WAM Research Limited (WAM) Earnings Call Transcript & Summary

I'd like to welcome everyone for dialing into today's call. On the call, you have myself, Oscar Oberg; and Tobias Yao to my right, our portfolio managers of the small-cap products that we run at Wilson Asset Management, being 4 funds called WAM Capital, WAM Microcap, WAM Research and WAM Active. Now in terms of how the call will go today. I'll talk about our outlook for small cap companies. I'll then pass it over to Tobias who will talk about how we saw things through reporting season in February. We'll then talk about some key stock ideas that we quite like at the moment. And then we'll jump into the question-and-answer session that will be run by Camilla. So look, we've had a great start to the financial year, and in particularly in the first half of the financial year that you've seen that we've released to the market across all funds. And the highlight being our WAM Capital, which has actually managed to outperform the market by just over 5% in this period. So look, you'll see on the presentation we've released in the ASX today that we've given our performance figures up to January. Our net tangible asset announcement will come out on Thursday in a couple of days' time across the 4 funds. And we'll actually put an updated presentation there in terms of how we're going to -- up to February. But in terms of what I can say is we had a very good reporting season across all 4 funds. Very happy with how it's going as the best reporting season that we've seen really since over the last 4 years since around August 2020 coming out of COVID. So to give us a summary of how we're seeing things, overall, we're very, very positive. It's probably the most positive we've been in a long time. And I think it's fair to say the last 2.5 years on these conference calls, we've talked pretty consistently about how small-cap companies have underperformed the broader market. And that's the all ordinaries index, which is effectively our benchmark across WAM Capital, WAM Active and WAM Research. The best example I can give you here is in the 2023 financial year. The team managed to outperform the Small Ordinaries Index, or the Small Cap Index, by close to 10%. But we only just outperformed the All Ordinaries Index by over 3%. So in other words, there was a 7% headwind in our performance numbers in 2023. Now as a reminder, it's worth noting that close to 50% of the All Ordinaries Index consists of 6 companies being the 4 major banks and also Rio Tinto and BHP in iron ore. And these are companies consistently that we haven't held across the funds as we prefer to focus on our value growth companies in the small-cap sector. So we think the pausing of interest rate rises that we first saw in the United States in December of last year, and what we do expect to see in Australia as we go through 2024 is going to be very positive for small-cap companies. And we think this will actually reverse the underperformance that we've seen over the last few years. And in fact, it could be a very positive period for small caps where we actually outperformed the broader market over the medium term. Now we've provided a very simple slide or chart in the presentation. And all this is showing is the Small Ordinaries Index and the All Ordinaries Index. And very simply, what you can see there is that the Small Ordinaries Index is trading at a level 15% below, its all-time high, which was in 2021. And the All Ordinaries Index, which is obviously largely dominated by large-cap companies, is -- just surpassed its all-time high through December and January. So look, basically, what we're saying here is it's been a very positive period for small-cap companies since around December when that changes in the macroeconomic environment occurred. And it's been very positive through February. But what that chart tells you is there's still a long way to go for that underperformance to be recaptured. So as I said before, sitting here today, we are the most bullish we've been in small and microcap companies for some time. And this largely reflects the fact that there are some sectors out there, which are trading at multi-decade lows in terms of their valuation. In small and microcap companies, over the last 12 months, we've seen extensive takeover activity. And in fact, the last 12 months, we've seen $18 billion of takeovers in this period, which is over 50% higher than the 5-year average. We've been very lucky in our portfolio of that period. We've had takeovers in SiP lasers, SCA Health and [ Sarada ], Healthia. What else, Tobias? [ Gen X ], Superloop. So it's probably the most [indiscernible], to be blunt. So we've been very lucky along the way. But when we look at the portfolio today, we expect it to continue. There's just so many companies out there that are trading below what they should be. And I think in public markets, bizarrely, we're seeing valuations actually lower than what they are in private markets. So we think private equity is going to be very active over the -- in the small-cap space over the next few years. More importantly, we see a very positive environment ahead of us in capital raisings and the initial public offerings. And this is a part of the market that's really been dead for the last 2 years. And as an example, us as a company today, we saw it -- I think it was about 6 months ago, and it's probably going to come on as an initial company on the ASX at a 50% discount than what we initially -- when we initially saw it 6 to 12 months ago. So that they're the opportunities that we're seeing here at the moment. Now while all funds will benefit from this, it's WAM Microcap really that is the big beneficiary. And this is largely because the companies we invest in where microcap are below $300 million market cap. So they're very small companies and they need capital for growth. So capital has been -- or capital raising has been a dirty word over the last 2.5 years. We actually think like it was in 2020 and 2021, it was very positive for a number of companies we own. So look, we're seeing a very strong outlook for that going forward. So look, I'll leave it at that. While everyone's on the call, I'd like to thank everyone for their support. We really appreciate the calls and the e-mails that come through. But look, I'll pass it over to Tobias, who will talk about reporting season.

Yes. Thanks, Oscar. So as Oscar said, we are very pleased with the February reporting season. So it's actually the first typical reporting season we've seen in over 2 years. And by typical, in our definition is that companies that reported good news went up. So what does that tell us? It tells us that the market is now focusing back on the fundamentals of the business rather than getting impacted by macro sentiment, which you've seen over the last 2 years. Over the last 6 to 12 months, we've rotated materially into tech and growth companies. And our view was that over the last 2 years, many of these high-quality tech companies were actually winning market share, while at the same time, cutting the cost base and optimizing the cost base. And given the macro sentiment, many of these companies were trading at significantly below the intrinsic values. So we increased holdings and board positions in companies like NextDC, Megaport, Temple & Webster, Life360, just to name a few, and those have done well during the February reporting season when they came out and reported accelerated growth, which led to more investors looking at these businesses and going back and buying these businesses. In addition to technology companies, we also took a contrarian view over the last 6 to 12 months in increasing our exposure in retail and consumer discretionary spend. Our view was the fact that we believe over the next 12 months, consensus or sell-side analysts on the street, their forecast for many of these retail and consumer discretionary names were very bearish and very low, and we thought that was unwarranted. So we increased positions in Harvey Norman. You may have seen Oscar talk about Harvey Norman on the last webinar, nextly, Premier and Myer. And so where many of these companies reported in February, the gross margin was a lot better for many of these businesses. And the outlook wasn't as bad as what people were expecting. So many of these businesses actually did pretty well. So technology and retail companies that we had in the portfolio really helped us over the February reporting season. And the reason why we are bullish in small caps over the next 12 months is the fact that typically, when you have momentum, we have upgrades in many of these businesses, they continue to keep going over the next few halves. So we feel very well having positioned appropriately for what is potentially going to be a very good 12 months. Now today, I also have to provide 2 topics. So I'd choose one from WAM Capital and one from WAM Microcap. The first one on WAM Capital is a company called a2 Milk. It's a milk and infant formula company that sells in Australia, in China and also in the U.S. Now for those shareholders that's been with us for a while, you may have heard us talk about a2 Milk 6 or 7 years ago when we had a lot of a2 milk, we had a lot of back malls, and they were exposed to the China trade. Now the reason why we are back in a2 in quite a large position, we started buying around December and January, is the fact that over the last 2 years, there's been seismic changes in China, a key customer end markets for a2, and a lot of regulatory change. And a2, thanks to the execution of the management team, has been able to come through this a lot stronger with a much higher market share. So the birth rate declining has been a key negative theme. And this year, we believe the birth rate could actually increase. So a2 was able to grow revenue even when the overall market was shrinking, our view is that when the market is now growing, the revenue could accelerate. Now a2 reminds us a little bit like NextDC this time last year. Now it's very different businesses, but like NextDC and Harvey Norman, these are large businesses that's often overlooked by large-cap managers and overlooked by -- and too large or small-cap managers. So they're sort of in that middle area. It had high short interest. And people, their negative views or the bearish views, were predicated on macro concerns, which we think are unwarranted. And therefore, as the fundamentals come through, in this case, earnings upgrades, potential EPS accretive acquisitions, the share price will rerate. A stock idea in the WAN Microcap portfolio is a company called GenusPlus. It's a founder-led business with the founder, David Riches, owning over 50% of the business. Now GenusPlus is a construction company which effectively build transmission lines in Australia. One of the reasons why you like the story, we think it's a long-term structural growth story, is because of the rewiring the nation initiative by the government to spend over $20 billion on turning the current transmission network to be more fit for purpose. Effectively, with all the new renewable hubs, energy hubs coming online, the transmission network is a little bit antiquated and need service providers like GenusPlus to effectively build these transmission lines. And so we believe Genus could win more contracts. They have a massive tender pipeline they've upgraded recently in February, and we believe these contracts could lead to further earnings upgrades. So these are my 2 stock ideas. Now I'll pass it over to Oscar for his 2 stock ideas.

Thanks, Tobias. Look, my 2 ideas. So the first one is a company called SG Fleet, which we own in WAM Microcap. We also own it in WAM Capital. SG Fleet is a fleet and novated leasing company in the automotive industry. So we've owned this company for quite some time, and it's been a frustrating stock for us. We've owned it for, I think, 4 years. And it has upgraded earnings consistently over that period of time. The only problem has been is that the large source of the upgrades has been elevated used car prices coming out of COVID. So in terms of our peers that don't own the company, they've been worried about this moment when used car prices will fall and then what that impact will happen on the SG Fleet earnings. Now we actually saw used car prices fall quite considerably in the first half of this financial year for the company. And that part of their business, I think, fell around 20% to 25%. However, through new car deliveries and the strength of novated leasing and prudent cross cost control, SG Fleet actually grew earnings through that period and actually grew earnings through that major headwind. So we think the business is now down a new base. We think the business can keep growing through here. They're also integrating a large acquisition that they made in 2021, and a lot of the synergies from that acquisition will occur in the next 12 months. And what's even more attractive is the valuation. Now SG Fleet is trading on a price to earnings multiple valuation of 9x earnings. And its closest peer, McMillan Shakespeare, is trading on a multiple of 15x earnings. So we're very bullish on this company. We think it's definitely turned the corner, and we think it can double. Now my final stock -- the final stock we'll talk about is G8 Education, which is the largest child operator in Australia. Now this company has been a dog. Full stop. Like it's been a shocking company for a number of years for a variety of reasons. However, our major catalyst to buy the company was meeting G8's new CEO, I think, just over a year ago. And G8's new CEO has a background in retail, very good at rationalizing their footprint, in other words, getting rid of their loss-making stores [indiscernible], but child care centers, handing back unprofitable leases or selling them, which we believe is a great tailwind for growth as we look going forward. Now coupled with that, through COVID, occupancy has fallen. So it's 3% below what it was at COVID. It's currently at around 76% versus pre COVID at 79%. And we think due to what they're doing internally in the business, that occupancy can increase 1% a year, really over the next 3 to 4 years. So in terms of how the business -- how we're looking at the business over the next 3 or 4 years, we see a quite conservative pathway to around 15% per annum earnings per share growth. The company has effectively a net cash balance sheet, very low levels of debt. So we think there is the ability for capital management. So potentially, that could increase closer to 20%. And we see a very attractive valuation. The company is trading on a price earnings multiple valuation of 12. We've seen it as high as 20x over the journey when it was doing well. So again, we see, call it, 50% to 70% upside in the share price in this name. So look, that's, I guess, the formal part of our presentation. I'll pass it on to Camilla now for the question-and-answer session. Now we're happy to go to the death like we always do. But if we do forget a question that comes through, look, we'll contact you personally after the call. So yes. Thanks again. But I'll pass it over to Camilla.

