Investor Presentation - May 2012 - Wilson Asset Management

WAM Capital Limited
(WAM)

Executive summary
• Investment Portfolio has outperformed by 7.5% financial year to 31 March 2012
• Average equity weighting 58%
• 10% increase in fully franked interim dividend to 5.5 cents per share
• Annualised fully franked dividend yield 6.9%*
• Bonus Option issue on a 1 for 1 basis – ASX Code: WAMO
Exercise at $1.60 at any time from now to 31 July 2013
• Cautiously optimistic on Australian equity market
* Based on 3 May closing price
2

Option issue
• Bonus option issue on a 1 for 1 basis
• Exercise price: $1.60
• Can exercise at any time up until 31 July 2013
• Options trade on the ASX under the code “WAMO”
3

Option issue
Frequently asked questions
Why?
• Create value for all shareholders
• Increase size of Company - making it more relevant
• Continue to grow the Company
• Lower the Company’s management expense ratio (MER)
How will the money be invested?
• In accordance with the existing investment process:
− Market Driven
− Research Driven
4

Consistent outperformance
Performance
as at 31 March 2012
WAM Investment
Portfolio
S&P/ASX All Ordinaries
Accumulation Index
1 Yr
%
3 Yrs
%pa
5 Yrs
%pa
10 Yrs
%pa
Since
Inception
%pa
(Aug-99)
+3.2% +22.5% +6.1% +13.5% +18.1%
-6.2% +12.3% -1.8% +7.1% +7.5%
Outperformance +9.4% +10.2% +7.9% +6.4% +10.6%
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Performance
Financial Year 31 March 2012
WAM Investment Portfolio +6.0%
WAM Pre-tax NTA per share growth plus dividends +3.2%
WAM Share price growth plus dividends +10.2%
S&P/ASX All Ordinaries Accumulation Index -1.5%
6

Outperformance since
inception
Index re-based
800
700
600
500
400
300
200
100
-
WAM Capital outperformed the market by 10.6% p.a.
over 12½ years
WAM Capital Ltd - Investment Portfolio (before all expenses, fees, taxes and dividends)
S&P/ASX All Ordinaries Accumulation Index
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Premium / Discount to NTA
Discount / Premium
30%
20%
10%
0%
‐10%
‐20%
‐30%
‐40%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 *
* To 20 April 2012
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Dividend growth
Cents per share
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
* Annualised interim dividend
Ordinary Fully Franked Dividend Special Fully Franked Dividend Equal Access Share Buy-Back
9

Discussion - some recent
portfolio changes
New Stocks
• Webjet Limited (WEB)
• Ethane Pipeline Income Fund (EPX)
• Flexigroup Limited (FXL)
Disposals
• STW Communications Group Limited (SGN)
• Macquarie Telecom Group Limited (MAQ)
• Coal & Allied Industries Limited (CNA)
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Contributors / Detractors
Best Performing Stocks Financial Year to 31 March 2012
Company Strategy Unrealised/
Realised Gains
SGI Signature Capital Investments Ltd Market Driven $1,412,041
AGI Ainsworth Game Technology Ltd Research Driven $1,077,752
BRG Breville Group Ltd Research Driven $1,040,702
Worst Performing Stocks Financial Year to 31 March 2012
Company Strategy Unrealised/
Realised Losses
CAF Centrepoint Alliance Ltd Research Driven ($863,385)
SYM Symex Holdings Ltd Market Driven ($775,326)
AUN Austar United Communications Ltd Market Driven ($711,944)
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Top 10 Research Driven stocks
as at 31 March 2012
Company
% Gross
Assets
RKN Reckon Limited 2.6%
BRG Breville Group Limited 2.1%
MMS McMillan Shakespeare Limited 1.7%
COF Coffey International Limited 1.4%
SKE Skilled Group Limited 1.3%
AMM Amcom Telecommunications Limited 1.2%
WEB Webjet Limited 1.1%
RCR RCR Tomlinson Limited 1.0%
IPP iProperty Group Limited 1.0%
MYS MyState Limited 1.0%
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Ainsworth Game Technology
Ltd (AGI) - Research Driven
• Identified opportunity through broker network
• Face to face management meeting at the company’s head
office in Silverwater
• Company rated highly on our models
• Identified catalyst – earnings surprise
• Current P/E 13x growing at 50%
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Top 10 Market Driven stocks
as at 31 March 2012
Company
% Gross
Assets
ELI Emerging Leaders Investments Limited 2.4%
IBC Ironbark Capital Limited 1.6%
CCQ Contango Capital Partners Limited 1.6%
CBAPB CBA Perpetual Exc Resale Listed Sec-PERLS IV 1.4%
CTN Contango Microcap Limited 1.2%
ILF ING Real Estate Community Living Group 1.2%
RHG RHG Limited 1.2%
EPX Ethane Pipeline Income Fund 1.1%
AIX Australian Infrastructure Fund 1.1%
SDG Sunland Group Limited 1.1%
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Market Driven facts
Financial Year to 20 April 2012
Turnover of invested equity: 6.8 times or 680%
Number of trades: 2,183
Individual stocks traded: 254
Takeovers: 37
Placements: 53
Short Sales: 24
15

