Spheria Emerging Companies Limited - ASX: SEC Full-year FY2021 Results & Portfolio Update
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Spheria Emerging Companies Limited ASX: SEC Full-year FY2021 Results & Portfolio Update
2 Agenda 1. SEC Company update 2. Portfolio update 3. Questions
Full-year FY2021 Highlights
3
Strong results with Company performance up 55.5%
FY21 profit Company Yield (including
Interim dividend Yield
performance1 franking)
$40.2m +55.5% 5.0c 3.5%2 4.8%3
• FY21 net profit after tax of $40.2m, a material turnaround from the net loss in FY20.
• Company NTA performance of +55.5%
• Final dividend of 5.0 cents per share (fully franked). Annual dividend yield equal to 3.5%2 (4.8%3 including franking).
• FY21 annual dividend of 8.5 cents is an increase of 55% on the FY20 annual dividend of 5.5 cents, in recognition of the
strong profit for the year.
• New target dividend yield of 4% of NTA p.a. (5.4% including franking), paid quarterly, for FY22, beginning in the
September 2021 quarter.
• On-market share buy-back of $9.9m to date, ($3.1m during FY21), adding 2.8 cents of NTA per share.
1 Calculated as movement in Company’s pre-tax NTA, which includes tax on realised gains/losses and other earnings, but excludes any provision for tax on unrealised gains/losses, adjusted for dividends paid by the Company.
2 Annualised dividend yield when combined with FY21 interim dividend of 3.5 cents per share, calculated on share price as at 30 June 2021 of $2.40
3 Annualised dividend yield when combined with FY21 interim dividend of 3.5 cents per share, calculated on share price as at 30 June 2021 of $2.40 using 26% tax rate
4
NTA breakdown for FY21
30 June 2021 NTA 30% higher than IPO price of $2.00
+ $0.935 - $0.010 - $0.007 - $0.060
$2.80 + $0.010 $2.599
$2.60
$2.40
$2.20
$2.00 $1.731
$1.80
$1.60
$1.40
$1.20
$1.00
Pre-tax NTA Portfolio Tax provided Company Dividends Buy-back Pre-tax NTA
1 July 2020 performance or paid expenses paid accretion 30 Jun 2021
Source: Spheria Emerging Companies5
Dividends
FY21 final dividend of 5c, up 100% on FY20
• Final dividend of 5.0 c per share. Full year dividends of 8.5 c, a dividend yield equal of 3.5% (4.8% including franking).
• Total dividends since IPO of 24.0 cents per share
Dividend History
6
FY21 Final Dividend
5
Final 5.0 cents
dividend Amount per share
4 (100%
Maiden Final franked)
Cents per share
dividend dividend
Interim
3 (100% (100% Ex-dividend Date 7 Sept 2021
dividend
franked) franked) Interim
(100%
dividend
Final franked)
2 (100%
dividend
Interim franked)
dividend
(100% Dividend Record Date 8 Sept 2021
franked)
1 (100%
franked)
0 Dividend Payment Date 22 Sept 2021
21-Sep-18 20-Mar-19 20-Sep-19 20-Mar-20 23-Sep-20 24-Mar-21 22-Sep-21
Dividend Payment Date
Source: Spheria Emerging CompaniesDividends 6
New 4% dividend target, paid quarterly
• Higher dividend: New target dividend yield of 4% of NTA p.a. (5.4% including franking) puts SEC in top half of
Australian Equity LIC income payers
• More regular dividend: Paid quarterly, for FY22, beginning in the September 2021 quarter
Domestic Equity LIC/LIT Dividend Yield (Net and Gross)
12%
Final
dividend
10% (100% New SEC target
franked) yield = 4% net
Final
8% dividend and 5.4% gross
(100% Interim
franked) dividend
Sector weighted average
6% Interim (100%
dividend gross dividend yield = 4.9%
Final franked)
(100%
4% franked) dividend
Interim (100%
dividend franked)
2% (100%
franked)
0%
WAM
WMI
DUI
CDM
MIR
QVE
AFI
FSI
TEK
NCC
OPH
WAX
WAA
PIC
WAR
WHF
CIN
WLE
BKI
SEC
AMH
NSC
MLT
WIC
DJW
ARG
ACQ
FGX
SNC
CAM
NAC
TOP
PL8
AUI
RYD
OZG
Gross Yield Net Yield
Source: Spheria COMPANY
SOURCE: Emerging Companies, Company
DATA, IRESS, Data,POTTER.