Thanks. Oscar. Thanks, Tobias. That was a great update. Before we open up for questions, I just wanted to touch on a few things with you both that come through quite regularly from investors. So we recently announced our interim results and WAM Research and WAM Capital, partially franked. Can you speak to the franking levels and the dividends across the 4 funds that you manage?

Yes, sure. So I'll start off with the easy ones. So that's WAM Research, WAM Active and WAM Microcap. So for those 3 funds, we held the level of franking and the dividend, consistent with what we did with the final dividend to the interim dividend. Now from WAM Microcap, it's worth noting that, that's the first time we've maintained the dividend really since the 2017 initial public offering. Now we are conscious that the profit reserve is very high. But if you look at the dividend yield on the WAM Microcap share price at the moment, it's very high at 7%. Now if you actually -- what really matters is the yield on the net tangible assets per share. That's even higher at 8%, and that's before we even consider franking. So we've had a lot of feedback. I assume this will come up with some questions in the call around why is the WAM Capital share price fallen so much. Well, it's a similar dynamic with WAM Microcap because we're paying out so much in a dividend. We need to market and our performance to grow quite considerably to offset that dividend and to grow the net tangible assets and affect the share price -- effectively the share price. So that is one of the reasons why the Board held the dividend. It's worth noting that nothing has changed from our market cap. If we have good years, there is the potential for special dividends. Now on WAM Capital, I think it's interesting going into the October board meeting, which I went into, I think it's fair to say myself, Jeff and the Board thought there was probably a 0% chance that we were going to hold the dividend into -- or hold the April dividend at $0.0775 a share. While we've been outperforming the market, the market was down at that point in time, we're only just up very small amount, and so haven't generated enough profit in the profit reserve. Now since December, the market has obviously gone up a lot but we've gone up more than the market. So as it stands today, we were able to pay the $0.0775 dividend in April. And we actually have further visibility as we look into 2025 across the October '25 -- sorry, October '24 dividend and the April '25 dividend. So again, I have a look at the net tangible assets release on Thursday, and you can see the level of profit reserve and how much coverage that we have for the $0.0775. Now in relation to franking, okay. So it's very similar to WAM Research. So with franking, you can only pay franking from your realized profits. And that -- all that means it's a fancy worth for saying when I sell the shares and they convert to cash. With dividends, you can pay dividends from your unrealized profits, right? So when that's when the share price goes from 100 to 120, I haven't sold the shares, but in my portfolio, it's gone up 20%. That's an unrealized profit. And your realized profits, which is when I actually physically sell the shares. Now because we had to sell off in 2022, you could -- and '23, market went up, but not too much. We actually haven't sold much in the portfolio in a relative sense than what we have historically. And so what that means is we haven't generated enough franking credits over that period, and we were short as the Board was looking as a Board decision, and it was very similar to WAM Research. We potentially could have paid 100%, but we chose -- but we would have had nothing in the tank for the future dividend. So the Board has chosen 60% as a number. There is some visibility over 60% into the next dividend. So how about I leave at that? I hopefully tried to make that as simple as possible. But I've been talking too much, so I'll leave to you, Camilla for the next question.

Thanks, Oscar. And you actually just covered off a couple of other questions with your answer. So thanks for the detail. You both spoke to reporting season. It sounds like you had a lot of good runs, but let's talk about some losses. Can you name a few stocks?

Yes, we always have some stinkers. And we're having a laugh the other day about there's a portion of the portfolio across all the funds really that you almost just like to carve off and forget again. But there was one company in particular, [ on my thought ], I think we talked about it on the present -- I've got a feeling we spoke about on the conference call probably a year ago. The company is called NextED. It's in the international education sector. It was a great stock for us in the 2023 financial year. I think we first bought shares at about $0.70 or $0.80. And it went -- it more than doubled, and then it came crashing down. And the reason is, is effectively cost of living pressures, full employment, there's been an influx of immigration coming, and the government said enough we're cutting immigration or cutting those really high levels of immigration back to where it was pre-COVID. These relates to English language schools and vocational courses for international students. So you couldn't get a worst sector really or business that's leveraged to immigration. So look, the revenue has fallen really quickly and it hasn't given enough the management team enough time to cut costs. We own a lot of the -- well, we still own a lot of the company. We're about 10% of the company, but we had a big swing at it a year or so ago. It came off in '23. It hasn't come off in '24. And unfortunately, when a company falls that much and it's illiquid, for a big fund like us, it's tough to get out. So we haven't sold a share, but unfortunately, we're sitting there at 10% of the company. So that's probably my gift to the portfolio. Tobias, what's yours?

Another one that probably hasn't performed as well as we thought is the company called The Reject Shop, which...

This was in your stock?

It was. That's -- but just in terms of why that hasn't performed, they saw an issue with shrinkage, which is effectively people stealing. And we thought they will do pretty well in an environment where consumers are sort of pulling back per strings and trying to spend better that hasn't really occurred. And obviously, the management is trying to optimize the business right now. But compared to, say, something like Kmart, which has done incredibly well, that sort of has really underperformed some of the peers. So that's one that's probably hasn't done as well.

Well, I think with that one as well, it's got $100 million of cash. And I think the market capitalization is, what, $160 million, $170 million or something like that. So we've got a good backstop in the cash balance. But yes, it has been a disappointing stock, that one.

Yes.

Great. The next question is from Paul. It's a bit of a long one, so I've just broken it down slightly. He said that you said WAM Capital shares have returned 15.1%. The share price has decreased 12% in the last quarter. So where are you getting this 15% from? He is down 29% in his portfolio. So are you being honest with investors?

Yes. Look, Yes. Thanks for the call -- the question, Paul. Look, obviously, we're always honest with our investors. So this thing -- what you've got to understand here is when we're saying 15%, that's the portfolio, that's our portfolio return. Now in a perfect world, the share price really should follow that portfolio return. Now you're investing in a listed investment company, right? And one of the positives and also the negatives within listed investment company is that when you first list on the ASX, your share price has a life of its own. So at various points in time, you could be -- your share price could be at a premium to what the assets are worth, which is the assets being the portfolio that we run. At other periods of time, you could be at a discount. Now Jeff, obviously, our Founder and Chairman, who everyone knows on the call, always likes talking about how he likes buying a dollar of assets at $0.80. Now that occurs when a listed investment company effectively is trading at a discount to what the portfolio is actually worth, which is effectively our net tangible assets. Now we -- our shareholders in WAM, we're frustrated as well. However, I think it's worth noting, and this is an unfortunate occurrence, let's call it, is that at the end of 2021, WAM Capital was trading at, I think, about a 30% premium to its net tangible assets. And we talked many times on this call, when the sell-off happened in 2022, the share price was pretty -- stayed pretty flat, and there was a big lag between the share price falling and the market falling, right? Now the portfolio went up around 18%. I think it was last year. It's up 20% now. Just given the way the math works, we're only just starting to cycle through that period and actually being able to grow the net tangible assets. But the main one is that when it was trading at a 30% premium, right? Effectively now, it's trading, I think, at around an 8% to 10% premium. So that is 20% that you've lost just purely because of the share price. In terms of our performance, that is what it is, but the share price itself has -- the premium has contracted. Now the other thing as well that you need to include when you look at that analysis is the total shareholder return. Now through that period, yes, the share price has fallen a lot. We acknowledge that, but we've actually continued paying out. And we've -- the Board has continued to choose to pay out quite a high level of dividends. Now that $0.15 -- $0.0775 a share twice a year to call it $0.15. That's on a net tangible asset. So I think today, I'm guessing, I think about $1.50, $1.55, let's call it. So effectively, you're getting a 10% yield on our net tangible assets, and that's even before we consider franking. So just to stand still, we need to effectively generate positive performance of over 15% or 16% just to keep the net tangible asset standing still because we're paying out so many dividends. So look, in summary, look, it's a long way to answer the question. Obviously, we're shareholders, too, in WAM Capital. We're frustrated with the performance. But the big reason why the shares have fallen is because it was trading at a 30% premium and stay is trading close to 10%, you've lost 20%. You need to add in dividends that we've paid you over this journey. The dividend yield is extremely high. Some may argue it's unsustainably high, but that will actually improve your total shareholder return because you've received dividends. And as well, the '22 sell-off was quite sharp, and we've only just started to cycle through that now in this current financial year. So hopefully, that gave you a good summary, but always happy to have a phone call if you need some more information.

Thanks, Oscar. Thanks for the detail. The next question is from Andrew Owen. He said, could you please comment on whether you're still invested in MMA offshore? And what you consider fair value in its share price?

I knew you'd point to me because Tobias is telling me fair value was about $3 a share, and I thought it was $2. So I was selling it. And Tobias was telling me to hold on. Look, no, look, we're still in the company. We own around 4% of the company. We did own a lot beyond 10%. I made the great decision of selling, I think, it was about $1.20, $1.30, which is when we went below 5%. It was a mistake I should have held on because it went into -- the earnings that the company has produced was much higher than what we thought it would be. Also, it's gone into the small-cap index. So that's created more passive or call it ETF buying, which has meant the shares have gone up quite a lot. So to answer your question, yes, if you asked me 6 months ago, I would have said probably around $2 was fair value. I think you could get well over $3 quite easy. It's got a great management team, doing all the right things, plenty of cash, capital management is coming, potential acquisitions. So it's still a lot of catalysts. So yes, unfortunately, I would have liked to have -- still would have liked to have 10% of the company today, but we did take -- we did sell some. But it's been probably our best stock after pay.

Second best.

