Prime Value Imputation B aims to provide a regular tax-effective income, combined with competitive capital growth over the medium to long-term, by managing a portfolio of assets comprised mainly of Australian equities listed on any recognised Australian stock exchange. The fund invests in Australian equities and will normally have short term cash investments for liquidity management purposes and may have limited investment in fixed interest securities.
The Fund returned -2.1% for the month of Sept, outperformed its benchmark. The Sept Quarter return was 1.7%, ahead of its benchmark. Cash of 1.9 cents per unit plus franking was distributed for the Quarter, yielding 1.4% including franking. Main contributors for the month of were Seven group (SVW +11.4%), Santos (STO +6.3%) and ANZ (+1.3%). Detractors were Macquarie group (MQG -5.5%), Goodman group (GMG -8.2%) and Waypoint REIT (-10.0%). It was a month where equity market rose and ebbed as it reacted to movement in bond yield. REITs were among the worst performers as “higher for longer” sentiment gained momentum.
Seven Group has largely remained under the radar, partly due to the relatively low liquidity of the stock. It’s the quirk of indices that companies such as Seven are deemed as a small cap company mainly because of its low free float despite its large market capitalisation. For us, being benchmark agnostic, it meant an opportunity to invest in an undervalued company that has been significantly re-rated up since our initial investment. Seven consists of Caterpillar supplier WesTrac and equipment hire business Coates. Recent results point to both business doing well – margins are improving which indicates a strong ability to price well into markets where demand is high. The conglomerate also owns stakes in listed companies Boral (70%), Beach Energy (30%) and Seven West Media (40%), as well as unlisted energy, media and property holdings. Of these investments, it is the recently acquired 70% stake in Boral the most material in terms of value creation for Seven. We estimate Seven is trading on a PE multiple of 13.5x FY24 earnings, which is at a substantial discount to the ASX300 Index. The Fund has a small holding in this name as part of the portfolio aiming for mediumterm growth.
Dividend boom in the past few years is fading partly due to higher capex requirements and general more subdued commodity prices. Recent government legislation discussion also deterred companies undertaking corporate actions. This Fund continues to seek out companies paying sustainable dividends and offering medium term growth prospects.
What is Prime Value Imputation B Prime Value Imputation B is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Value Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Prime Value Imputation B has Assets Under Management of 38.70 M with a management fee of 1.03%, a performance fee of 0 and a buy/sell spread fee of 0.76%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Prime Value Imputation B has returned 6.34% in the last month. The previous three years have returned 10.43% annualised and 14.49% each year since inception, which is when the Prime Value Imputation B first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Prime Value Imputation B first started, the Sharpe ratio is 0.45 with an annualised volatility of 14.49%. The maximum drawdown of the investment product in the last 12 months is -5.28% and -53.02% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Prime Value Imputation B has a 12-month excess return when compared to the Domestic Equity - Large Value Index of 3.4% and 0.51% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Prime Value Imputation B has produced Alpha over the Domestic Equity - Large Value Index of 0.25% in the last 12 months and 0.05% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Value Index category, you can click here for the Peer Investment Report.
What level of diversification will Prime Value Imputation B provide?
Prime Value Imputation B has a correlation coefficient of 0.9 and a beta of 1.07 when compared to the Domestic Equity - Large Value Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Prime Value Imputation B and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Prime Value Imputation B with the ASX Index 200 Index?
For a full quantitative report on Prime Value Imputation B compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Prime Value Imputation B to do my own analysis?
To sort and compare the Prime Value Imputation B financial metrics, please refer to the table above.
Has the Prime Value Imputation B been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Prime Value Imputation B?
How do I get in contact with the Prime Value Imputation B?
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Prime Value Imputation B. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The August result season is over and most fundies are still catching up on the deluge of information. Market reactions for the results had been particularly strong (good or bad) even for the big companies.
Woolworths and Coles were up 3% and down 7% respectively on the day of the result. Consumer facing companies seemed continue to deliver but forward-looking guidance was scarce. Some of the key thematics from the result season included impact of rising interest rates on borrowing cost, labour shortage still a key challenge, consumers rather resilient (low unemployment), travel companies continue to benefit from sector tailwinds. Consensus earnings estimates for FY24 were revised down, now some -6% (resources the main culprit).
The Fund returned 0.4% for the month of August, outperformed its benchmark (-0.7%). Key contributors were Wesfarmers (WES +8.5%), Goodman Group (GMG +13.7%) and Harvey Norman (HVN +6.9%).
