Australian Listed Investment Company Report November 2021

This story features REGAL INVESTMENT FUND, and other companies. For more info SHARE ANALYSIS: RF1

Download related file: Monthly-LMI-Update_1-November-2021

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market. Also known as Listed Investment Trusts or Listed Managed Investments.

For comprehensive comparative data tables for LICs please see attached.

LMI Market News

Loomis Sayles Global Equity Fund (Quoted Managed Fund) Lists

Loomis Sayles Global Equity Fund (Quoted Managed Fund) ((LSGE)) listed on the ASX on 1 October 2021. LSGE provides exposure to the Loomis Sayles Global Equity Opportunities Strategy, which was established in October 2004. The Responsible Entity (RE) is Investors Mutual Limited who has appointed Loomis, Sayles & Company, L.P as the Investment Manager of the Fund. Loomis Sayles is a global asset manager that was established in 1926 and had over US$350b AUM as at 30 June 2021 across fixed income and equity investment mandates.

The Fund has a long only investment strategy with a fundamental bottom-up investment approach with the portfolio representing the “best ideas” of the investment team. The Fund seeks to deliver a return (after fees and expenses but before taxes) in excess of the benchmark (MSCI All Country World Index) over a full market cycle, which is considered to be 3-5 years. The Manager has an unconstrained mandate with no sector, style or geographic limitations. Stock selection is driven by the fundamental bottom up analysis undertaken by the investment team. The portfolio is concentrated given the investable universe with 35-65 stocks. The Manager has a long-term investment horizon and as such typically has low levels of portfolio turnover. The portfolio is expected to be largely fully invested at all times, with the portfolio typically having a cash position of less than 5%.

Regal Investment Fund ((RF1)) Raises $212m through Placement and Entitlement Offers

On 6 October 2021, RF1 announced it was conducting a Placement and Accelerated Entitlement Offer to institutional and wholesale investors and a General Entitlement Offer to eligible unitholders. Combined the Fund was seeking to raise up to $212m.

RF1 successfully completed the Placement and Entitlement Offers during the month, raising $212m. All units issued under the Placement and Entitlement Offers were issued at a price of $3.79 per unit, representing the NAV of the Fund at 1 October 2021 and a substantial discount to the unit price at the time the capital raising was announced.

Capital raised under the Offer will be allocated to existing strategies in line with the Fund’s investment objective with the aim of further diversifying RF1’s portfolio across both private and public alternative investments. The Manager is covering all fees and expenses associated with the Offer.

Qualitas Real Estate Income Fund ((QRI)) Raises $171.6m through Entitlement Offer

On 7 October 2021, QRI announced they were seeking to raise up to $214m through a 1-for-2 pro-rata non-renounceable entitlement offer to eligible unitholders and a shortfall offer to new investors at an Offer price of $1.60 per unit.

There was strong demand for the Offer with QRI raising $171.6m. The raise takes the total capital of the Trust to $599.6m.

The capital raised will be invested as per the investment strategy of the Trust, with the raising providing unitholders the benefits of greater liquidity and portfolio diversification.

The Manager will waive its management fee with respect to any uninvested capital raised from the Entitlement Offer, ensuring unitholders are not paying fees on idle capital. We view this as a significant positive for unitholders.

Cadence Opportunities Fund Seeks to List

Applications are open for investment in the Cadence Opportunities Fund (expected ASX code: CDO) with the Company seeking to raise up to $52m. The offer closes on 3 November 2021. CDO has been operating as an unlisted investment company since January 2019 after the first attempt at an IPO fell short. Shares in the Company will be issued at the mid-point of the pre-tax and post-tax NTA at 31 October 2021.

CDO provides exposure to an actively managed long/short portfolio, with a long bias, of Australian and international securities. Cadence Asset Management Pty Limited (Cadence) is the Manager of the portfolio. Cadence manages the portfolio of Cadence Capital Limited ((CDM)), which listed in 2006, using a similar investment philosophy and process that is used for the CDO portfolio.

The Company has two stated investment objectives: (1) provide capital growth through investment cycles; and (2) provide fully franked dividends, subject to the Company having sufficient profit reserves and franking credits and it being within prudent business practices. The Manager uses a combination of fundamental and technical analysis in making investment decisions with the portfolio consisting of both core and trading positions.

For core positions, the ideas generation process is based on the Manager’s fundamental analysis and investment skill, however, the investment process is largely rules-based, with position sizing and timing all determined by technical rules. The portfolio is managed according to an open mandate, with no stock, sector or country limitations and, as such, is very much an alpha seeking mandate. CDO will focus on taking advantage of shorter-term duration trends and as such will have high levels of turnover.

IIR has issued CDO a Recommended rating. Further information regarding the Company and the IIR report can be found on the Manager’s website (www.cadencecapital.com.au).

FSI Convertible Notes Commence Trading

On 4 October 2021, FSI Convertible Notes commenced trading of the ASX under the ticker ((FSIGA)). The Company raised $20m through the issue of 7.41m Notes at a price of $2.70. The Notes will pay an interest rate of 5.50%p.a, paid quarterly, until the first step-up date of 30 September 2024 at which point the interest rate will increase to 6.50%p.a if the 2-year BBSW is above 1.2832%. If the BBSW is not above this rate, the interest payment will remain at 5.50% until maturity. The Notes will have a maturity date of 1 October 2026, if not converted or redeemed prior.

The proceeds of the Notes will be deployed in accordance with FSI’s investment mandate and investment process.

