Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AMCIL Ltd (ASX:AMH, Financial) reported a profit of $7.5 million, only slightly down from $7.6 million the previous year, despite a decrease in dividends from resource stocks.
- The company declared a final dividend of $0.025 plus a special dividend of $0.5, totaling $0.04 for the year.
- The management expense ratio decreased to 0.56% from 0.66% the previous year, indicating improved cost efficiency.
- The portfolio return was 20.5%, significantly outperforming the market's 13.5% increase.
- AMCIL Ltd (ASX:AMH) maintains a diversified portfolio across sectors, including a mix of large-cap, mid-cap, and small-cap stocks.
Negative Points
- The profit for the year was slightly down due to a decrease in dividends from resource stocks, particularly BHP.
- There was a low level of capital gains this year due to brought forward losses from the prior year.
- The NTA was $1.26 per share, but the share price was $1.10, indicating a 13% discount to the NTA.
- The management expense ratio is expected to increase in the next fiscal year due to higher costs.
- Valuations appear very high, with price-to-sales and price-to-book ratios at upper levels, indicating potential overvaluation in the market.
Q & A Highlights
Q: SCBAs at an historic high would answer replace it with Macquarie Group within the portfolio?
A: The P/E on CBA is beyond anything seen in my career, so we've been trimming that position. Macquarie is already a large position, and while we're happy to buy more if the price is right, we've seen other opportunities to allocate funds.
Q: Is the sizable reduction in the management expense ratio permanent or due to specific factors this year?
A: The actual costs in dollar terms are expected to be slightly up this year, but the ratio itself will depend on portfolio performance. If the portfolio grows more than the rate of increase in costs, the MER will come down.
Q: What is your assessment of private credit investments claiming equity-like returns?
A: We are equity investors and not credit analysts. While private credit can offer equity-like returns, it involves different risks and expertise. It's not our area of expertise, and we prefer to stick to what we know best.
Q: With improving gold prices, will gold companies now have improved earnings?
A: Yes, they will. However, predicting gold prices is difficult. Historically, buying gold has been more profitable than buying gold equities. We prefer to invest in businesses where we can see a clearer path to profit growth.
Q: Can you discuss individual company weight limits and the annual dividend policy?
A: We don't have a formal limit, but our largest stock, CSL, is about 8.8% of the portfolio. We look at absolute levels and relative to the index. The Board determines the dividend annually, and we have enough franking credits to cover one full year's worth of ordinary dividends.
Q: Was there any one position that caused the realized capital losses last year?
A: We don't specify capital gains tax positions for particular investments, but in '22-'23, the largest sales were in Iris and Texas Group, which we sold out of last year.
Q: Given the exposure to lithium and iron ore prices, what attracted you to Mineral Resources?
A: The business is led by founder Chris Ellison, who has significant equity in the company. They have a strong mining services division and are growing production sensibly. We are mindful of the cyclical nature and have kept our position smaller.
Q: What are your thoughts on the positioning of small caps versus large caps?
A: Small caps in the Australian market are different from those in the US. They often have more challenges and are less established. While there may be value in some, one must be careful in selecting them.
Q: Would you consider investing in Berkshire Hathaway?
A: We would consider it if the price and valuation were right, and we were confident in the long-term management. It has characteristics we like, but we need to be sure about its future leadership.
Q: What are you doing to reduce the discount between the share price and NTA?
A: We are focused on delivering strong performance, increasing dividends, and maintaining low management fees. We are also engaging with the market and financial advisors to get our story out there.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