Clarius Group Limited (CND) –
Market Driven
• Idea generated from industry contact
• Followed company for years
• Stock started to trade below NTA which is comprised of cash and receivables
• Current share price: $0.41 vs NTA $0.41. No debt.
• Free option on a recovery as downside protected by NTA
16

Did you know?…..
Apple Inc. – Member of G20?
• Market Capitalisation US$600bn. P/E ratio: 13x
• Net Cash: $US100bn
• Annualised revenue: US$184bn. Annualised profit US$52bn
• One third the size of Australia’s GDP
• Five times the size of BHP Billiton
• Larger than Poland, Belgium and Norway’s total GDP
17

Apple Inc.
Key metrics relative to Country GDPs
Rank Country GDP
Rank Country GDP
(2011 US$bn)
(2011 US$bn)
1 United States 15,065 21 Saudi Arabia 560
2 China 6,988 22 Apple Market Cap 556
3 Japan 5,855 23 Poland 532
4 Germany 3,629 24 Belgium 529
5 France 2,808 25 Taiwan Province of China 505
6 Brazil 2,518 26 Norway 479
7 United Kingdom 2,481 27 Islamic Republic of Iran 475
8 Italy 2,246 28 Argentina 435
9 Russia 1,885 29 Austria 425
10 India 1,843 30 South Africa 422
11 Canada 1,759 31 United Arab Emirates 358
12 Spain 1,536 32 Denmark 349
13 Australia 1,507 33 Thailand 339
14 Mexico 1,185 34 Columbia 321
15 Korea 1,164 35 Greece 312
16 Netherlands 858 36 Venezuela 310
17 Indonesia 834 37 Finland 271
18 Turkey 763 38 Singapore 266
19 Switzerland 666 39 Malaysia 248
20 Sweden 572 40 Nigeria 247
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Looking ahead
• Further interest rate cuts
• US economic recovery to continue
• Global deleveraging cycle to
continue
• Cautiously optimistic on the
Australian equity market
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Looking Ahead
Forward P/E for the Australian market
• Global deleveraging to continue
• Interest rate cuts positive for equity
markets
• Industrial stocks cheap on a
historical basis
• Expect continued merger and
acquisition activity in Australia with
balance sheets in good shape
*Source: Merrill Lynch
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Summary
• Investment team continue to apply rigorous investment process that will identify
opportunities and deliver performance
• Board is focused on delivering a rising stream of fully franked dividends
• Cautiously optimistic on Australian equity market
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Questions
22

Additional Information
23

Who is Wilson Asset
Management?
• The WAM Group is the fund manager of three listed investment companies and
one unlisted fund, with funds under management of approximately $340 million.
• 3 Listed Funds:
− WAM Capital Ltd (ASX: WAM)
− WAM Research Ltd (ASX: WAX)
− WAM Active Ltd (ASX: WAA)
• Focus on listed industrial companies on the ASX
• Concentrates on growth companies predominantly in the small to mid cap area
of the market
24

What Wilson Asset
Management delivers
• Quick decision making
• Bottom up approach
• Staying very close to the market and investee companies
• Strong risk adjusted returns
• Significant market experience
• Closed end fund - avoiding being forced seller and buyer
at inappropriate times
• Actively managed portfolio
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The Team
Geoff Wilson - Chairman / Portfolio Manager
Kate Thorley - CEO & Company Secretary
Chris Stott - CIO / Portfolio Manager
Matt Haupt - Equity Analyst
Martin Hickson - Analyst / Dealer
Mark Tobin - Assistant Analyst
Linda Vo - Senior Financial Accountant
Lillie Johnson - Accountant
Mary-Ann Baldock - Office Manager
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Our Business Model
Investment
Process
=
LIC Structure
Benefits
Investment Focus –
Growth Companies
+
Flexible
+
Mandate
+
Superior Long Term
Performance Record
Experienced
Team
Tight Cost
Control
27