Second best. 2 TPG Singapore and then this one.

Thanks, guys. The next one is from Peter. He said when we pay quarterly dividends or at least read the dividend pay at over a few months?

Just -- I'll start off with the quarterly dividend. I think -- look, I think our investors have been there for a long time know the volatility that you see in the share price through the ex-dividend date in particular. I think if you add it -- and this is probably one for Jeff, to be frank, but my view is that if you're adding another 2 dates, so having 4 ex-dividend dates instead of 2, is going to create a whole heap of unnecessary volatility in the share price. So that would be my answer there. On the dates, I think that's probably one for Jeff. Sorry.

Thanks, Oscar. I'm going to skip down the list just because you just mentioned this company as being one of your best. Ashok has asked, have you completely sold out from your holding into limited?

The short answer is no. We sold out a little bit, which sort of led to the seas of substantial, we're still very, very positive. TUA, given they're sort of just starting to gain traction in Singapore. They're only about 11%, 10%, 11% of the market share. in Singapore. And if you look at TPG Telecom over the many years, they grew their business in Australia, they went to 25% of Australia. And what we're looking out for and the upcoming result is the broadband strategy, which they've just started and how quickly they can gain share in broadband. So unfortunately, it's doing really well for us. So we have to sell, but given it was a very large position in the fund, just to link it back to [ see subs ], it doesn't -- when we see subs, it doesn't mean we've sold out of the company. We're just adjusting the size of the position.

Yes. So what it is when you see it on the ASX, I'll say WAM Capital [ cedes ] substantial in the company. Now all that means is that we've gone we might have gone from 5.5% of the company to 4.5% of the company. And it doesn't mean that we go to 0. A company like that would take 6 months to get to 0. And we're certainly very, very positive in the company. So we're not doing that. But if you have a look when we became a substantial shareholder, I think it was -- what was it $1.80?

Yes.

I think I told you at $1 or talk about $0.50. No. But look, we were taking profits in the company. It's been a tremendous performance. Tobias, it was all his work. He's done an amazing job on it. So -- but yes, just remember that, does it say substantial, doesn't mean we've got in 0.

The next one is from Michael, says, do you think undervalued growth companies and small- to medium-sized businesses like the ones that you hold in WAM cap stand to gain from the forecast interest rate cuts.

I'll say yes. and sort of this is our typical hunting ground. So in our view, that's going to be additionally positive. But in terms of what we're trying to figure out, we're trying to figure out the fundamentals of these businesses because let's say, we're picking tech companies, not all tech companies can exhibit high levels of organic growth. And so we try to differentiate the ones that we believe can continue to take market share from their peers versus everyone else. So we spend a lot of time trying to understand that as well. So overall, the macro sentiment will be -- will benefit. You've also seen takeovers in the space, like LTM, which is a circa $10 billion company got acquired. And that's $10 billion of sort of capital invested in tied up in growth that should cascade down to many of the other tech companies on the ASX over time. And so we're seeing a few -- quite a few green shoots in the space, and we think that's going to help tech and growth companies in general, but we're still trying to pick the best out of the bunch.

The hardest thing that's been over the last 2 years with the rising interest rate environment, is there or stop picking -- and we've talked about this in the core numerous times, it's actually been pretty good. And unfortunately, the index -- how the composition looks, as I said earlier in my presentation, a substantial amount of the ASX is the big 4 banks and the 2 large resource companies, BHP and Rio. We don't own them. We never have. So when they're going up, that can be a significant headwind for us, which a number of our listeners will know they've done tremendously well. I mean, Commonwealth Bank, I think, hit $121 the other day. I think that's 10% of the market we don't own a share. So that's been the hardest bit. We've been calling the stocks. It's just the weight of money is going to the large-cap companies, right? Because interest rates being up, there's uncertainty around future earnings. Now if we just have an evolve, we're not even looking for interest rates to fall. We just want them to be flat. If they're flat, then that's all really we think we need because the stock picking should get us there. And then investors will just have more confidence to invest in small-cap companies again.

Great. Thank you. This next one is from Alex. He said, you mentioned you're the most bullish on small caps that you have been in a while. So do you see the Small Ords testing its record highs this year like the ASX 200 and All Ords have done?

We think it can. There's a lot of companies. We've talked numerous -- I think on this last conference call back in -- when we do banks early September, we talked about bet on consumer discretionary as an example, which is retail, automotive, housing stocks, et cetera. And that has really played out. That's been one of the team's great calls really, but there's still more to go. We're looking at, say, like a scale as an example, which is probably more than doubled since we owned it. Most of the analysts are still quite pessimistic on the company. It's done well, but it's still trading on a price to earnings multiple of 13x. It's net cash. It looks like it might want to do an acquisition. So we've seen that trade as high as 16 and 17 when it's through in an upgrade cycle. Harvey Norman, as an example, is currently trading on, I think, about 12x earnings. And most of the market capitalization is in property. It's net cash. We've seen a trade as high as 16 and 17 in the upgrade cycle. And why that's important to talk about is that -- those stocks are pretty -- are around 30% of the small-cap index. So yes, there's some tech companies that have gone really, really well over this period. A number of companies really well, but it's that 30% that we see effectively just getting a high valuation, call it 20% high valuation in time, which could happen if interest rates start falling, I mean, people start getting more bullish and more positive on retail. That really should get you there to the all-time high that I was referring to before. So yes, we are bullish. We think it will happen at some point because the underperformance, as you saw in those charts, it's been quite savage really. And then it's been one of the highest periods of underperformance we've seen over the last 25 years.

Great. Thank you. This next one is from George. He's looking for your comments on stock. Are you still positive on SETI given the speed ticket recently issued to them by the ASX and the company's response?

Yes. One of the topical stock. And the answer is yes, we are. One of the beauties of the WAM investment process is -- and we are an active fund manager. So we had quite a large position in SETI at the result. The stock, I think, went from $3.30 to almost $5. We halved our position through that period. I mean it was -- been one of our best-performing stocks really through that February. We're in half our position that we did when we went into that. And you always do things like that for companies like this that are quite topical. They're new to the market. People trying to get their heads around it. There's a bit of noise around it, and this stock certainly has this. It's no different from Afterpay when it first came out. And so yes, when the article came, we saw it on, what was it, Monday morning, last, last week, when the new the stock was going to fall a lot. But the reality was our weight was quite low. And we know the stock really well. We've met management numerous times. We've spoken to peers or competitors in the U.S., into Europe, done a lot of work on the industry. Will Thompson who works with us, has done a tremendous job on it. So we took the liberty on when situations like that to buy more stock, and we've been buying more stock every day since. So I guess, in summary, is, yes, we're still very confident on the company. Its largest competitor in the U.S. fell over in December. It was actually through that December period, had a great result SETI, but it was actually a very tough quarter because their competitor was heavily discounting to say to stay alive. And so now that competitor is gone. So these guys could end up being the largest player in this space. So we actually -- just fundamentally on the numbers, we still like to stop. Is there going to be more noise on the stock? Yes, probably. But it's very similar to Afterpay in the early days. So yes, we're still positive on it.

Thanks, Oscar. This next question, I know you can't really answer it, but maybe you can speak to the profit reserve. It's from Michael, and he said, do you think the next dividend for WAM Capital will be $0.0775?

Board decision, Michael, obviously, and I'm not on the Board. But how about look at the Thursday's net tangible asset release?

Great. Roger says, is WAM microcap planning on acquiring any other small cap licks.

No. Never say never, but no, we are trading at a premium. So if there was a list investment company trading at a discount or we can make it accretive and beneficial to shareholders through an uplift in the net tangible assets, then potentially that's something we could do. But that's not on the radar at the moment. What I will say in where Microcap is right now, we think is the best opportunity we've probably ever seen in that space. It is like a hunting ground. There is just so many companies there at the moment. And why is that the -- why is that the case? Effectively, we've had a very uncertain period with interest rates and the war and everything like that, inflation, et cetera. You've seen a whole gravitation in the market towards the large-cap companies, right? We think at the moment, what we're seeing, hopefully, is a period where the -- all that weight of money starts flowing down to the mids and smalls, which WAM capital focuses on. At the moment, Microcap companies are dead. They're atrocious. Like we saw them in February, they're upgrading earnings expectations and going down 10%. Now we're looking at that going like, there's so many opportunities here to invest. And look, to be perfectly honest to all the listeners, I said to the Board in -- I think it was in July. And I said I thought were going to -- I thought there was a high chance of us underperforming this year and WAM Microcap. If we were write that interest rates were -- stabilized or fall because we thought the way to money would go into small caps, not microcap. Now we are outperforming in microcap, but that is largely due to the fact that we've had quite a number of takeovers. And we've been very lucky in that sense, in that regard. Most of our portfolio is just static and doesn't move. We had our misses as well. But I'd say for the most part, we've got probably 30% of the portfolio that just doesn't move. Share market goes up, sometimes goes down. So I guess what we're saying is that, that space, if we're right on small caps doing well in the next 12 months, we should start seeing investors starting to come down into micro caps. And this is what we saw in 2020 and 2021, and that will be very positive for the WAM Microcap fund. Sorry, a long way to answer the question, but -- and we also haven't seen any capital markets activity, which WAM Microcap a massive beneficiary of that. So yes, we're definitely seeing a lot of opportunities in that space.

Thanks, Oscar. Interesting time for Microcap. Next one, we'll go back to a stock pick from Graham. What is your view of [ Bobs ]?

Probably no view at the moment. I think they -- we were positive [ Bobs ] would have been 2 years ago when they first entered into the U.S. We got -- the reason we got it wrong was the fact that the management just couldn't execute, it was a very large market, required a lot of capital to do well in the U.S. And so for sort of a Microcap, Aussie company, obviously, with sales in Australia and sales in China and having to take on effectively a very large market in the U.S. during that period of time, it was very difficult, and we got it wrong. We lost money on the investment. And so they've had a change of management since I think we need to see more sort of runs on the Board, just to understand how they're actually going to take advantage of the current temporary license they have to sell infant formula into the U.S. Obviously, we're bullish a2 Milk. They have a U.S. business as well, and they're looking at the infant formula space in the U.S. as well. So that's probably where we're playing the infant formula space. And so definitely prefer a2 milk over [ Bobs ].

Thanks, Tobias. Another one. Trevor is asking about NextDC. Do you think they'll ever pay a dividend?

So yes, the answer is not in the short term. I think NextDC...

I'd say never.

Or probably never. Not in the short term.

I want to be NextDC for a dividend. No way.

