WAM Global Limited (WGB) Earnings Call Transcript & Summary

Welcome to the fourth WAM Global Limited Annual General Meeting. This is a hybrid meeting held both online and in person here at the Museum of Sydney. I'd like to acknowledge the Gadigal people of the Eora Nation and pay my respects to Elders past and present. I also acknowledge the custodians of the lands and waters on which our shareholders and fellow directors currently stand a view and listen to today's AGM. [Foreign Language] that's welcome to all our shareholders. Thank you for joining us and for your continued support of WAM Global, and what has been a challenging 12 months. I'm Geoff Wilson, Chairman of the Board of Directors. Joining me today in person is my fellow Board member, Katherine Anne Thorley, on my right. And joining us online, that's one of the wonders of technology, is Gabrielle Trainor, AO; and Caesar Bryan from the U.S. Acting capacity of moderator today is our Finance Manager of Wilson Asset Management, Ophelia Lam, on my far right. And she'll be assisting with any questions submitted during the meeting in person or online; Scott Whiddett, he's the representative of our auditor, Pitcher Partners, is here in the front row. And also, if you have any specific questions on the company's financial statements that we are unable to answer or specifically, you'd like to ask Scott, he is here. It is just after 10:45 Sydney time, and a quorum is present. So I declare the meeting open. The notice of meeting has been circulated to shareholders in the absence of any objections, I'd like to proceed on the basis of the notice has been taken as read. I encourage you to read the Chairman's address, which earlier we've announced today. And I'm not sure if we give prizes, but there's a mistake in the first paragraph. So the...

[indiscernible].

What is that?

Only your script.

Only my script, sorry, sorry, on my script, it says good afternoon. But on the one we announced is good morning, good to see. Shareholders, they're just keeping me on my toes. That's a test for Alzheimer's yes. Okay, great. I got my mistake. Put it in the first line. So I'm still able to continue as Chair. Well, you get to vote on that a little later. Shareholders who have logged into the web cast with your user name and password will have the opportunity to submit questions online and please do because this is your company, and ask any audio questions as well as voting on all resolutions. [Operator Instructions]. Voting today will be conducted by way of a poll on all items of business and in order to provide you with ample time to vote, I'll shortly open the voting for all resolutions. If you've already submitted a proxy form or voted online prior to this meeting, you are not required to vote again. When I open the poll, the voting icon will appear on the navigation bar. Once you click on this, a list of resolutions will appear on the screen with voting options. Simply select the one and cast your vote. If you change your mind, select another option. You can change your mind as many times as you want until we close the poll, and I'll give you a little bit of notice on the closing of the poll. Your vote will be submitted when the voting icon changes color. There is no submit button. I now declare voting open on all items of business. You can vote at any time during these proceedings. I'll give you a clear prompt later in the meeting about closing the voting. The votes cast during the meeting will be combined with votes submitted before the meeting. Please note that only shareholders, proxy holders and shareholders representatives may vote. If you have logged into the webcast as a guest, you'll be able to view our webcast but not submit questions or vote. In terms of the Chairman's address for WAM Global, I'll just give you a little bit of a summary. And that it has been a very challenging 2022 WAM Global. Obviously, and also how the -- with WAM Global, we're trying to find the best undervalued growth companies globally. And we -- and the Wilson Asset Management team, led by Catriona Burns is focused really on finding those undervalued growth companies with a catalyst and have been looking very closely the areas that probably got the bulk of their money in -- is a smaller, undervalued growth companies. And over 2022, it was quite brutal -- down then into the market. The actual discount globally for the small caps versus large caps. I think is the widest it's been for the last 2-plus decades. In terms of -- so that was back -- looking at back in 2022. In terms of how things have started so far this year, the investment portfolio has increased about a little over 5%. That's -- 5.3%. That's until the end of October. And that is still -- which is frustrating from our perspective. a little under the performance of the world MSCI in Aussie dollar terms. And that's again due to our exposure to the really -- the very small global companies. In terms of the investment portfolio over the period, this has still been reasonable, but not up to what we would like. The -- in terms of the investment portfolio as performance, that's increased the profit reserve, which is now very healthy. It's just a little under $0.35. One of the things -- and that's really allowed us to lift the dividend to where we are. One of the things that we're short of is franking at the moment in WAM Global. And obviously, where does the franking come from? We don't get dividends, obviously, WAM Global's invested in global dividend company. So there's no franking from those. It's really from tax paid. And at the moment, it's a little over $0.01 in the franking account. That may well change if we continue to make money this year. And then the franking levels will increase. The good thing is we've already got the profit reserves. So the ability to pay dividends is there and now franking has to come. We shall -- so that's just a little bit of a summary. The detailed Chairman's address has been announced. And if you have any additional questions, please -- this is your company. Please ask us or e-mail us or call us. In terms of the formal part of the meeting, I'll move to that. There are 4 items of business for the AGM today as said in the notice of meeting, 3 items are to be voted on. The notice of meeting, an extraordinary memorandum was circulated to shareholders. And in the absence of any objections, I'll proceed on the basis that these are taken as read. You're all aware of the voting, how to vote. I'll give you that in detail. I note the Boardroom are the returning officers for today's meeting and will conduct our poll. I further note, resolution 1 is subject to voting exclusions as outlined in the Notice of Meeting. The Board recommends approval of resolution 1 and 2. As Chairman, I'll be casting all the open votes for both those resolutions. The Board recommends voting against resolution 3. And as Chairman, I'll be voting all open votes provided against that resolution. We'll advise the ASX as soon as the results are determined, which will be later on today. You may submit any questions or comments you have on the financial statements or reports online now. And the first -- because the first item of business is to receive and consider the financial statements, the director's report and the auditor's report for the company for the year ending 30th of June 2022. I mentioned earlier, Scott Whiddett, from Pitchers is here. There's no resolution on this matter. So I'll just pause now. Do we have any questions on the floor on this or -- either online?