Detractors were BHP -2.5%, Insignia (IFL -12.7%) and Telstra (TLS – 5.8%). A key feature of the reporting season is the outperformance of the Discretionary sector (retail, travel, discretionary spend etc). The low expectations going into reporting meant much of the bad news had been factored in – hence the outperformance when actuals were not as bad or had been anticipated. Conversely, Defensive sector underperformed. GMG is particularly interesting as it continued to evolve over the last 25 years from having a few sheds to integrated warehousing to data centres. It is responding to the significant data centre opportunity with secured and potential power allocation of >3GW. They now represent 30% of WIP – a sizeable data centre business inside GMG, something worthwhile keeping an eye on. This earnings season was slightly disappointing from a dividend perspective. Dividend boom (thanks to the strong commodity prices) in the past few years is fading (rising capex requirements and general uncertainties). Fewer companies than usual lifted their dividend. This Fund continues to seek out companies paying sustainable dividends and offering medium term growth prospects.
Performance Commentary - July 31, 2023 The Fund returned 3.4% in the first month of the new financial year. The market was buoyant, partly driven by the improving inflation data and the likelihood of seeing the end of interest rate rise. Energy names performed well on the back of rally in energy prices (trading on tighter market fundamentals and improved US macroeconomic data). Contributors were Woodside (+10.3%), NAB (+7.7%) and CBA (+5.4%). Detractors were Macquarie Group (MQG -1.5%), Woolworths (WOW – 2.8%) and Telstra (TLS -0.9%). MQG held their AGM during the month and provided a soft June Quarter update. Both commodities income (lower volatility) and investment-related income (poor environment for deal flow) were guided lower. These will be the areas to watch for MQG to meet their FY24 forecast. August is when many companies reporting their half-yearly results.
From the overall market perspective, the big miners are expected to have lower earnings due to softer commodity prices (ie lower dividends). CBA is the only Big-4 bank reporting whereas others will provide trade updates. The pressure on net interest margin and the lack of credit growth had been weighing on the sector. We also need to monitor any deterioration in the bad debt cycle.
Performance Commentary - June 30, 2023 The Fund returned 15.4% for FY2023, outperformed its benchmark. Total return including franking was 17.7% for our investors. Cash distribution was 9.99 cents per unit plus franking credits, hence an income yield of 4.5% or approximately 6.8% including franking. The year could be broadly divided into 2 halves in term of returns – first 6 months dominated by Resources & Financial sectors whereas Information Technology sector surged in the second half. Mid-caps did particularly well, assisted partly by a raft of M&A activities.
Key absolute return contributors for the year were Oz Minerals (OZL +58.7%), BHP (+9.1%) and Macquarie Group (MQG +7.9%). Detractors were Amcor (AMC -17.6%), Ampol (ALD -12.5%) and S32 (-4.5%). Interest rate rise, inflation, economic growth (possible recession) were some of the main concerns for FY23. Company results reported thus far seemed to indicate consumer resilience, however many retailers started to witness the apprehension of consumers as they face cost of living increases, higher mortgage repayments etc. Market earnings estimates continued to be revised downwards. Whilst we might potentially move towards the tail end of the interest rate tightening cycle, the outlook still remains uncertain. This coupled with questions over China growth stimulus (read commodity price impacts) lead us to remain cautious but constructive in equity market outlook. We will remain selective. We expect the ordinary dividends to be rather stable in the near term. The big dividend payers (big miners for example) in the last few reporting rounds are unlikely to repeat the big payouts due to lower commodity prices (lower earnings) and also to preserve the corporate balance sheet for future growth projects. We continue to hold a balanced portfolio, seeking sustainable dividends plus medium-term growth opportunities.
Performance Commentary - May 31, 2023 The Fund returned -3.4% compared with benchmark of -2.5% in May. Macro volatility / commentary continued to be the significant driver of market return. Materials and Financial sectors retracted whilst the IT / growth names outperformed. Main detractors were BHP (-5.4%), Wesfarmers (WES -8.3%) and National Australia Bank (NAB -9.9%). Contributors were Suncorp (SUN +6.6%), Ampol (ALD +4.9%) and Woodside (WDS +1.8%). During the month NCM received a revised non-binding indicative proposal from Newmont.
This new indicative proposal is the second attempt from Newmont at about 16% higher than one proposed in February. It also permits NCM to pay a franked special dividend of up to US$1.10 per share should they proceed. Newcrest has agreed to grant Newmont the opportunity to conduct confirmatory due diligence. NCM is rich in assets and long dated growth options. This is particularly attractive to foreign big gold operators with a long term approach to investment. It could be our second holding in the M&A space this year as Oz Minerals (OZL) bid sayonara to ASX in April. Assuming the bid for NCM is successful, the dividend distribution will most likely occur in FY24. Ampol continues to be a high yielding stock, with significant amount of franking credits available to the directors to consider capital management options. The market remains volatile as it tries to position for Central Banks’ move. We continue to hold a balanced portfolio aiming for good income plus growth overtime.