Yes. So we first bought NextDC, I think around $9 this time last year. At the time, the catalyst we have at NextDC was just winning contracts, and these were cloud contracts, contracts with the likes of Amazon, Microsoft, Google after effectively to -- 2 years of COVID where effectively all the contracts was very hard to come by due to supply chain issues. And what's actually happened since is with the ChatGPT and with the AI effectively trend taking off in earnest some of the contracts you're talking to now are significantly larger to contracts they've ever won in the history of NextDC. NextDC is a growth company. They are beneficiary of AI now, and they're beneficiary of AI because a lot of the hyperscale guys need data center capacity to be able to compute for a lot of the large language models for AI. And so we have an investment in NextDC for growth. So we're not there looking for a dividend. And I think the business is effectively positioned that way effectively to grow as quickly as they can.

Thanks, Tobias. Joseph has asked, will you place a small amount in small pharma and biological stocks?

Very much generalist investors, and we focused on all sectors really in the industrial space and biotech is one of them. Now I think it's fair to say over the years, we -- and it still is. It's still something that we find difficult. It's not really -- if you're ranking all the sectors up against each other within the industrial space, it's probably the lowest in terms of our expertise. Now in saying that, we never say never, and we've done very well out of Neuren over the last 12 months. We actually exited the stock. We just thought a lot of the catalyst had played out. There was a bit of risk emerging in the company. Telix as well. We haven't owned it for about 6 months, but we did quite well out of it, particularly in that recovery phase in 2022. So -- but we're always looking at these companies. I mean what we've learned over the journey is once they start executing, there's sort of no limit to where the share price can go. So they can be very, very good stocks if you get them right. You don't get them right, they can be a disaster. So look, there's always part of the portfolio that's open to biotech. I think at the moment, we're -- I don't think we have one in the -- Neuren was quite a large position, but we did exit. So yes, so we're actually renewed at the moment. We don't have any in the portfolio.

Thanks, Oscar. Lawrence asked, what was your reason for selling Select Harvests?

Well, I picked the low on that one, that's for sure. Again, we have seen substantial in that one. But look, it's still a big position, and it's -- I think, effectively, we've gone from, call it, 6.5% of the company to about 4% of the company. Now why did I sell? Well, I said I'd probably pick the lowest in the almond price that day probably. Look, it was concerns around their balance sheet really. We did talk about the stock a few months earlier. Conditions got worse. And in Australia, there is shocking harvest. This is in last June 2023. And so I think the noise around -- or the feeling was particularly after that November result that they probably needed to raise equity, different market back then as well. So our view was, geez, if they're going to raise -- just at the time when Helios had just done a discounted capital raise and it performed poorly. And so on the day the result, effectively, I took the opportunity to sell some stock. I think we sold in the high 3s and then the stock fell quite considerably afterwards. And then honestly, the -- from that point, probably picked by a day, the almond price started rallying hard. The market started rallying hard. And we actually put back a lot of the stock that we sold at around $3.20, $3.30. So we've actually haven't done too badly out of that selling. And the almond prices continue to go up. So it looks like it's going to it feels like touch wood, it's going to be a good Australian harvest. And if that all plays out, they should generate a whole cash that can pay off the debt. So the stock is still trading at a discount to tangible assets. We still like it fundamentally. And as I said, it's still a very decent position in the portfolio.

Great. Thank you. This next one is from Ian, who says he understands why he like M&A activity, but he's asked if you're concerned that the ASX is disappearing. He notes that we have lost many good dividend-paying companies to foreign acquisition. What are your thoughts on that?

Absolutely, huge concern. I mean -- from a dividend paying perspective, like it's probably Matt and John in the large-cap portfolio with the WAM leaders, will speak to that. But just if we look just at really good companies, growth companies in small and mid-cap companies in the small and mid-cap sector, yes. So we've lost CSR, we're losing Adelaide Brighton, Altium, Virgin Money U.K. Like there's a whole heap. The building materials sector, as an example, has been fascinating. If we send Boral, Adelaide Brighton and CSR in the space of a few weeks, which sort of gives you an indication of how things -- people overseas are feeling about Australia. I think it's not a bad place to invest in. So yes, I would agree, and it's hard to get initial public offerings away. So the universe in small caps is just getting smaller. And at the same time, superannuation funds are growing really -- are growing quite a lot. So it makes things our job a lot harder. Definitely. Definitely. So it would be great to see some more IPOs. It's just got to be priced appropriately.

And I think to add to what Oscar is saying, the Aussie dollar is very low. So if you're in overseas acquire, it's probably as cheap as it's ever been in terms of acquiring business in Australia. So we think the M&A activity will continue over the next 12 months.

So as an example, we own a company called Healthia, and I would have said it was one of the mistakes in the portfolio, and that was all me. But I've got a phone call when it was at the end of last day of August. I was down the South Coast and I think I'd cracked open a beer. It was about 6:00 this random number and it was an investment banker. And -- [ you all own ] some shares in Healthia? Yes, yes, yes. 10% of it. It's been terrible [indiscernible]. We just had a takeover bid by private equity at a 90% premium. 90%. I've never seen that before in my career. But that just shows you how undervalued, particularly in that microcap space is some number of the companies are. I mean there was a company yesterday, I think that got TASK -- or the old a -- tech company called Plexure. It's called TASK. What was it? 110% premium. So that's what we're seeing in the microcap space right now. That's why we're really excited about it because we can just see some bargains like that right now that if they're not going to go up in the Aussie market, they're just going to get taken out. So yes, that's, hence, why we're quite bullish on the market cap portfolio.

This next one is from Alan and you have touched on it earlier, Oscar, but if we could just revisit. He said his investments in WAM Capital and WAM Research in April 2021 have reduced in value, while at the same time, the ASX recorded record highs. Can you please explain why small caps have performed so poorly?

Yes. So there's -- as also said before, there's a -- the biggest dynamic as to why that happened. If you go back to April '21, very positive time in the market, right? And there was -- small caps are doing well. Everyone was doing well. WAM Capital was trading at -- I'm guessing probably between a 25% to 30% premium to its net tangible assets, right? So that would mean if we liquidated every company, sold every company in the portfolio today, you would have gone 25% to 30% less, right, because the share price is trading much higher than what the actual assets are worth. And this is why all people on the call should be monitoring really closely what funds are trading at a premium, what funds are trading at a discount. Geoff would only buy funds that are trading at a discount, right? So when you say the 30%, obviously, we feel terrible about that. But that 20% of that 30% is effectively the premium in WAM Capital shrinking. It's gone from a 30% premium to a 10% premium, right? Small caps have underperformed over that time. So within that 10%, I'd say probably half of that relates to that. And then what you've got to add back and without seeing your portfolio is the dividends you have received through that period. It's actually quite a lot of dividend. So it shouldn't be as bad as the 30% of previous. Yes, the share price won't be down that much. But if you add back dividends that you've received, it would be a bit better. So look, again, Alan, very happy to -- if you want to call in to discuss. But yes, unfortunately, a lot of our newer shareholders in that 2020, '21, '22 period, before the sell-off happen bought shares at quite a high premium and the premium of the WAM capital share price has shrunk. It's gone to about 10% today.

Thanks, Oscar. We've had a few people join the call a little bit late. And we've got a few questions on how WAM Capital will be able to maintain its high dividend. Can you talk to this?

So the simple fact is if the market -- if we were in the same position in October, the dividend was getting cut, like straight out. It was getting cut. And I think it's worth understanding -- we talked to a few times, how do we pay dividends, like how does it occur, right? It occurs from making unrealized gains and realized gains. So unrealized is that example I gave before. Share price goes from $100 to $120. I've made an unrealized gain of $20. The realized gain is when it goes from $100 to $120 and I sell it at $120. So I make it $20 in profit and receive that money in cash, right? So effectively, we need the market to keep going up. When the market is going up, we're generating what's called profit, right, which we add to a reserve, right? In periods when the market goes down, right, say the portfolio -- say the market goes down 20% and our portfolio goes down 5%, right? As a fund manager, I'm really happy because I think we've done a good job. We've outperformed the market by 15% a really bad market. But as a shareholder, you're not happy because I've generated a loss, right? So if you generate a loss, you can't add profit, right? So when COVID occurred back in 2020, we had a huge selloff in the market from January to June, right? And then the market started recovering. Now because we had a period like that the market fell a lot, we weren't generating any profit. We're generating losses. Yet we were still paying the same rate of dividends, right? So we ate into our profit reserve, right? Now that dynamic has been in play really for the last 5 years. And when we came out of COVID, look, I remember Board meeting in July 2020, where the Board thought we're going to cut the dividend, and then the market just shot up, right? The same things happened this time. In October, last year, going to the Board meeting, we're talking about potentially cutting the dividend. And the market from December has gone like that. And our portfolio actually has increased a lot relative to the market, which has been great. So we've added -- been able to add more profit reserve, right, which you'll see on Thursday, right, hopefully, to give you a little bit more confidence into the next few dividends. But I think you just got to take a step back and you just got to say, okay, WAM Capital right now is paying a $0.0775 dividend, which is great, but it is a 10% fully franked dividend yield. It's very, very high. Very high. And we need the market and say, our performance in line with the market to be up 15% or 16% a year just to stand still, just to keep funding that dividend, right? So in periods where the market falls, we're not adding to that profit reserve. And you've got to remember that. So this is the reason why we talk about, unfortunately, the premium going from 30% to say, 10% today, right? It could go to a discount one day if we can't pay the dividend or we have to reduce the dividend, right? So that's the potentially where obviously, the frustration of shareholders will come through more -- even more -- 10x more than what it has come through today because your share price will fall, go to a discount, and will cut the dividend as well. But that could happen. And potentially, it was going to happen, but the market really rallied in December, January, February. So look, again, a long way to answer the question, but you really need to be monitoring every net tangible asset announcement, what our profit reserve is in each fund and comparing that to our interim dividend. In other words, what is the ability for our profits within the fund to keep funding that dividend into -- over the next few years?

Perfect. Thank you, Oscar. This next one is back to stock, and it's Joseph. He says, will you or do you invest in Megaport?