BELL IRESS, Bell BASED
Potter, Based on last 12
ON LAST 12-month
MONTH dividends/distributions paid. As at 30 June
DIVIDENDS/DISTRIBUTIONS PAID.2021.
AS AT 30 JUNE 2021.Performance History
7
FY21 Company performance up 55.5%
SEC Company performance
Performance as at 31st July 2021
Since Inception
Period 6 month 1 year 3 year (pa)
Inception (pa) Date
Company 15.4% 54.3% 11.4% 11.2% 30/11/2017
S&P/ASX Small Ordinaries Accumulation Index 11.8% 32.3% 9.2% 9.4%
Outperformance 3.6% 22.0% 2.2% 1.8%
Past performance is not a reliable indicator of future performance.
Company’s performance is calculated as the Company’s investment portfolio performance after fees excluding tax on realised and unrealised gains/losses and other earnings, and after company expenses
Benchmark is the S&P/ASX Small Ordinaries Accumulation Index.
All p.a. returns are annualised60.0%
10.0%
20.0%
40.0%
70.0%
30.0%
50.0%
-40.0%
-20.0%
-10.0%
0.0%
-30.0%
29-Nov-17
29-Dec-17
29-Jan-18
28-Feb-18
Source: Spheria Asset Management
31-Mar-18
30-Apr-18
31-May-18
Index
Spheria
30-Jun-18
31-Jul-18
31-Aug-18
30-Sep-18
Relative Performance
31-Oct-18
30-Nov-18
31-Dec-18
31-Jan-19
28-Feb-19
31-Mar-19
30-Apr-19
SEC Portfolio Performance
31-May-19
30-Jun-19
31-Jul-19
31-Aug-19
30-Sep-19
31-Oct-19
30-Nov-19
31-Dec-19
* Net Portfolio performance = investment performance of mandate after investment management fees but before taxes.
31-Jan-20
29-Feb-20
31-Mar-20
30-Apr-20
31-May-20
30-Jun-20
31-Jul-20
SEC Portfolio - Net Performance* since Inception
31-Aug-20
30-Sep-20
31-Oct-20
30-Nov-20
31-Dec-20
31-Jan-21
28-Feb-21
31-Mar-21
30-Apr-21
31-May-21
30-Jun-21
31-Jul-21
31-Aug-21
89
SEC attribution over past 12m
Spheria Emerging Companies - Attribution - 12 Month - June 2021
6
5
4
3
2
1
0
-1
-2
Source : Bloomberg Data as at June 30 202110
Performance by Market Cap Sector
Micro vs Small vs Large Caps
210
190
170
+42%
150
130
110
90
70
Small Cap Micro Caps ASX 100
50
06/2019 08/2019 10/2019 12/2019 02/2020 04/2020 06/2020 08/2020 10/2020 12/2020 02/2021 04/2021 06/2021
• Microcaps and small caps have outperformed large caps since beginning of 2019
• Microcaps have outperformed small caps by 52% since March of last year
• Feb 2021 represents greatest rolling 12m period of micros outperformance
Chart Source: Bloomberg data. Micro/small/large accumulation indices. As at 31/07/2021Bifurcation in the market creates opportunities
No. of stocks with EV/ Sales > 10
300
250
200
150
100
50
0
07/2021
07/2020
07/2010
07/2012
07/2011
07/2013
07/2015
07/2017
07/2014
07/2018
07/2016
07/2019
07/2001
07/2006
07/1996
07/2000
07/2002
07/2007
07/2008
07/2009
07/1997
07/1998
07/1999
07/2003
07/2005
07/2004
• EV/Sales > 10 is expensive in historical context
• The number of highly rated stocks has hugely expanded since Sept last year
Chart Source: Bloomberg data, ASX stocks with market cap > $50m, < $3.0bn and EV/trailing sales multiple over 10x. As at 31/07/2021
11 1112
Monadelphous (ASX:MND)
Resources recovery not priced in.