Performance Commentary - April 30, 2023 The Fund returned 1.5% compared with benchmark of 1.8%. Resource names reversed their previous gains (soft iron ore price) and were the main detractors – BHP (-5.9%), Mineral Resources (MIN -8.5%, disappointing production numbers plus weak lithium price) and RIO (-6.5%). Contributors were Macquarie group (MQG +3.9%), Newcrest (NCM +7.7%) and CSR (+10.5%). During the month NCM received a revised non-binding indicative proposal from Newmont. This new indicative proposal is the second attempt from Newmont at about 16% higher than one proposed in February. It also permits NCM to pay a franked special dividend of up to US$1.10 per share should they proceed. Newcrest has agreed to grant Newmont the opportunity to conduct confirmatory due diligence. NCM is rich in assets and long dated growth options. This is particularly attractive to foreign big gold operators with a long term approach to investment. It could be our second holding in the M&A space this year as Oz Minerals (OZL) bid sayonara to ASX in April. Assuming the bid for NCM is successful, the dividend distribution will most likely occur in FY24.
As we write this report, the major banks are reporting their half-yearly results (or trade update). Whilst the half yearly results appeared reasonable, all eyes are on the current state of the play. Net interest margin (NIM) are under pressure (even lower than some bearish expectation) as banks face heightened competition in the mortgage space and have to pay higher interest rates for deposits. It would seem the peak NIM has passed and the outlook for the sector would be tougher going forward. Asset quality doesn’t seem to be too much of a concern at the moment. Banks are cum-div, most yielding in excess of 3% for the Half. We will hold them for now to capture the dividends.
The market remains volatile as it tries to position for Central Banks’ move. We continue to hold a balanced portfolio aiming for good income plus growth overtime.
Performance Commentary - February 28, 2023 The Fund returned -2.6%, in line with its benchmark. Mining stocks declined 7.5%, the main contributors for the negative return as the Fed articulated a more hawkish stand and investors rotated away from resources after concerns over falling spot prices. The Central banks’ stand impacted overall asset valuation. Main contributors to performance were Ampol (ALD +8.1%, declared special dividend), Telstra (TLS +1.9%) and Seven (SVW +7.9%). Detractors were BHP (-8.5%), CBA (-8.5%) and Harvey Norman (HVN -13.8%, slower trading data in January).
The overall reported half-yearly results were marred by higher-thanaverage number of profit misses and FY consensus estimate downgrades after companies flagged a more challenging second Half. On balance, whilst companies can maintain revenues, the challenge is margin as they navigate through rising cost, inflationary pressures (which is quite a new phenomenon to many companies which are so used to a low inflationary environment in past decade). Jan-Feb trading updates highlighted some change in spending patterns away from big-ticket items and more towards necessities. We might continue to see the change in consumer behaviour as many face higher mortgage repayments and higher cost of living for the first time.
In terms of direction of dividends, we note both BHP and RIO have flagged their intention to invest in “growth”. BHP continues to move to “futurefacing” commodities, investing through technology. This plus pending acquisition of Oz Minerals (OZL) means they are likely to be more conservative in their short-term dividend payout. RIO similarly did not declare any “special” dividend as they position themselves for growth (including potential M&A), hence we expect cash return to be more modest going forward from the big miners. Corporate action re “off-market” buybacks etc with big distribution of dividends had been lean as companies await outcome of government policy proposal on buyback/equity issue currently being debated.
Performance Commentary - January 31, 2023 The Fund returned 6.3% in line with the strong January market performance. Most holdings had a positive return month. Key contributors were Macquarie Group (MQG +12.2%), BHP (+8.2%) and CBA (+7.3%). Only two holdings had negative return: Amcor (AMC – 5.1%) and Santos (STO -0.4%). Companies that are seen as more defensive with stable earnings were the main detractors. The lower than expected US inflation data raised hope of an easing of the aggressive rate hikes, hence driving equity markets higher. Market especially interested in the previous “sold off” names as they can potentially provide the big share price upside.
February reporting season is upon us again. As part of continuous reporting practice, many companies provide trading updates to keep market informed and to manage market expectations. We hope this reporting of the last half year result would not have too much negative “surprises” but market daily price reaction can be volatile. Market would be more interested in any comments regarding the current trading conditions especially any discernible behavior change as consumers (mortgage payers) start to factor in higher loan repayment. This might be quite a new thinking for some new home owners who had enjoyed a very low interest rate and low unemployment environment for an extended period.
The rapid change of Covid policy and opening of China are expected provide a positive impetus to global growth. There is a massive potential demand for travel and retail when Chinese residents start moving again. Movements so far seemed to be within the country – presumably similar to Australia when people started to drive / domestic flights; then international flights. Barriers to travel are gradually coming down when countries remove the “extra” Covid tests requirements for travelers from China.
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