It's a very timely question. We do. Megaport is probably one of our top ideas that's exposed to the AI theme. The -- when we first invested in Megaport, it was on the back half of -- effectively, the new CEO starting. One of Oscar's close contact -- contacts knew Megaport's new CEO, Michael Reid, really well, and gave us the 2 thumbs up that this guy has had an incredible track record when he was running ThousandEyes, which was a subsidiary of Cisco. And then effectively, what Michael has done and Tish, the CEO; and Ben and the Chairman over the last 12 months in terms of turning around the business is nothing short of amazing. They have an incredible product. Effectively, a connectivity product that links companies with data centers around the world, bypassing effectively the traditional telco provisioning process, which is much shorter and much cheaper, and we believe that they are very well positioned for the future where there's going to be a lot of data getting transferred between companies and data centers and AI models around the world. And Megaport is a key beneficiary. So we believe over the next 2 to 3 years, the revenue growth could accelerate. And the good thing is the management has done incredible job cutting costs as well. So they're now in sort of a very profitable position. So we're getting strong growth in the top line over the next few years, at the same time, very healthy earnings margin. So Megaport is one of our key ideas.

Great. Thanks, Tobias. This next one is from Ashok. He says, do you think the IPO market will become more active soon?

Yes, I do. As I said, we saw one this morning that looked really interesting and was on almost half the valuation that they thought it was going to be a year earlier, so potentially. So look, it could be, yes, like I mean, and that would be great. But vendors and private equity need to be realistic around what their valuations are. And unfortunately, the terrible IPOs that occurred at the end of '22 is still -- sorry, 2021 is still on the back of everyone's minds. There was some good companies that IPO-ed in that period, but the valuations is just way too high. So hopefully, we'll see some positivity around that market because as I said before, it's generally very good from the active side or the market-driven side parts of our portfolios.

Thanks, Oscar. Kristin has written in, and she said, why should we buy more WAM Microcap when the share price is more than the NTA?

That's a great question. Well, look, I mean -- okay, so how about I say this? Why do -- why did the shares trade at a premium? Why are they consistently traded at a premium, right? Two reasons: The dividend, right; and the longevity of the dividend. Like yes, we're short on the profit reserve, but WAM has paid a decent dividend for a very long period now where Microcap is pretty similar. Look, we've paid the dividends have gone up quite a lot over the years. And so when you see the share price and look at it, yes, it looks pretty attractive relative to its dividend yield. And I think, look, the track record, particularly WAM Microcap is that we've outperformed every year really since we IPO-ed. So that is -- and obviously, there's a lot of goodwill just to roll some asset management as a whole. So I'd say just generally, that's potentially one of the reasons why it trades at a premium. Yes. I mean every individual is different in terms of what their risk profile is and so forth. I mean, the only thing I'll say is that, Geoff -- well, I mean -- okay, I'll go to the other view. Why does some company -- why does some funds trade at a discount? Or it could be -- management team has done some poor decisions over the years. Maybe they've underperformed consistently, et cetera, et cetera. Are they doing things to fix it, like that's generally an opportunity, and that's when our WAM strategic fund will come in. When they can see an outcome where somebody was trading at a discount, I say 20%, that can close that gap and go back to NTA. So look, I think it's just every individual's preference and risk profile, really, and you've got to make up that decision. But as I said earlier to the last question, just -- whenever you're looking at an listed investment company, you've got to look at, is it trading at a premium or a discount to its net tangible assets. What are they investing in? And what is their profit reserve? What is their ability to keep funding the current interim dividend? There are the 3 questions really you sort of need to ask yourself.

Great. Thanks for the detail. This next one is a good one. It's from David for both of you. What is your highest conviction holding across the 4 portfolios?

Great question. What's his time horizon?

David has not given a time horizon.

5 years, I think.

Yes, 5-year time horizon. Some of the ones that is pretty high conviction for us. TUA is obviously one, Temple & Webster, I would say, Megaport, Regis Health -- Healthcare, are probably the 4 that comes to mind.

[indiscernible] What market are they in. You've just chosen the 4. The other ones -- trying to think -- it can be like [indiscernible].

Yes. Why don't you tell some growth ones while I say some value ones. So look, I think -- it's going through a tough spot now, but I really like Ridley, I think that's a really good business -- I should think sorry, an underestimated business by the market, generates great cash flow, really run by a good management team; taking out costs, investing in the top line. Look, yes, there's good things happening in that business, car sales. We didn't talk about that. That's a fabulous business done incredibly well. I mean any of those classifieds business is really a great business on News Corp. That's a good one. News Corp is a good one to over the next 5 years is potential -- who knows what happened when Rupert finally passes away, but there's some hidden businesses particularly our News and Media business or Dow Jones business, sorry, in News Corp that is materially undervalued by the market that can release a lot of value in time if the family wants to do it. So that would be a good one. You obviously said 2 or TPG Singapore. Light and Wonder, I think, is a really good business as they become the #2 player in the world in term for gaming. What else? Gentrack, you didn't say Gentrack.

Gentrack. I think maybe we are a founder-led business as well. So companies where fellows have a lot of shares probably in the underlying business and it's fair to run. They look at the long term and they're not afraid to invest for growth. I mean these businesses typically outperform. So any company that has a really good founder, that's proven to have delivered value for shareholders, not minority shareholders, we'll back them and we have a lot of these founder-led businesses in our portfolio. So for -- I guess, for investors that's looking out sort of 5, 10 years' time, I'll say back to founder-led businesses and pretty much converse with that.

Hang on. We've said about 15 companies. We've got to say 1 each.

All right. I'll say, TUA, Tuas Limited over the next 5 years.

I'm going to say -- it's a tough one. I'm going to say car sales. I think car sales is a great business. I still think it's underestimated by the market. So I'm going to say car sales.

Thank you. That was heat you both overdelivered there. Greg, do you have a view on AXA, ticker is AXA?

I've seen it on the wires, but no, we haven't seen it. Sorry, Greg. It sounds like we should.

Another one. Peter, what is your view on DroneShield?

It's done really well. We had about a few years ago. yes. But I mean, look, I think it's -- we own Codan in WAM Capital, which is very much a defense business these days, and it has been growing extremely well in that part of the market. I mean the Microcap fund, we own EOS. We bought Sean -- actually, one of our colleagues bought really good price. I think it's doubled since he bought it. These businesses, clearly, there's a war going on in the Middle East and also in Ukraine, Russia, so you got to be careful around that. And these businesses are benefiting from that. So look, you've got to -- that conflict doesn't seem to be ending anytime soon, but these guys are going well. So you do need to take that in account. Look, I'd say with DroneShield, met them before, liked the technology. It was loss making that period of time. We've had a look at the numbers. It does look like it's really -- it's turning. It's had some great orders as well. But I think for us, we owned EOS. So it was either one or the other, and so we've chosen ELS.

Cool. Thanks, Oscar. The next one is from Ian. You might not have the exact figures, but how much cash are you holding across the 4 funds.

So I wonder if this is Ian, my father. But in the 4 funds, it's -- we are 13% cash in WAM, which is actually quite high over the last 12 months, and it was lower in January. So we have taken some profits in a number of companies that have done well. WAM Research is about 10. I think WAM Active is about 8 or 9. And Microcap is 8. Pretty standard. Doesn't really change. It hasn't really changed much really for years around those sort of levels.

Okay. And then the next one is Brian. Do you regard businesses in transition industries such as Ampol as a sound investment with growth potential?

Yes. I mean, look, I think there are great opportunities really. I mean Ampol -- we don't own Ampol. I think the WAM Leaders guys do, but the company we own a lot of is fever energy, which we've owned for some time. But they were great. They fantastic buyers around 3 or 4 years ago where the EV transition was taking over the world, and petrol cars were going to be nonexistent in 5 years or whatever. And lo and behold. I think it's fair. It's fair to say it's going to take a lot longer than what people think. And this is giving them -- these -- the petrol station operators time to think how they reposition their business. And that's what Viva Energy has done. So it's brought a company called -- On the Run, which is the largest service station operator in South Australia. It's a very good business, and they're converting the Coles Express service stations, which is around 700 of them, to On The Run across Australia over the next decade. Now On The Run is quite a good business. It's a retailer. It's not your standard Coles Express server that you jump in, buy a pack of chips and some eclipse meds to your petrol and leave. It's a destination. So for those Coles in South Australia, they'll know well, there's coffee there. There's fast food, you actually sit there. They've got a lot of their own brands in the servos. They've got their own app, which none of the other -- I don't think I've ever used an app from another petrol station operator. So that's something that maybe they can leverage as they roll it out. So it's just a different retail experience, and that's how they're transforming their business is that they're going to become more of a retailer. In other words, trying to increase the volume of people coming to the store potentially take share away from the supermarkets or probably the -- it's probably the corner store as people start refueling or recharging their cars in time. So I think -- so to answer your question, yes, definitely. We always plan themes. So AI is a theme, energy transition is a theme. Some sectors become in vogue, others go out of favor, sometimes looking at the out-of-favor sectors like Ampol and Viva were, you can make really good money out of it. Because I think Ampol, for instance, I think both stocks have doubled over the last 3 years. So -- and both look very, very good going forward.

All right. We've had a couple of people ask this next one. So do you own any lithium or uranium?

We own 1 uranium company, which is Boss Energy, which has done very well for us. Lithium, we don't own any. We -- the stock that we do like from time to time, we don't own now it's Pilbara Minerals. It's fascinating this coming because I don't think I've ever seen a bigger short interest, which is effectively call it hedge funds bidding against the company. In other words, the shares will go down. So I think the short interest last time I looked was like 21% or 22% of the shares on issue, which is enormous. I don't think I've ever seen a company as big as that. So clearly, people are negative out there on the company. But if you look at the fundamentals, it doesn't have any debt. It's got very strong cash. It's got low cost with their mine. So for us, that looks pretty interesting because at some point, if lithium prices go up, those guys are short or selling the stock, they're going to have to buy the stock at some point, and it could go up a lot. So we don't own at the moment, but we are sort of looking at Pilbara, which is PLS. But look, generally, for both sectors, I mean, yes, clearly beneficiaries of the energy transition move away from fossil fuels, in the case of uranium, opening up more in countries such as the U.S. And in lithium, longer term, still very positive on the space. I think there's just been an oversupply generally over the last 12 months and plenty of processing capacity in China. But in time, that will free up. And we're still -- longer term, you've got to be bullish on both those sectors.

Thanks, Oscar. This one is from Noel. He said, are you expecting WAM Capital and the Small Ords to outperform the All Ords over the next 2 years?