Our Funds
WAM Research
(WAX)
Research
Driven
WAM Capital
(WAM)
Market
Driven
WAM Active
(WAA)
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Superior returns from growth
companies
• We buy growth companies that trade on low price to earnings multiples (P/E)
• We buy when we can identify a catalyst that will increase the valuation
• We find these opportunities are more prevalent in the small to mid cap industrials
sector
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Mid to small cap sector
benefits
• Small cap value has outperformed all other sectors *
• Under researched
• Access to management - ability to build strong relationships
• Life cycle of the business - ability to grow at a faster rate than larger companies
• Higher risk and higher returns
• More takeover activity
* Source – Ibbotson Associates
30

Smaller and more rewarding
*Source – The New York Times
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LICs are superior investment
vehicles
Listed Investment Companies are very attractive investment vehicles
• LICs have outperformed the market ^
• Studies show LICs outperform managed funds *^
• Closed pool of capital – never forced seller or buyer
• Provide consistent flow of fully franked dividends
• Lower MER compared to managed funds
• Provide opportunities – can trade at a premium/discount to assets
• Trades on the ASX which provides intra-day liquidity
^ Australian Study: Morgan Stanly Smith Barney
* UK Study: Collins Stewart
32

LICs outperform the share
market over the long term
* Source: Morgan Stanley Smith Barney
33

WAM Funds outperformance
vs ASX LIC Index
*Source: Iress
34

Investment objectives
The investment objectives of WAM Capital are:
• To deliver a rising stream of fully franked dividends;
• To provide capital growth; and
• To preserve capital.
35

Robust investment process
“Research Driven”
Identify Company
Undertake Detailed Research
Visit with Management – 800+ companies p.a.
Rank the Company
(WAM’s unique rating template)
Catalyst identified or occurs
Buy or short sell shares
36

Investment process
“ Market Driven”
We scour the market for opportunities:
• Initial public offerings
• Capital raisings
• Block trades
• Oversold position
• Takeovers
• Listed Investment Companies (LIC) discount to net tangible assets (NTA)
• Stocks trading at a discount to their NTA
• Earnings momentum / surprise
• Short selling
• Market themes and trends
37

External research coverage
Research Houses covering listed investment companies & WAM Capital:
- Bell Potter Securities
- Morgan Stanley Smith Barney
- Zenith Partners
- Independent Investment Research
- APAM LIC Research
- Evans & Partners
- JBWere
- Morningstar
- E.L.&C. Baillieu
The Company is on the approved product list of the Association of Independently
Owned Financial Planners (AIOFP), and the Company is listed on BT SuperWrap and
BT Investment Wrap platforms.
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Investor communications
� Website – wamfunds.com.au
� Subscribe for weekly emails – includes market update
� Audio casts – Monthly
� Media – Sky Business, Switzer, CNBC, Newspapers, Industry Magazines
� Half yearly Investor Newsletters
� Half yearly Results and Media Release
� Attend and present at industry conferences – ASX, AIA, ASA
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Disclaimer
This presentation has been prepared for use in conjunction with a verbal presentation and should be read in that context.
Information for the graphs, charts and quoted indices contained in this presentation has been sourced from IRESS Market
Technology, Credit Suisse Strategy, Morgan Stanley Smith Barney, Merrill Lynch, Ibbotson Associates, The New York
Times, Collins Stewart, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd unless otherwise stated.
The information in this presentation is only intended for Australian residents.
The purpose of this presentation is to provide information only and the contents of the presentation does not purport to
provide investment advice. We strongly suggest that investors consult a financial adviser prior to making any investment
decision.
The presentation does not take into account the investment objectives, financial situation or particular needs of any person
and should not be used as the basis for making investment, financial or other decisions. The information is selective and may
not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any
particular investment or security, or Fund offered by Wilson Asset Management.
The information provided in the presentation is given in good faith and is believed to be accurate at the time of compilation.
Neither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or
employees make any representation or warranty as to the accuracy, reliability, timeliness or completeness of the information.
To the extent permissible by law, Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd
and its director and employees disclaim all liability (whether arising in contract, tort, negligence or otherwise) for any error,
omission, loss or damage (whether direct, indirect, consequential or otherwise).
Performance figures quoted in the report are past performance. Past performance is not an indicator of future performance.
Neither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or
employees guarantee or make any representation as to the performance of the Funds, the maintenance or repayment of
capital, the price at which shares may trade or any particular rate of return.
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