's very strategic. So and they had a very positive announcement a few weeks ago around their processing plant, and we think the potential they could announce them off the partners. So that's the catalyst for that one. So yes.

We have a question here on GDD. Mark, as I asked about GDD because it's a long-term holding of WAM LICs. Do you think the rerating is related to Evidentia inflows, AI risk or something else?

Inflows broadly and you've got the Division 296 changes coming through, like the super changes. This would be very positive for the bond business, and the shift to manage our accounts is an accelerating. So look, what we've seen a great example from the previous question, it's just the price earnings multiple valuation in the company has rapidly declined. Has anything changed in the business? 0. In fact, we think it's getting stronger. So again, it's one we've just been buying pretty much every day for about 3 months.

Yes, I was going to say at some point, we're trying to invest in these businesses with strong top line growth with growth. At some point, it's going to reach a certain point where the growth is going to offset the valuation decline. And that sort of the trend where it goes the other way, where then the growth has been priced in once they reach sort of equilibrium valuation there?

Yes. I think it's a good point, look, because it feels to us that the carsales REAs of the world have found a technology won't have found a little bit of a bottom here. So they're bouncing around at these levels, so which is a positive sign. And when they get to depressed levels like this, they don't rule -- every investor can look at them. When they're at very high levels, there's only a certain portion of the market that invest our way that looks at them. So more eyeballs, more ability for other funds to buy is a good thing. I would say GTG is still a small cap, and so that's why it's falling, and it is exposed to the market as well.

George has asked about WAM Active. Can you comment on how the newly issued shares have affected the profit reserve per share and franking credits on hand? Does the issue put at risk the quantum of future dividends per share and the franking? And I suppose I'll just cover off the profit that is $0.165 per share, and the dividend that equates to a dividend coverage of about 2.6 years. If you have anything else to add.

Yes, so the performance has been very, very strong, and that allowed us to do the capital raise. So effectively, we do raise the capital and it reduced the profit reserve, but we've got 2.6 years coverage as April said. So that's quite very strong. For context, WAM Capital has about 1.3 years coverage, I think, at this point, at this juncture. And WAM Active should be a turbocharged-style product with the market. So if you get periods for a year where the market is up and there's more capital raising, there's more IPOs, WAM Active business small fund, we'd like to think that we do better than the market. And so that should be very strong for the profit reserve. And Shaun, who runs the fund has done a tremendous job in the last 3 years and got to the position where the fund could do this. And I think as a business I've been in the business for 10 years. We've been talking about WAM Active to grow at ever since I've been in the business. So to be able to do it and have the support from our shareholders was truly extraordinary and in a very difficult market as well. So obviously, thank you to everyone who participated. But yes, so it's a decent achievement, I think, and shareholders benefit because you can spread those costs over a wider level of funds. And there's just -- and we think there's a lot more opportunity for the fund itself. So yes.

We have a question from Steve, and you've covered off your area of expertise being small industrials, but he's asked, please explain why you avoid investing in resources given the recent outperformance? It's a gap in your portfolio diversification strategy.

Yes, it's a gap. But again, it's been and it's been a painful gap, let's be frank. So as something that's been going on for a small amount of time, it's been about 10 years. But however, it's just worth pointing out that I think 4- or 5-year period in 2016 was the best 4- or 5-year period the business has ever seen. So we will get a benefit of a resources downturn at some point. It's -- okay, let's take a step back, why doesn't it fit the investment process? So resources companies, why you could be positive on a resources company for doing a production upgrade or potentially an acquisition or something like that. The reality is it doesn't really matter because all that matters is the commodity. And we're not commodity experts. And now that's not to say we couldn't be in the future. But we've traditionally been exposed to small and mid-cap industrial companies. We've done that for 30 years. It's been a very tough period. As I said, it's -- yes, look, we've never seen underperformance like this from small mid-cap industrial companies, and it's been a 5-year period. It hasn't been like. It's not like it's been 4 months. It's been over 5 years. So it will revert. And it's up to us to tell you that when we have a B year when it happens to say, "Hey, call your jets a little bit. Just remember, resources fell, and we got that benefit. It was a natural tailwind to our performance because that's the same as what it's been at the moment, which is a headwind." So yes, look, not to say we wouldn't do in the future. It's just that we feel our expertise and what fits the investment process is in industrial companies.