I'm not -- how can I say. So from December, the Small Ords has outperformed the All Ords. I think by about -- I reckon about 4% or 5%, something like that. As soon as the Federal Reserve said they're pausing interest rate hikes. Now as I said earlier, our base case across the team is we're just hoping that interest rates stay flat. And the reason why we're hoping it stays flat is you sort of -- it becomes more about the stock picking as opposed to the macroeconomic data that comes through. And what we view ourselves as is we're not very good on the macroeconomic reading what the Federal Reserve is going to do, the next CPI print, what the RBA is going to do. Like, honestly, we just want to pick stocks that are going to double in the next 3 years. That's what we're trying to do. And it's been very difficult to do that over the last couple of years. So look, in time, we think it will revert. Is it going to happen in the next 2 years? I'm not sure. We're not actually -- we don't really care if it does, doesn't. As long as it stays in line with the All Ordinaries Index, then we're pretty happy because we think it's more about our stock picking. And that should, in itself, hopefully, bring good performance.

Thanks, Oscar. This is one from Chris on the team structure. Can you talk to a potential succession planning for WAM Cap once Geoff hangs up his stock charts. Is there a key man risk or is this just a perception?

Well, as Geoff has always said, so Geoff leaves, let's call it the investing to effectively the teams. So Geoff is always a sounding board. Geoff and I speak a lot of the time. Geoff's obviously done this for a very, very long time. But ever since I've been at WAM since 2016, Tobias has been there since 2015.

'14.

'14, sorry, and he's been very hands off. So extremely hands off. So it leaves us to do it. He knows we're doing the work. He trusts us. And so he's more focused on the business in terms of our growth in the Wilson Asset Management brand as such. So look, yes, obviously, Geoff is amazing. It would be -- when we talk about succession planning, be a huge loss to the business when it does occur. However, does the day-to-day investing change when he steps away? No, not at all. It's exactly the same as what it always was. So we've got a big team, the 6 of us in the WAM Capital team. There's 4 in the leaders team, there's 4 in the global team, 2 in the alternatives team. So look, there's plenty of expertise across the wider Wilson Asset Management investment team. And we've all been doing this for a very long time.

Thanks, Oscar. This one is Dave again, and he's curious if Sigma is on any of your radars across the funds with the reverse takeover of Chemist Warehouse.

Yes, it's been probably at -- I reckon top 3 best stocks over the last, call it, this financial year. So I first bought shares at the start of 2022, I think. And again, it was a CEO change. It's been a very funny stock. I said these sort of -- it's been -- at the same time we were buying it, HomeCo were buying it. We didn't know at the time. And I remember saying to Sam, who could first came with the idea is less buyers really, really slowly. We've got lots of time. And then just started shooting up and what's going on here. So we sort of went with it and got a decent position. And then fast forward 1.5 years time, it's interesting. We're talking internally, I think, a couple of days before the deal actually happened about who can we speak to. Surely there's an investment banker or someone who's out of the industry if something did happen because there was rumors at the time, something was happening, how would it look? Because at Chemist Warehouse is an enormous business and Sigma is just a small underperforming distributor that's been there for -- in the ASX forever and hasn't really done much. And then I think 2 days later, the deal happened, and we have no idea. So in that process, that occurred, I think it was in October and November. We got -- we spent the weekend, we spoke to the Chemist Warehouse management team. It's an incredible business, like it's one of the best businesses we've probably ever seen. And it's very unusual to potentially a $9 billion business where we can invest in that in the small-cap space. So normally, that's for Matt and John, Ann Hailey in the WAM leaders portfolio. But effectively, we get a great position in this company. And yes, look, I mean, the thing is -- so to answer your question, yes, it's a big position. Sigma done really well for us. Look, we -- again, -- like I said, with satire earlier, we have taken some profits along the way because we don't -- who knows the ACCC might have an issue with the acquisition, which might create some uncertainty in the share price. But overall, we do think it will go ahead. And once it does go ahead, I think the market will then finally see how good this business is. And I think we'll do very well.

Thanks, Oscar. Another stock question. Kirsten has asked your view on Metcash, please.

One for John and Matt in the WAM Leaders portfolio. We haven't invested in from our perspective for a while. Why would that be the case? It would be because their hardware business was a bit of a COVID beneficiary, like a number of sectors were, and was doing incredibly well. And we thought that would come off at some point. Obviously, their grocery business or the core business, it's in a very competitive market where Woolworths and Coles dominate. But in the end, I think it's fair to say we're probably wrong on the hardware business. And it does look like the acquisition they did recently looks quite good. So look, we don't own in the portfolio. Like we tend to look at the retailers, like a Harvey Norman or a super retail as an example. But I do know that Matt and John own it, and they quite like it. Pay is a good dividend, it's quite cheap valuation as well.

Thanks, Oscar. And I'll just mention that Matt and John will be hosting a webinar next Tuesday at 3, and they could dive further into it. The next one is from Tony. And Tobias, you were commenting on this one a little while ago. What is driving Appen? And any thoughts on Audinate, please?

What's Appen-ing? Sorry. It's actually -- sorry, it's a question. That's a really good question. We're actually asking ourselves today.

It was trading, wasn't it?

In the last where we checked when we came in with some force training. So I don't know what was sort of an announcement that's occurred since then. They had a new management team and new CEO, that's -- the old CEO left. And I think the last update that provided was positive in terms of giving the market a little bit more visibility that they lost a very large client. That's what appears to be a one-off case. So potentially some of that -- obviously, it was sold down very heavily, so potentially some reversion of that. So I'll have to go back to the [indiscernible] and just check to see whether there's been any announcement on Appen since. In terms of Audinate, look, it's one where I'd say it's a big mistake not investing in Ordinate over the last couple of years. We had a couple of chances. We didn't quite get what it was one time. We didn't quite get enough position, didn't quite get enough conviction. They have a very good IP in terms of the core products and the business has done incredibly well. So it's one we've jot wrong personally. That's done really well.

Perfect. Thanks. Peter has asked you lend shares to short sellers. And if you do, why?

The answer is no. And we agree.

And we don't anyone would do that to.

Thank you. Tony Watkins, gold is looking good. Do you own any goal at the moment?

Gold probably is looking good, look, given the macroeconomic environment. So we do -- we own 2 names, and they came from actually from the Urals sorry, one of them came from the Urals acquisition, which was Emerald Resources. So that's been a cracker. So I think that's probably up 150% to 200% since we inherited that portfolio. And was it April '22. And that business is run by Regis Resources. CEO, Morgan Hart. He's fantastic. He's a good fellow and he's -- have delivered everything he said he would do. They own 2 mines in Cambodia. And Cambodia is actually quite a friendly jurisdiction in terms of mining, and they're the largest operator there. And they actually what's more interest -- the catalyst actually to buy it as they bought a tenement in Australia called Bullseye. And by developing that mine, that will increase Australian exposure within Emerald, which should hopefully drive a re-rating of the share price. So that's been done incredibly well for us over time. It's a small position that we have reduced it over the last couple of years of sitting at about 0.5% in the portfolio. And the other company that we own is Bellevue Gold, which we took in a placement, I think, around this time last year, I think, I think, and have traded the stock quite well over the journey. It's in a key risk period right now because the processing mill is fully operational. These guys have quite high-grade gold. And I think there's a big debate in the market at the moment as to whether it's sustainable or not, we think it is. And we do think that they can get through this period, start operating at their full run rate. And when that happens, as we've seen with Emerald, as you can see, quite a large rerating of the share price as the company go -- starts going into various gold indices globally. So we like those 2. On the mining services side and the gold exposure, normally, we do own index and our ALS Limited, but we don't at the moment for various reasons, trying to think of any other. And Codan, obviously, Codan, which we own quite a lot of is the gold. About 40% of that business is in gold metal detectors. And that's been a fabulous business for these guys, and then they had a very good result. So that's probably -- to be fair, that's probably our biggest gold exposure in the portfolio.

Thanks, Oscar. Next question from Joseph. Would [indiscernible] ever merge?

That's an interesting question. I've never had that one before. I'd say no, they definitely -- they wouldn't because effectively, you'd be disadvantaging Microcap shareholders because our size would get so big and the whole point of the WAM Microcap portfolio was to stay relatively nimble. You'd be more than doubling the size if you added WAM Research. From a WAM Microcap perspective as well, you would be diluting your profit reserve. Microcap has a profit reserve of $0.50. WAM Research, I think, is about $0.35 to $0.40. So there's a lower profit reserve in WAM Research, so you're disadvantaging your Microcap shareholders there. And also, if you're a Microcap shareholder, you want to be investing less than $300 million in -- less than $300 million companies as WAM Research, obviously, is the whole market. So I'd say no. Never say never, as Geoff would say. But the question I do get asked is whether Capital and Research would merge, or in fact, would Active, Research and Capital will merge at some point. And look, again, it is possible, but each fund has sometimes are trading at a premium, some net tangible asset in actives case, there's a slight discount. There's different levels of profit reserves. So you don't want to be disadvantaging each of the shareholders that like the specific strategies by merging into one. So yes, there's my long-winded answer to that question.

Thanks, Oscar. Alex has said what assurances are you able to offer investors in WAM that have ridden the share price down for so far?

Obviously, I can't give you any assurances, but all I can say is it's been -- we've come out of a very challenging period. Like the '22 financial year was extremely hard. It's hard to explain this because we were sitting in it. Look, that February '22 reporting season, well, we had a great reporting season. And we get upgrades of earnings, shares would go up 5%, and 2 days later, they're 20%. But that's what we're fighting against when the war in Ukraine occurred and interest rates start to go up, right? The '23 financial year, for us to outperform, which I said before in my presentation, there was -- I think it was a 7% headwind in terms of large-cap stocks outperforming small-cap stocks, and we still outperformed by just over 3, for me, that was, in terms of the team, that was an amazing achievement. If you told me that at the start of the financial year, I would have said no chance. So we feel like we've cycled through the tough times. The start to this financial year was still tough, very tough, and we're doing well at that point in time, still outperforming. And we finally had the, call it, the macro event that we've been searching for was just, as I said before, rates hopefully flattening out. And [indiscernible], we've seen the portfolio do well. We're seeing small caps do well. So look, I can't obviously give you assurances. But to put it this way, the macro environment right now, as it stands, is 1 million times better than what it was 2 years ago. Is that fair? Like so much better in terms of our process and how we look at stocks.

Thanks, Oscar. The next one is from John, and we know you can't give advice, but he's interested in which fund would return the most on capital gain.

Okay. Well, how would I say this? So the fund that should -- with the highest -- you would expect the highest risk profile to return the highest capital gain over the longer term, which would be WAM Microcap. Yes, that would be fair. But obviously, if you look at a total shareholder return perspective, our market caps a 7% dividend yield, I think, on the share price. I think WAM is sort of 9% or 10%. So if markets sort of just stayed the same way they are now, maybe on a total shareholder return, WAM might be better. But I'd say looking at sort of economic textbook, finance textbook, you'd say Microcap should be the one that should do the best but will also do the worst, if that makes sense. It's got the highest volatility because it's been -- as I discussed before, we're in very speculative stocks there. If we get something wrong, we get it really well. At least if it was something we get wrong at WAM Capital, we can get out of it. If we can't get so really wrong where Microcap can't get out. So that's the risk you take. But over the longer term, that should return the best.