We've got 3 questions online, but we'll leave them until the general section.

General? Excellent. Thank you. Resolution 1 relates to the adoption of the remuneration report. Now -- you may now submit any additional questions you have on Resolution 1. Please submit them online. The company -- in terms of the proxies, the company has received proxies amounting to 15,463,229 in favor of this resolution, 7,885,040 against 5,286,841 open, of which 3,853,009 have been granted to the Chair. And I mentioned earlier that I'll be voting in favor for those. The -- now do we -- are there any -- let's -- now are there any questions in the room on this resolution? No? And are there any questions on this resolution online? No. So there are no further -- no questions. I now put the motion and resolution be approved as set out in the notice of meeting. Resolution 2 relates to the reelection of myself and as a Director -- as a Director. And as such, I will pass over to Kate, who will handle this resolution. Thank you, Kate.

Thanks, Geoff. As this resolution relates to your reelection, did you want to say a few short words to our shareholders? I won't read your bio [indiscernible].

Thanks, Kate. Thanks, Kate. Yes, I would -- and specifically for WAM Global. The -- it has been a, I think, a frustrating 12 months. As I'm a sizable shareholder in WAM Global. In terms of the fact that go back a year and a bit ago, we had WAM global trading at NTA a little bit of a premium. We thought we're all heading in the right direction. And unfortunately, obviously, the market has been impacted. The [ WAM ] Global hunt -- and is those undervalued growth companies at the very small end, even though WAM Global does have some exposure to the larger companies, but the bulk of the portfolio is down there. And it has been brutal. As an investor, but also as a director, we're -- I suppose, like a number of shareholders frustrated with the last period. We look forward to the share price fully reflecting the NTA. And we look forward to the underlying portfolio to perform. And I would like to stay on as a Director to see that happen. So that's my plea. Thank you. Kate?