Cash Flow Conversion (EBITA) EBITA vs Share Price
250.0 120% 250 $30.00
97%
200.0 100% $25.00
200
80% $20.00
150.0 150
60% $15.00
100.0 100
40% $10.00
50.0 20% 50 $5.00
0.0 0% 0 $0.00
Jun-20
Jun-11
Jun-12
Jun-15
Jun-16
Jun-10
Jun-13
Jun-17
Jun-18
Jun-19
Jun-14
Jun-03
Jun-04
Jun-00
Jun-01
Jun-02
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Free Cash Flow before Tax and Interest
EBITA
Cash Conversion (Average) EBITA-NTM Price
• MND has one of the best sector performance histories – executional excellence, good cash flow, conservative management.
• Market concerned about next 12m margins – resource companies looking to re-invest with record commodity prices
• Net cash balance sheet, trading on EV/EBIT of 8.8x Fy 22
• Revenue mix has shifted substantially over past 5 years to maintenance revenue, margins will recover with recovery of Eng Construction
Source : Morningstar, IRESS, Spheria.
1213
Company Positions
Spheria Emerging Companies as at 31st July 2021
Company Name % Portfolio
Adbri Limited 4.8
Fletcher Building 4.5
Healius 4.0
City Chic Collective 3.6
Seven West Media Ltd 3.5
Flight Centre Travel 3.4
IRESS Limited 3.4
Monadelphous Group 3.4
Blackmores Limited 3.4
Breville Group Ltd 3.3
Top 10 37.3
Source: IRESS14 Outlook • FY 2021 was a year of recovery driven by abundant liquidity and cheap valuations • Capital markets likely to remain buoyant (M&A cycle, IPO market) • Potential for sustained inflation to lift 10-year bond rates – would favour valuation centric investors • Bi-furcation in market valuations continues to offer opportunities • Despite the market’s strong recovery, we see good investing opportunities for SEC Ltd
15 Questions
16
Disclaimer
Spheria Emerging Companies Limited ACN 621 402 588 (SEC)
Spheria Asset Management Pty Ltd (ABN 42 611 081 326, Corporate Authorised Representative No. 1240979) (‘Spheria’) is the investment manager of Spheria Emerging
Companies Limited ABN 84 621 402 588 (‘SEC or the ‘Company’). This communication is not, and does not constitute, an offer to sell or the solicitation, invitation or
recommendation to purchase any securities and neither this communication nor anything contained in it forms the basis of any contract or commitment. Any offer or sale of
securities are made pursuant to definitive documentation, which describes the terms of the offer (‘Offer Document’) available at www.spheria.com.au. Prospective investors
should consider the Offer Document in deciding whether to acquire securities under the offer. Spheria Emerging Companies Limited (ACN 621 402 588) is the issuer of the
shares under the Offer Document. Prospective investors who want to acquire under the offer will need to complete an application form that is in or accompanies the Offer
Document. The Offer Document is an important document that should be read in its entirety before deciding whether to participate in the offer. Prospective investors should
rely only on information in the Offer Document and any supplementary or replacement document. Prospective investors should contact their professional advisers with any
queries after reading the Offer Document.
While SEC and Spheria believe the information contained in this communication is based on reliable information, no warranty is given as to its accuracy and persons relying on
this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Spheria and SEC disclaim all liability to any person relying on
the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise
directly or indirectly in respect of such information. Any opinions and forecasts reflect the judgment and assumptions of Spheria and its representatives on the basis of
information at the date of publication and may later change without notice. Disclosure contained in this communication is for general information only and was prepared for
multiple distribution. The information is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in
relation to investment. The information in this communication has been prepared without taking account of any person’s objectives, financial situation or needs. Persons
considering action on the basis of information in this communication are to contact their financial adviser for individual advice in the light of their particular circumstances. Past
performance is not a reliable indicator of future performance. Unless otherwise specified, all amounts are in Australian Dollars (AUD). Unauthorised use, copying, distribution,
replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining
prior written permission from SEC and Spheria.You can also read
