SEC - Spheria Emerging Companies

[System]

Spheria Emerging Companies Limited provides an opportunity to invest in an actively managed, Australian and New Zealand small and micro companies portfolio, designed for investors seeking capital growth and portfolio diversification.

The aim of the Company is to outperform the S&P/ASX Small Ordinaries Accumulation Index, and provide investors with capital growth and income over the medium-to-long term by investing predominantly in Australian listed entities within the S&P/ASX Small Ordinaries Index.

It is anticipated that SEC will list on the ASX during December 2017.

http://www.spheria.com.au

 

[Miner]

Folks
There have been some great success stories like VG1, WMI from recent IPOs. Not so much success stories with stagnant pricing for some of the investment fund like SEC scrips. eg : PL8 and others.
What do you believe the future or rather potential of SEC ?
Cheers

 

[Tightwad]

it's a good space at the moment, but not sure that they'll command the premium that wilson's have with wmi. compared it to a similar lic with a good record and it was trading slightly below NAV

 

[Miner]

it's a good space at the moment, but not sure that they'll command the premium that wilson's have with wmi. compared it to a similar lic with a good record and it was trading slightly below NAV

Thanks Tightwad. I am watching the space accordingly . WMI has been a great success so far and I agree with your observation

 

[AUSG]

Hi guys
I am just curious how would you evaluate a LiC ?

 

[Dona Ferentes]

another subscale LIC trading below NTA

A fortnight ago, the board of Spheria Emerging Companies, a small caps LIC managed by Sydney funds manager, Spheria Asset Management, gave its manager one year to close the LIC’s discount to its net asset backing, or it will be gone from the ASX boards for good.

 

[divs4ever]

Hi guys
I am just curious how would you evaluate a LiC ?

well i look at the div. yield compared to the price paid , this discount to NTA ( or premium ) only matters to me if i am going to sell

now of course fixated on NTA is not the only metric you need to watch performance fees and the liquidity in the portfolio

but since there is a possibility QVE will be taken over by Wilson's i will have to start putting the tape measure over SEC ( and smaller cap. rivals ) looking for a replacement

one reason i won't be eager for WLE is it only pays 6 monthly ( QVE pays 3 monthly ) WLE concentrates on the ASX largest stocks ( while QVE's mid. caps imply some capital growth above the index ) i have a choice of two 'top 50' ETFs to do that , and several 'top 200 ETFs '

but how will SEC handle the discount issue ? a buy-back using div. money ( maybe saved from those irregular winners )

but hmmmm ! unlisted vs. listed , i have a couple of unlisted holdings already .. that might not be a 'show-stopper '

 

[divs4ever]

Top 10 Holdings Company Name % Portfolio
Link Administration Holdings Limited 5.7
IRESS Limited 5.3
Adbri Limited 4.9
Bega Cheese Limited 4.3
Supply Network Limited 3.8
Vista Group International Limited 3.7
Deterra Royalties Limited 3.4
A2B Australia Limited 3.1
Bravura Solutions Limited 3.0
Breville Group Limited 2.9

Top 10 40.0%

pays 3 monthly ( good for me )


however i already hold some of the 'top 10 '

so there is increased concentration risk

would i be better just buying some BGA ( thinking to myself )

 

[divs4ever]

Major Contributors to Performance

Over the month the largest contributors to performance were from overweight positions in Link Administration Holdings (LNK.ASX, +59%), Adbri (ABC.ASX, +47%), and Vista Group International (VGL.ASX, +30%).

Link Administration Holdings (LNK.ASX) share price rallied nearly 60% during the month after the company received a takeover offer from Mitsubishi UFJ Financial Group. Link shareholders will receive $2.10 plus a $0.16 cash dividend (25% franked) which represented a ~33% premium to the prior day’s closing price and a ~63% premium to the 3-month volume-weighted average price. We have discussed LNK in prior commentaries as the share price had come under pressure in the last year due to legal proceedings relating to its Funds Solution (LFSL) division in the UK, as well as the surprise loss of a large client (HESTA) representing 10% of divisional revenue in June 2023 which sent the company’s share price into a tailspin. We entered the name in late calendar year 2022 on valuation grounds (having never owned the company since it listed in 2015) and subsequently bought more over the last year as the share price retraced further. Whilst the bid is opportunistic, we think the significant premium offered and the risk-reward given the Company’s relatively high gearing levels means the deal is highly attractive to shareholders. The takeover validates the significant strategic value on offer with Link Market Services (share registry and employee share plans) being the second largest player in Australia and NZ, third in the UK and second in India, whilst the Retirement & Superannuation Solutions (RSS) business is the largest administrator in the industry fund space in Australia.
Adbri (ABC.ASX) share price rose 47% in December after it received a non-binding proposal from CRH and the Barro Group to acquire 100% of the company for $3.20 per share which represented a 41% premium to the last closing price. CRH is a leading global building materials company with strong market positions in North America, Europe and growing presence in Asia and South America. As we understand CRH will be buying out minority shareholders with the Barro group retaining its 43% interest. Given CRH has only a small existing presence in the Australian market the deal is not expected to face any notable competition hurdles.  ABC has been a long-term holding of the Company, but its share price has come under pressure in the last few years due to several factors including an irrational industry pricing environment, a material loss of lime volumes in respect of long-term supply agreement and balance sheet pressure from higher-than-expected capital expenditure on their Kwinana project upgrade. With these issues now largely resolved the group was looking forward to significantly improved returns for shareholders which has likely prompted the CRH/Barro consortium to pounce on the balance of the company at this point in time.

or maybe that will reduce by itself ( i hold LNK and ABC already ) ( and some others not under T/O consideration )

 

[divs4ever]

Increase in quarterly dividend target to 1.5% post-tax NTA per share

The Board of Spheria Emerging Companies Limited (ASX: SEC) (Company) has resolved to increase its targeted quarterly fully franked dividend to 1.5% of post-tax net tangible assets (NTA) per share from the current 1.25% of post-tax NTA per share.