Thanks, Geoff. So you may now submit any questions or comments that you have on resolution 2. Is there anything -- so the company has received proxies amounting to 41,809,307 in favor of this resolution, 6,441,064 against and 5,354,931 open, of which 3,825,574 have been granted to the chair. And for these, I will be voting in favor of the resolution. We'll now pause to take any questions that have been submitted either in the room. Any questions? Anything online? Thanks, Ophelia. As there's no questions or comments, I now put that -- put the motion that Geoff Wilson be reelected as set out in the notice of meeting. If you are a shareholder or proxy holder and eligible to vote online, can you now please complete your vote for resolution 2. I'll now pass back to Geoff.

Thank you, Kate. Resolution 3 relates to the Conditional Spill Resolution. Okay, the company has received -- look, if you'd like to -- if you like to submit any questions or comments, please submit them now online. The company has received proxies amounting to 7,726,641 in favor of this resolution, 4,007,053 against and 3,296,789, open, of which 2,730,898 have been granted to the Chair. And for these, I'll be voting against the resolution, as I said earlier. Are there any questions in the room? Online? No? As there are no further questions or comments, I note the Board recommends that shareholders vote against this resolution. I now put the motion that the resolution be considered as set out in the notice of meeting. If you are a shareholder or proxy holder and eligible to vote online, could you please complete your vote for Resolution 3 now. The poll -- just about to close the poll. I said at the start that I would -- that's for the people voting online that I would be doing that. So I now declare the poll closed and formally charge Boardroom, sounds very formal and formally charge Boardroom to count the votes. So Boardroom you are charged. Please go and count those votes. The resolution of today's meeting will be released to the market as soon as they are determined, which will be later today. Now we'd like to move to general questions. Due to time constraints, we may run out of time. If this happens, we will call you and speak to -- or e-mail you and speak to you in due course. So do we have any questions, I'll grab my glass, any questions in the room? I know we've got 3 online questions. Are we -- any questions in the room?

Geoff, [ Cary Boebel ]. Just want to know, of course, the bit that I've been reading in the various financial articles and things seem to think that 2023 is going to actually be worse. The share prices are going down. So are you anticipating that? And if so, what strategy are you using? And the second part of my question is, is it worthwhile short selling? Are you doing that?