We have a few more stocks. What's your view on 0?

We don't have a strong view, and we haven't had 0 in the fund for quite a few years now. I mean the large and we have Pro Medicus Tech HUB24, which I think I mentioned earlier, so that that's sort of been our larger tech sort of exposure there. So 0 wise tech, we don't currently have in our funds.

And DBI, Dalrymple Bay infrastructure.

No, we don't.

BlinkLab, BB1.

No.

Question from Leon, which small industrial WAM LIC would you invest in if funds became available?

Well, that depends on I can't give you a bias, obviously. But it just depends on what your investment horizon is and what you're after. I mean in terms of riskiest fund to probably least riskier fund in the industrial space, it's probably the riskiest is probably what then when microcap and research and then WAM Capital. So again, it just depends on what your risk profile is.

And few more stocks, what WAM Active you on 14D, which is 14 degrees at LAS outside.

Sorry, yes, don't know it.

And just following up on the Sonic Healthcare, specifically, the student wants a bit of clarification. Sonic Healthcare Housing growth earnings since 2020 minus the COVID spike. And yes, are you aware of any adverse headwinds for Sonic and what is your view on future earnings?

It's lightly costs.

Yes. But it's things with years to come back?

I'd say broadly, it's a large-cap company but thinking about the other pathology players like Healius in our space, there's been a lot of cost pressure in pathology. And it's probably the cost pressure is offset any sort of the more than offset the revenue growth that we're seeing. So but yes, that's probably specifically WAM Leaders question.

But yes, I mean, the other thing is, I would say, where we've held a lot of pathology in the past, we've always thought that the volumes will go back to pre-COVID levels, and there was always this trajectory back. where you saw that sort of dip in volume. I mean has probably taken a long time or I think the view is it probably doesn't really get back to that level pre-COVID. So perhaps the structural element as well.

Great. And maybe just touching on the WAM capital share price that got to $2.20 with the lower ASX. I suppose, maybe just touch on that journey over the last few years as well, which I know you covered on fairly.

That's fine. Look, when it was $2.20, it was trading at a very high premium. And that was before -- well, I think COVID, we had the really big COVID bounce in 2021, right? And that was fantastic. Then we had the sell-off in 2022 we kept paying you the same amount of dividends through that period, notwithstanding the market was negative. And so the what happened was the value of the portfolio fell with the market. We then paid the dividends. That made it for even further the NTA, the net tangible assets fell further. Then the premium, the share price fell with the net tangible assets, but it also what happened was, was the premium, which is what I was discussing in early -- the first thing in their presentation, the premium also contracted. Now we've worked incredibly hard as a team since that '22 period over that 3.5-year period on the fund, and I'd like to think that the performance speaks for itself in '23, '24, '25. And we got it to a point in October where we're feeling pretty good about where the share price was and where the net tangible assets were. But as we discussed earlier in the presentation, it's been an incredibly tough period since that point in time. But despite all that, the premium, i.e., the share price hasn't fallen to the same extent that the net tangible assets have fallen. So it's just so important. I can't reiterate that enough to the calls today. So in our eyes, the share price is artificially high. So I'll leave it at that.

Just a few more thoughts on MTS, Metcash, [indiscernible]

More large cap question.

And then defense stocks, such as DroneShield and EOS.

Well, we have Codan in the fund. That's probably our defense name.

It was hard to buy drones when the CEO sold $65 million worth of shares and in EOS' case which you had to pick one of the two, that's probably the one we probably own and then they had a misstep in terms of their announcements and a short report written on them and so forth. But again, like you got to be careful with these stocks, they're hot at the moment for obvious reasons. But if the market changes, then they'll get sold, and we'll all go back into the stocks that are suffering at the moment. So not there in DroneShield, might consider EOS, but we're not there. But the one that we like is Codan. We've been in Codan got 11, 12 years. So we know the management and the business very well.

And that's all we have time for today. To stay informed with our latest investment insights, join our community of 100,000 subscribers, and you can also follow us on LinkedIn, X or Facebook and visit our website for more. Thank you very much for everyone that submitted questions. A recording of this call will be made available on our website shortly, and I'll pass back to Oscar for closing remarks.

Yes. Look, just thanks to everyone for dialing in. I appreciate it's quite a volatile time at the moment. But yes, I appreciate you saw it, and I hope to see you at the road show. So thank you very much.

Thank you.