This represents an increase of 20% on the current level of dividends, an increase of 50% over the level of dividends from one year prior1 , and is equivalent to a targeted yield of 6% of post-tax NTA per share p.a. (8.6% including franking).

This increased dividend target will be implemented from the 30 June 2024 quarterly dividend.

The Company’s continued strong level of dividends received from its underlying investment portfolio together with a healthy level of retained profits and franking credits has enabled the increase.

Mr Jonathan Trollip said: “One of the benefits of a LIC structure is the ability to manage capital so as to pay regular and consistent fully franked dividends to shareholders.

Since IPO the Company has already paid more than 50 cents per share of fully franked dividends, and we are very pleased to announce this increase in dividend target which will apply from the next quarterly dividend payment.”

The new dividend guidance is subject to available profits, cash flow and franking credits.

The Board will continue to monitor the Company’s dividend policy based on prevailing market conditions.

This announcement was authorised for release by the Board of Directors.

1 March 2023 and prior quarterly dividends paid at 1% of post-tax NTA per share

i hold SEC ( bought in April this year )

hhmmm this might reduce my ability to accumulate a larger position , but the extra divs. will be gratefully accepted

 

[divs4ever]

Spheria Emerging Companies Limited (ASX: SEC) announces quarterly fully franked dividend of 3.4cents per share

The Board of SEC has resolved to pay a quarterly dividend for the period ended 30 June 2024 of 3.4cents per share, which will be payable on 13 August 2024.

The dividend will be fully franked at the corporate tax rate of 30%.

The payment of the dividend is consistent with the Company’s increased dividend target announced in June 2024 to pay dividend on a quarterly basis, at a level of 1.5% of post-tax NTA at the end of each calendar quarter, subject to available profits, cash flow and franking credits.

Previously the dividends were paid at a rate of 1.25% of post-tax NTA.

The dividend has been calculated based on the Company’s post-tax NTA as at 30 June 2024 of $2.239 per share, multiplied by 1.5%, giving rise to a fully franked dividend of 3.4 cents.

Details of the dividend are as follows:

Amount: 3.4 cents per shareEx – Dividend Date: 23 July 2024
Dividend Record Date: 24 July 2024
Dividend Payment Date: 13 August 2024

Commenting on current market conditions, Spheria Asset Management Pty Ltd (Investment Manager of SEC) said: “The small cap index fell 4.5% in the June quarter due to heavy selling pressure reflecting a myriad of factors ranging from macro to micro-economic.

On the macro-economic front, the persistent issue being a higher for longer interest rate thematic which is now hammering consumer spending and will undoubtedly lead to some ugly economic prints over the next couple of quarters.

The question in our minds is how deep and long will the recession be if the current monetary policy settings are maintained and therefore can they be maintained?

Whilst negative for corporate profitability it is also driving a continued fight to safety thematic that is favouring large cap companies - the top 100 index down only 0.8% over June quarter - that are seen as less sensitive to the economy with little regard to the pronounced over-valuation of this segment.

Perversely, smaller companies that are speculative in nature or ridiculously expensive but where the narrative is overpowering any common sense are finding favour as well (e.g. Mesoblast rallied +50% in the quarter and Life360 +28%).

This is figuratively a macro quagmire for any small cap manager that has a valuation bent.

Moving on from the macro, the June quarter saw several small cap mandates being transitioned in the market which added to the selling pressure as well as end of year tax loss selling (which is rarely good for us).

Whilst the quarter was challenging for our absolute and relative performance, we have used the downturn to deploy cash from several takeovers that completed during the quarter into more cyclically exposed companies where the valuations are so depressed we feel the odds are heavily stacked in our favour to make significant returns over the next few years at relatively low risk

.”Please note that the Company’s dividend reinvestment plan (DRP) is available for this dividend.

Shareholders who would like to participate in the DRP for this dividend need to elect to do so by Thursday,25 July 2024.

Shareholders can enrol at: https://investor.automic.com.au or alternatively, please contact theCompany’s share registry, Automic, for assistance on 1300 902 587 (in Australia) / +61 2 7208 4521(International).

Shareholders who would like to find out more about the DRP can visit the Company’s website.After payment of this dividend, the total dividends since the Company’s IPO in December 2017 will be55.1 cents per share.

At 30 June 2024, the value of the Company’s franking account1 was $5.6m (9.3 cents per share).

This is equivalent to 21.7 cents per share in fully-franked dividends at the Company tax rate of 30% and the Company presently maintains sufficient profit reserves for this value of dividends.

The Board will continue to monitor the Company’s dividend policy based on prevailing market conditions.

This announcement was authorised for release by the Board of Directors.


i hold SEC ( bought in April this year )