Okay. We better get a pen, that's 3 questions there. The -- no, no, no. We'd do them. So probably -- and I'll come back to it. So probably the first one is what is our view on the market or my view on the market or Wilson Asset Management view on the market. Now it is the next 12 months is going to be worse than the last 12 months. The difficult thing is if we all knew, we wouldn't be -- I wouldn't be standing up here. We wouldn't be sitting here. We'd have it all on black. The -- I mean what we do know is -- the -- in terms of economies, it looks like economies will get worse. Now the thing about the equity market, it tends to move 6 to 9 months in advance of economies. And so probably the million dollar question at the moment is how bad does everything get? We know interest rates are still going up. So that's -- that will have their impact take 6 to 9 months to impact the economy. So that is the difficult part. It has been a tough period already. I think in terms of economies, it will get worse. Now will the market go down further? That's the hard part. I mean what we do know is the difference -- we tend to WAM Global focus on undervalued growth companies, and they tend to be the smaller global ones. And that's been a very tough period where there's been -- with the market sort of dislocation, as I said earlier, the discount of small caps to sort of large caps is, I think, close to 25-year high. So you'd assume there's great value there. But is there going to be greater value? And that's the hard part. And that's -- I don't know. What my gut feel is the things will get worse in the market, we've had a rally over the last couple of months. I just -- to me, there was a lot of excesses that we're starting to see being taken out of the system. To me, the great thing about the capital system, it does cleanse itself. We've seen that with FTX with what's happening with crypto. Some of those excesses are being taken out. But I just think there's still probably more excesses that need to be taken out. And people got to realize that there's a number of people that -- a bit of gray hair, a bit of age here in terms of seeing cycles and they know that it's not that easy. You just don't buy something and make money. And I think what a lot of people would have thought over the last -- up until more recently, that are great. All the millennials, I'm going to the stock market, that's easier, as by this I'm planning crypto, et cetera, et cetera. So I think a lot of those excesses have to be cleansed. And I just don't know if that's happened yet. So that's sort of what sort of holds me back in terms of -- I could be 100% wrong, now we may have seen the bottom. And that's the challenge of the market, isn't it? We're trying to be -- I mean, one of the sort of semi-positive things over the market is just talking to the investment guys yesterday, and you've got to -- and also, let's put everything into context. I am the old guy that sort of has a little portfolio that's kind of have strategic value and manages that. The -- we've got 15 -- a lot younger, a lot smarter investment professionals that are managing the various other pools of capital that we manage. But just up there talking with them yesterday, they were saying how the professional market is probably in terms of expectations is very negative. So then when everyone is very negative, then the market tends to do the opposite. So that's sort of the juxtaposition, which is very difficult. So to me, it's not clear at the moment. My gut feel is it could be -- next year, there could be another pain point. That's -- and that's probably what has to happen for that to occur, probably interest [ rates ] to continue to go up. Maybe a few more cracks in the system somewhere. We've seen a crack in crypto market. So a few more cracks. And then just see how the various policymakers respond to that. I mean, the tough thing is when they're raising rates. I think it's probably nearly a foregone conclusion, we're going to have a recession. But yes, obviously, the stock market and what's happening in the economy at 2 different things. As I said, the stock market anticipates. So whether it's seen through our recession, if everyone thinks there's going to be a recession, then that's already priced in. Obviously, if the recession is deeper, than the market is expecting, then that's when there's a bit more than a bit more pain in the market. That's probably as clear as mud for you. But it's sort of -- that's my current view.

[indiscernible].

And the last one and the other -- short selling, that is an option. The -- we tend to default the cash. The thing about short selling is -- and we've done that in the various funds over the years. And use a similar -- the reverse of the buying, like the undervalued growth company with a catalyst, and we find a catalyst when we think it's going to re-rate and buy it. And here the expensive company with a catalyst that we think an earnings downgrade or something is going to fall. We -- it's very hard when you're a long investor, when you're used to buying stocks, it's very hard to have the mentality of shorting as well. And historically, we've tended to add no value on the short side. So we may, if we see specific, but it's never been a big percentage of our portfolio like it would be 1% or 2%, if max. Yes.

Hey Geoff, all right -- preferably, by saying I acknowledge the state of the market that -- the markets you've been operating in. Two things I just want to mention. I may be getting old, but I remember, in the early days of this company that it was seen as a strength to be investing in not the top tier international companies, and that there was good hunting in the second tier. Now that appears to be something which is not as desirable as you first thought or the company first thought. I'd like you to comment on that.

Yes. Why don't we do that first? And then we'll go to the second one. Because then otherwise I'll get you to repeat the second. And that hasn't changed. I mean you look at -- so buying undervalued growth companies or the mid and small space, you can add significant value. The -- and so that thesis is still there. The fact is they're probably significantly better value than they have for the last quarter of a century in terms of relative to the larger company. So that thesis. We won't be changing that thesis at all.

Yes. And the second question, Geoff, was it seems that the performance of the company has been less than the index. And I was wondering whether you see any lessons in that or any -- what -- would you like to discuss why or how it can comes about as the performance is less than what the general market performance is?

And then that is really a function of how the portfolio is set up. Because the bulk of the money is in that -- in the smaller companies. And that is not even the mid-caps. We're in the small caps on a global basis and the performance of that sector like has been very brutal. In theory, I mean, they are when things get tough, that's what happens. What -- should have we probably in hindsight, appears we've got flexibility there. Should have we rotated up to the large companies a year ago? The answer -- obviously, I can't speak for Katherine who is based in New York who's the lead portfolio manager. But my gut would say that would probably have been the strategy. but we didn't do that. The tough thing there is you're sort of moving out of your comfort zone. So my sort of experience is, you're better off staying -- well, I suppose, like you talk about buffet, work out what you're good at and just keep hitting that. And in theory, it's small cap global companies that just keep focusing on that. So the plan is to keep doing that. We've got 3 online, let's go, Ophelia.