Thanks, Oscar. Trevor is interested in your take on Sandfire Resources for the long term.

Geez. A copper stock. That tough, isn't it? Now we don't own Sandfire. But look, longer term, I mean, you would expect this company -- look, there's no -- OZ Minerals has left the ASX. There's no pure-play copper companies on the ASX. Good management team. Look, clearly, we don't own it at the moment. But there's no pure plays in copper. It's part of the energy transition. So you would expect if the guys do a good job, hit production targets, they should do well. And you would always expect them given OZ Minerals got taken out at such a high valuation that potentially it's a takeover target at some point.

Thanks, Oscar. And next, would you consider Silex systems as an opportunity?

Always consider stocks like that as an opportunity. Will and our team saw them recently, actually quite liked it. It's not a company, I'd say, is in our wheelhouse. It's very obviously leveraged to uranium. It's sort of tech company sort of -- so it's sort of hard to know whether.

Yes. We like -- I think our bread and butter, we like easy-to-understand [indiscernible] businesses, and it sort of helps -- which is one of the reasons why we typically haven't had a huge exposure in biotech because they sort of binary. And then so for us, what can we add the most value to the portfolio to our shareholders is defining businesses that we can really understand and investing in those. And hopefully, the margin of safety for us is a bit higher in those types of businesses. So we try to pick the best ones. And obviously, there's opportunity costs. So if we invest a percent a company, then the stocks we're investing 1% in the company we like more or have more confidence. So we're always thinking about opportunity cost and how best to allocate the capital.

Thanks, Tobias. Mark has said there was takeover speculation around generation development in the media a few months ago. Would a takeover bid end game for them?

Well, end game, yes, someone wants to pay a big premium for the share. Yes, well, it could be the end game. But then given we're quite a big shareholder there, we'd want a pretty nice premium to the share price. But the article was largely referring to their investment in Lonsec. They own 49%, I think it is of Lonsec. Lonsec is as a ratings house, so it provides investment recommendations on various funds, but it has its own managed portfolio, and that managed portfolio has grown incredibly well. Look, it's currently, I think -- what is it at? I think it's is $12 billion, I think, and it's come from nothing in the space of like a few years. And so that part of generation GTG has actually outperformed expectations massively. Now if that was listed by itself, we actually think it could -- it would basically be the current valuation of GTG at the moment. That's how we think the market will value it. Now we didn't actually invest in GTG for that reason. We invested in it for its investment bond business, which is going to be a huge beneficiary of the changes in superannuation that is occurring in terms of restricting amounts over $3 million. And to put that in context, I think there's around $200 billion that's over that $3 billion -- that $3 million threshold. So if GTG was to get 1% of that, it would double that business. So that's why we're very positive on the business. It's got a great management team, great Board. We've been there for a while, but if you have a look at the share price, we feel like it's finally breaking out. And we see quite strong upside. We think it's very similar to Pinnacle was in the early days, back in 2016 and 2017.

Thanks, Oscar. From Graham, I'm not sure if you know this one, but will you be looking at the IPO for Aegero's later this year?

Sorry, I missed that. Well, IPO for?

It's spelled A-E-G-R-O-S, the company.

Haven't heard, haven't seen it come through. Sorry, Graham.

Next would be Tony. I think we've had this on a previous call. Again, no financial advice, but out of all the WAM products, which ones will be the best investment in the next 12 to 18 months?

Well, okay. Okay. All right. I'll give you this one. This is not advice, but this is my view. I can say that?

I don't know. I don't know.

I think, well, look, okay, I put it this way. If Geoff was here, what would he say he say? He'd say WAM Active, because we're trading at a discount to stand tangible assets. And if you look at the -- we had a great year last year, we're having a great year this year. So we would like to think, hopefully, that NTA gap will close.

Great. Do you have a view on Strike Energy. Ticker, STX. That is from Dane.

Not particularly at the moment. Sorry, Dane. We have owned it occasionally in the microcap polio. I think the hits on the drilling hasn't been as good as the market as expected. However, given where it's located, it's very strategic in between Beach and Mineral Resources with AWE. You would expect it to be acquired at some point. So yes, I'd say not one for us. But don't be surprised if we got acquired one day.

Thank you, Oscar. Interesting. The next one is from a Geoff Wilson, but it's a different e-mail. So it's not our Geoff Wilson, who's asked what catalyst do you think NextEd needs to drive recovery? And how do you rate the chance of that happening?

I think -- thanks, Geoff. Well, yes, it's -- we call it dead. Look, I think, look, it's no man's land for a period of time. The catalysts -- like what we always see with the government when they make rash decisions like they have, we saw in aged care coming out of the Royal Commission, and then they've done a 180 and now it's all positive in the space because they realize they're killing providers. I think there's going to be a huge amount of fall out from their decision around immigration because effectively, that -- a lot of these colleges scaled up over 2021, '22. They've got massively hit in COVID, right? Then the government comes out we're all pro immigration, everything like that, and all these guys scale up to taking all these students, and then a year later to go up, sorry, not cutting half. So I think you'd need pain and blood on the streets from a lot of the private providers. And then for the government to realize that we've probably gone too far here. Now that's the catalyst. Now are we there yet? No. I think it's going to be when the trajectory, the government can see that we're getting back to those pre-COVID immigration levels. But -- and you need noise in the press from this college that was doing the right thing falling over, going bankrupt and all this sort of stuff. And then they realize we've probably gone too far. We actually need international students. It's good, obviously, for tax purposes and education and whatnot jobs and everything like that. So -- and you probably need the unemployment rate to start going up as well, which we're probably a long way off. So I'd love to paint a more bullish picture for you, but I can't at this juncture. So honestly, think you can't be looking for a catalyst in the next 12 months. We do think that -- don't get me wrong. Over a longer-term view, we think the business is massively under earning. They've done all they can. Balance sheet is fine. We've done all they can. We just got to wait. So unfortunately, I think it will probably take longer than a year for that to occur.

Thanks, Oscar. Next up, Chris, also and Tobias, what is your view on health care equipment stocks?

Yes. So stock, you're probably referring to the likes of something like Nanosonics. During reporting season, we had a very small position, and that's one that didn't do as well. We're still trying to get our head around something like Nanosonics. For example, the U.S., from what we can tell is sort of back business as usual in terms of for most companies, analysis having some issues, growing pains in the U.S., which has cost out on the longer-term trajectory of the business. I think it's fair to say we're still trying to make up our mind on companies like this and so sort of it's a bit difficult for us. We just -- one of my colleagues, one of our colleagues is going to the U.S. for a trip. We will have obviously the trips to do on the ground research and meeting a lot of these businesses. So happy to report back on the next webinar to see whether we've probably had sort of more insights on those.

Great. Thanks, Tobias. The next question you might want to comment on is another stock. Could you give a view on Pacific Current Group, PAC?

Well, I think like if you asked me last week, I would have said that was a great way to play GQG, which is that a big shareholding in, a really fast-growing fund manager that's listed as well in the ASX has been doing well, but they sold their stake. Now I assume we haven't seen them for a while, but given they've sold their stake, that probably is code for, we're going to use that cash to make acquisitions. I think it would be fair to say. So yes, maybe that's one we should probably have a look at. But it's always been very cheap. Our issue with the stock is -- and we have -- like I reckon, I think it was 2017, we own quite a lot of it. And the issue why we sold just so complex a lot of funds we didn't really understand that they own shares in or had a stake in. I think fair enough. And the liquidity was pretty tight in the stock as well. So I think we might have done okay and then a buyer came around, we thought we'll take liquidity and sell out. But I think you probably want to look at the balance sheet post this GQG sale, read between the lines, I assume. That can't -- we haven't -- we don't know this, but we assume they're probably looking for acquisitions now.

And I think a lot of...

Or maybe the capital management potentially.

I think a lot of investors invest in fund managers, some of the larger ones, just for market exposure. Of course, it's a big because it's a big index waiting for us, we'll index unaware. And for market exposure, we would vest in the underlying businesses. So we don't have the same impetus to sort of invest in some of these fund managers.

And then next one is Chris, looking for your opinion on Link Market, please.

It's under takeover. If it wasn't just take over, I think we would have said it was actually turning around. It had high debt levels. So that was what -- he was doing an okay job on costs, but the debt levels were about 3x when they. So we would have probably said, no, we don't own it at the moment, but it got taken over in December like quite a number of other companies. So it's another company that's leaving the ASX.

And then Mary has said, do you or would you invest in companies such as connection mobility, which have market caps of $23 million? And why wouldn't you?

So the answer is yes, of course, we would. If we -- but for 20 -- to put this into context, so the Microcap portfolio is where that would fit. I mean the Microcap at $20 million, something like that in size. That company, you said, I think, was $23 million. So for it to make a difference in our portfolio, we need to own 15% of the company, right? So if we're making a bet like that, we would have to be extremely bullish on the company. And I think the closest example I can think of is something when we did that was when Noni B acquired the Specialty Fashion Group and was left with City Chic back in 2017, we took -- I think it was about 12% of the company. There might have been a market cap of $40 million or something like that at the time. So look, a long way to answer your question again. But yes, we have to be extremely bullish, extremely positive on the company to do that. Because the problem is if you're buying a company that size, you're buying a big stake like that, you're not getting out of the company.

Thanks. Next one. Chris is looking for your view on the future of Cogstate.

Frustrating. Start this one.

Yes. I think we've had a few cracks at Cogstate. And then I think the longer-term story makes sense in terms of how the sort of exposed to accept -- to biotech pharmaceutical companies needing to do research around Alzheimer's. However, I think probably over the last -- probably over the last 12 to 18 months, we just probably found better ideas that have more near-term catalyst, which is more sticking with how we invest. And so we've gravitated towards ones where I guess it's probably a little bit more binary in nature. So it's one where we sort of keep an eye out on, but we're seeing a lot of ideas in both the small-market cap space that's within our, I guess, circle of confidence and ones that we like and more liquid and we think give us sort of 10 years of growth, for example. So we are looking more for those ideas and so one that we have followed, but it's not one we have in the portfolio now.

Thanks, Tobias. This is more of a question for the Board, it's from Joseph. Do you think there'll be a rights issue soon to build up your firepower?

