WAM Microcap (WMI) H2 2024 earnings summary

Executive summary

• All four managed funds—WAM Capital, WAM Research, WAM Microcap, and WAM Active—outperformed their benchmarks in FY24, with WAM Capital and WAM Research notably beating the All Ordinaries Index by 14% and 18% and the Small Ordinaries Index by 17% and 21% respectively, marking the best performance in over a decade.

• WAM Microcap outperformed by 12.3%, marking its seventh consecutive year of outperformance since IPO.

• WAM Active outperformed its benchmark by 25.8%, benefiting from increased capital markets activity in larger small caps.

• Dividends remained robust across all funds, with high franking levels and substantial profit reserves maintained.

Financial highlights

• WAM Capital: +26.4% portfolio performance, +17.1% outperformance vs. S&P/ASX Small Ordinaries, 15.5 cps full year dividend (60% franked), and trades at a fully franked dividend yield of around 10%.

• WAM Microcap: +21.6% portfolio performance, +12.3% outperformance, 10.5 cps fully franked dividend, 7.0% dividend yield.

• WAM Research: +30.7% portfolio performance, +21.4% outperformance, 10.0 cps full year dividend (60% franked).

• WAM Active: +29.4% total shareholder return, +25.8% portfolio performance, 6.0 cps fully franked dividend, 7.1% dividend yield.

• Net tangible assets (NTA) have declined by about 5% per year over five years due to high dividend payouts, despite market outperformance.

Outlook and guidance

• The team remains bullish on small caps, viewing underperformance as cyclical and expecting a rebound if interest rates fall.

• Dividend increases are unlikely in the near term due to already high payout ratios and the need to balance capital preservation.

• The investment process focuses on diligent research, free cash flow, and market catalysts to identify mispricing opportunities.