Now if we're going to have time to get through all...

No. We will.

We will? Okay. First one is what are we doing to address the share price discount? And would you consider publishing daily NTA to address this?

Give me all three. And I'll -- what's the other one?

And then the follow-on question is why is WAM Global issuing shares through the DRP discount when there's a large discount? The third one is, can you please provide some feedback on performance?

Yes. Okay. So I think we talked about performance. So we covered off that and pleased that person if space with the office, very happy to put you in contact with the Portfolio Manager directly to talk to and anyone, if you'd like to. In terms of the other ones, what was the -- just hit me with -- I mean there's -- what we've done is in terms of the DRP, there's no discount for the DRP. So we're not encouraging people to go into the DRP. But we know a lot of people like just putting their money in and accumulating through the DRP. It's -- so we keep the DRP going. I think their answer was why have the DRP when it's trading at discount. When it's trading at a premium or a discount, we'll keep the DRP and allow people to participate if they want. We're just not giving a discount on the DRP. If we're trading at a premium, then we'll have a 2.5% discount. That's what we tend to do. And the other one was...

What are we doing to address the discount?

Yes. And what are we doing to address the discount. Obviously, we take that very seriously. Of our 8 listed investment companies, 5 are premiums, 3 are discounts. We the -- we did get global to a premium. We merged with timberland then obviously, there's a bit of flow back of stock. So we've got to work through that. And we understand that we actually had a sort of a senior get together a few weeks ago. Just looking at the 3 listed investment companies we've got trading at discounts and what strategies we should put in place. And we're sort of -- we're rolling those out. And it's about shareholder communication, fully understanding what people have invested in. The simplest way of an LIC to trade at NTA is effectively stop everyone from selling and get one person to buy at NTA or if not a premium. Now it's very simple to say, it's very complex to do. We did it with all of our LICs, WAM researched, traded at the -- traded at a premium soon after it listed. And then for 7 years, it traded at a discount. And it took us 7 years to get that to NTA. That was the longest it took of any of our LICs. And now it's trading at a like 40% premium, which is crazy. But it's the fact that we sort of engage with our shareholders. We effectively ended up only having the shareholders that wanted to come on that journey and all the other shareholders left. The tough thing is they don't want to let go. And so anyone else who has to buy has to pay quite a premium. So we sort of know what we need to do, and that's what we're doing. So yes, the plan is to get -- the worst case is to get the share price trading at NTA. And that's one of the tougher things for performance because you're looking at the share price, when it was trading at NTA and then goes to a discount, coupled on top of that, where the performance of the portfolio has been down. Now then it's obviously significantly more painful. So I think I've covered them, Ophelia. Do we have any -- just before I close the meeting, do we have any more questions? No? Thank you. And look, if you do have any more questions, please, we've got Martyn McCathie, one of our investment specialists, Martyn, do you want to put your hand up -- we'll put your hand up there, Sam, our Head of comms, we got -- get everyone, Jesus, all the Wilson Asset Management people, put their hand up here, if anyone asks any questions. But then we've got half -- exactly half -- no, no, no, for the online people, the room is full. I could hardly get in here. No. So there's no other formal business for the meeting, I declare the AGM closed. I'd like to close by thanking all the WAM Global shareholders. It has been a challenging period. We obviously appreciate your support. Also, I'd like to thank the Wilson Asset Management team, those here in person and also those aren't here, who worked tirelessly for our shareholders as well as my fellow board members virtually also online as well as in person, whose guidance and expertise makes an invaluable contribution. Thank you very much.