Great question. Definitely not in the largest small cap funds like WAN Capital, Research and Active. But yes, I mean, look, it's a Board decision. But clearly, as you can tell from our comments today, we're quite positive on the microcap space. We're seeing a lot of opportunities there. We think it's a very similar environment when we raised money back in August 2020 in the Microcap fund. So yes, look, I mean, look, who knows what markets do over the coming months. But from my perspective and Tobias' perspective, yes, we -- in the Microcap portfolio, we'd love a little bit of extra cash because we're seeing a lot of opportunities.

Thank you. And then a bit of a [indiscernible] call kind of coming through a couple of stocks for your thoughts. Kogan, Taro and EcoIQ, please.

So you do EcoIQ? So we don't know EcoIQ. You do Taro. I'll do -- you tend to like the good ones. So I'll do the bad one. So I'll do Taro.

I'll do Kogan. So Kogan is one where [indiscernible] is told, been really bullish on and being sort of more bearish and he's being right and discuss the stock has done incredibly well in the business. And it's on the back of the profit growth for the business. That's on Kogan. So we are positive. The stock and ask is pick the bottom on that one.

Thanks, Tobias. You get everything right. Taro, look, I mean, it's again a frustrating stock for us. We do own quite a bit of the company. We're about 6% of the company or so. The results, it was a funny one because we sort of saw the result in lots is good, it's going up and then it went down 15%. So clearly, we were wrong. Look, the business is going through a bit of a transition. I had too many -- too much costs. New CEO is doing a really good job, taking a lot of cost out, but they've got to grow the top line now, and that's what the market is focused on in that result. They didn't grow the top line. They actually downgraded the top line, but then upgraded the profit, and we thought that's what the market would care about. But they didn't. So it was the top line is that the stock fell. But again, it's a net cash balance sheet. As we said, we like the management team. We're hoping that the top line can start moving again this half and as we go into the next financial year. But I think the other thing with that payments industry, which we think is interesting is they are takeover targets. And we would not be surprised one day if it was a square or someone who wanted to get into the Australian market. And then this buy in Taro, you get pretty decent market share on day 1. So yes, been a frustrating stock, but we still like it is still a decent holding.

Okay. Next one, Chris is asking for PEXA Group. What's your view?

PEXA. We've had PEXA for a while. I know the -- our large cap colleagues like PEXA is not one that we currently have in the portfolio. I think it's fair to say the registry business is coming back because obviously, the property market in Australia is probably doing better than what people were expecting. The interesting part, and I guess, the catalyst for PEXA over the next 12 months is what they're going to do with the both business and what are they going to do in the U.K. Those were supposed to be the 2 growth drivers. Given the PEXA business itself, the registry business is pretty much like a monopoly here in Australia. So it's not one we currently have in the small cap fund. I know the large cap guys like it because they think there's optionalities with the potentially shutting down the growth business if it doesn't do well, if it doesn't breakeven or winning more contracts in the U.K.

All right. Thanks, Tobias. Stephen has asked. Oscar, is a 60% franked dividend in effect, a decrease in a dividend coming down from 100% freight $0.0775 per share?

It's not a decrease in the actual dividend. It's more the franking, right, that you effectively can offset your tax right? So look, a lot of our shareholders, if you remember from back in, when was it 2019 with Bowen and -- yes, a lot of our shareholders get the cash refunds from the franking effectively by going to 60% franked, you will get a less -- call it, 40% lower franking coming back to you in that cash refund. I thought that was probably the easiest way to explain it. Now does that -- is that permanent? No. As I said in my preso, the Board made the call. We could have paid you 100% this dividend and hoped that the market could go up quite extensively over the next 6 months and asked to sell out of a few stocks to generate those franking credits, but the Board took the conservative approach doing 60%. So there was some visibility on the next dividend of 60%. But again, like -- as we said, us cutting the franking that we have should have effectively been a, as I say, morning. Is that the right -- like where we're on?

[indiscernible]

Yes, look, it's a precursor, I think it's probably the right word, in terms of where we were at with the dividend, the dividend could have -- we should have been cut. We could have been on this call, apologizing for the dividend being cut by 50% or something. Now the market saved us through December, January, February, effectively. So yes. So look, yes, we obviously feel bad that the franking has been cut from 100% to 60%, but the story could have been a lot more different certainly went through the result and on this call today.

Thanks, Oscar. Tony is wondering, have you ever invested in and ENN, Eleanor Investor Group.

Yes, a long time ago, like in pre COVID. It's a property sort of funds management business. And I think at the time they we're trying to grow there effectively our funds under management and taking advantage of some of the opportunities that we saw in the market. It's not one we followed very closely. I think at the time, was paying out a very high dividend yield. So we are sort of getting paid to wait and sit there to wait for the, I guess, increase in the funds under management. But it's probably been a while since we've looked at it.

Joseph says, what's your view on AXON and UNI in the mid-cap range for staples compared to your positive view on mixed value.

So we own Universal UNI in the microcap portfolio, I really like it. There's concerns going to that result that it was going to get hit hard because of its exposed exposure to youth but actually came flowing through and they're accelerating their rollout. So that's valuation, good management quite like that one. Accent. I think that the issue -- we're not in Accent, we could be. Again, really good management team found or their business, so it's good to tick all the right boxes. I think with those guys, though, the core business is slowing. So that's the Athletes foot and Platypus and height, but they've got a very new strong new business in HOKA in terms of the distribution rights there for Australia, which is doing incredibly well. So it's trying to work out when that sort of inflection point is with their earnings. But again, yes, I mean, we'd never rule it out, but we don't own it at the moment.

All right. Thank you. Let's do a quick by [ wholesale ] with these ones. There's 4 from Tony. NXL, AML, RDY and CCX.

New X, probably hold. We don't have it in the portfolio now. Effectively, we're finding more opportunities elsewhere in technology. EML, buy. We have it in both market cap and Capital. The new management team has come in and we believe has effectively got rid of the biggest problem that's plagued the business for many years, which is the PS business over in Europe. And the base business, what's remaining, could potentially be a 5% to 10% growing business over the coming years. What's the other one? CCX?

I think it's a hold. Look, look, been a shocker obviously, the last couple of years was a good business. It's finally through that destocking period, the balance sheet is fine. So it's just going to find out where it's a true level of sort of the new base of sales are at. I still think there's a bit more uncertainty in the next 6 months. So it's probably 6 to 12 months away. What was the other one?

I think that was RDY. I think the other was ReadyTech. Yes, we don't have ReadyTech, but we have TechOne, TNE in the WAM capital portfolio, which is I guess, much larger.

We saw in ReadyTech, but I struggle with that one was there was always all this investment coming into the business that was -- that hit their EBITDA forecast. But as Warren Buffett will always say, what you say is EBITDA is a c*** term that's made up by investment bankers or something. And the profit, which is all that matters, would always miss. So we don't own the shares at the moment. If they fix that up, we probably would item because they're trading on a very discounted valuation relative to tech line.

Yes. yes.

I think generally, in the tech space. We're just looking for the ones that we believe will have the highest growth rates. Okay. Cool. Thanks, Tobias. Next, it looks like our final 2 stocks, Square stock and BWP Trust.

BWP, unfortunately, no. The only thing I will say is REITs, we don't -- a real estate investment trust, we don't generally -- we don't do. We prefer the fund managers like a HomeCo or the Lendlease guys like Ingenia. However, I will say they're probably all buys, I think, just in the -- if you got to view that interest rates are flattening and then going down, they're big beneficiaries, right, because they've been a terrible sector in small caps for some time. So yes, so I don't know anything about BWP Trust, so I'm sorry about that. So I don't know any of the specifics, but I do think that REITs or the trust will go up over the next period.

Square would be a buy just in terms of how they've really optimized the cost base over the last few years, and they're really taking on the -- was a rather antiquated sort of banking sort of system in the U.S. And you have to pay -- it's a small portion of the overall Square business with CashApp and the Square terminals and continue to win market share in the U.S. and winning share and upgrading. So it's a buy for us, and it's still quite a bit below the previous highs.

Thanks. This is from Greg. Why do you have to sell stock to obtain franking credits? Don't they company dividends that you receive? Or is it because your dividend income is low and the sale crystallizes a tax gain and you pay tax to access those franking credits?

Correct. So that last part of the question is right, but not the first half of the second point, if that makes sense. So you're right. So when you sell the shares and you make a profit, you pay tax, and that tax we pass on to you guys. That's the franking. So that, effectively, is around -- I think it's about 60% to 70% of the franking that we give out to our shareholders through our franked dividends. The remainder is generally the franked dividends we receive from the companies we invest in, right? So if we receive a fully franked dividend from a company, what's a company that we own that's fully franked dividend.

SG Fleet.

SG Fleet. Good example. Yes. So SG Fleet. We will then pass that on to our shareholders. Now just remember what we invest in. We invest in small microcap companies. A lot of these companies -- and the other thing is just think about over the last 5 or 6 years, the technology sector has increased in terms of its weighting in terms of our universe that we look at, a lot of these companies don't pay dividends, right? So that impacts our ability to 30% of the dividends, let's call it, or franking every year, right? So we're in small cap companies, a lot of them don't pay dividends, and we're not just going to invest in a company because it pays a dividend. And that's to your first point of that -- first half of that question when you're saying, I think you said, are we just selling shares to get the franking. No, we don't -- we definitely do not do that because that would hurt your return. We don't do that for the dividends. We don't do that for franking, never, because that would impact the return you're getting on the portfolio, if we were just selling everything, just to fund the dividend or frankly, it would be detrimental to you. So we just purely look at the fundamentals of the stock, does it fit our investment process, and we'll buy or sell the stock, depending on the investment process. So yes, I think it was Greg, was it, that asked the question, I'll call later, if need be.

Thanks, Oscar. That is actually it for the questions. We've had a few comments saying thank you for the opening and informative session, for answering everything. So we'll leave the Q&A there. And then...

I don't think -- there's those ones, the guys that e-mailed .

[indiscernible]

Okay. Right. Cool. I just want to make sure we got them all. I think we did.

We'll call anyone.

I haven't apologize or we'll get back to you.

We'll had 97 today but I'll let you comment.

Is that a record?

I'll come back to you on that.

I think 2 hours is a record. I don't think we've done long. Look, thank you very much for everyone dialing and really appreciate it. It was a great turnout. Thanks for all your questions. And we're seeing you all in a few weeks for our road show. So Yes. Please, we'll be there before the actual formal presentation. So any questions you have, please fire away. So thank you very much for dialing in.

Thank you.