Clime Capital Limited ((CAM)) Seeks to Restructure Convertible Notes

CAM is seeking to restructure the Convertible Notes which are set to mature on 30 November 2021. On 28 October 2021, the Company issued a Prospectus regarding the Restructure Offer and intends to offer up to $35m new Notes with a face value of $1.00 per Note. The Company intends to have no more than $35m Notes on issue following the Completion of the Offer.

The Company will be seeking approval of the Restructure Proposal at the AGM on 18 November 2021. The key terms of the Restructure Offer include:

Face value of the Notes will be amended from $0.96 per Note to $1.00 per Note;

The maturity date will be extended from 30 November 2021 to 30 November 2025;

Interest rate on restructured Notes will be 5.25%p.a (previously 6.25%p.a); and the Conversion Ratio will revert to 1-for-1 (previously 1-for-1.025).

For existing Noteholders, under the Restructure Offer, Notes will be consolidated with 24 Notes for every 25 Notes held. Noteholders that seek to redeem their Notes at the maturity date of 30 November 2021 will receive a cash payment equalling the face value of their Notes plus any accrued interest.

Capital raised under the offer will be used to fund redemptions of existing Notes with any remaining capital invested in line with the current investment strategy.

The Company will require shareholder approval to issue the full $35m of Notes. In the event, shareholder approval is not received, the Company will proceed with the Offer, however will have to scaleback the size of the Offer to remain within the Listing Rule Capacity requirements.

Bailador Technology Investments Limited ((BTI)) – SiteMinder Lodged Prospectus for IPO

During October, BTI announced that SiteMinder has lodged a prospectus for its proposed IPO on the ASX. SiteMinder shares will have an issue price of $5.06 per share and an enterprise value of $1.3b upon listing. BTI confirmed that it was able to secure a priority allocation in the IPO for current BTI shareholders. SiteMinder is the largest holding in the BTI portfolio with a value of $82.5m as at 30 September 2021.

As detailed in an announcement on 18 October 2021, the valuation for the proposed IPO implies a valuation of $99.6m for BTI’s holding. The implied valuation represents a $17.1m uplift (21%) to BTI’s current carrying value of SiteMinder. The valuation represents a multiple of 22.7x investment costs on BTI’s investment in SiteMinder.

BTI has confirmed that it will continue to hold the majority of its shareholding in SiteMinder following the proposed IPO. BTI has entered into an agreement to realise a minority portfolio of its investment in SiteMinder for a total of $15.1m in cash. BTI is committing to not selling any of its remaining $84.6m investment in SiteMinder until at least the date of SiteMinder’s full year results release for FY22, pursuant to a voluntary escrow agreement.

Scheme Booklet Distributed for Proposal to Exchange of APL Share into AGX1 Units

On 22 October 2021, the Scheme Booklet was distributed to APL shareholders regarding the proposal to exchange APL shares into units of ((AGX1)) and wind up APL. AGX1 is an existing Exchange Traded Managed Fund ((ETMF)), with a long only exposure to a portfolio of global equities managed by Antipodes Partners Limited.

Two of the key aspects of the Scheme are: (1) APL shareholders will be moving from a LIC structure to an ETMF structure; and (2) APL has a long/short strategy versus AGX1 which has a long only strategy. Therefore the exchange into AGX1 units will result in a move to a global long only strategy.

The Scheme Meeting is due to be held on 24 November 2021. On 28 October 2021, IIR released a Corporate Action report outlining some of the key considerations regarding the proposed Scheme for APL shareholders and highlighting the key differences between the two vehicles. The report can be found on the IIR website (www. independentresearch.com.au).

Independent Investment Research, “IIR”, is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPOs. IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

INDEPENDENCE OF RESEARCH ANALYSTS

Research analysts are not directly supervised by personnel from other areas of the Firm whose interests or functions may conflict with those of the research analysts. The evaluation and appraisal of research analysts for purposes of career advancement, remuneration and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Research analysts do not report to, and are not supervised by, any sales personnel nor do they have dealings with Sales personnel

Evaluation and remuneration: The remuneration of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients.

INDEPENDENCE – ACTIVITIES OF ANALYSTS

IIR restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for corporate mandates on behalf of a Broker and are not permitted to prepare or review materials for those pitches. Pitch materials by investor clients may not contain the promise of research coverage by IIR.

No promotion of issuers’ transactions: Research analysts may not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer. For this reason, analysts are not permitted to attend “road show” presentations by issuers that are corporate clients of the Firm relating to offerings of securities or any other investment banking transaction from that our clients may undertake from time to time. Analysts may, however, observe road shows remotely, without asking questions, by video link or telephone in order to help ensure that they have access to the same information as their investor clients.

Widely-attended conferences: Analysts are permitted to attend and speak at widely-attended conferences at which our firm has been invited to present our views. These widely-attended conferences may include investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by Firm sales personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations. Analysts may also carry out preliminary due diligence and vetting of issuers that may be prospective research clients of ours.

INDUCEMENTS AND INAPPROPRIATE INFLUENCES

IIR prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within the Firm including management, which might be perceived to result in inappropriate influence on analysts’ views.

Remuneration and other benefits: IIR procedures prohibit analysts from accepting any remuneration or other benefit from an issuer or any other party in respect of the publication of research and from offering or accepting any inducement (including the selective disclosure by an issuer of material information not generally available) for the publication of favourable research. These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm’s general policies on entertainment, gifts and corporate hospitality.

DISCLAIMER

This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (“IIR”) (ABN 11 152 172 079), an corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report (the “Report”) and will receive fees for its preparation. Each company specified in the Report (the “Participants”) has provided IIR with information about its current activities. While the information contained in this publication has been prepared with all reasonable care from sources that IIR believes are reliable, no responsibility or liability is accepted by IIR for any errors, omissions or misstatements however caused. In the event that updated or additional information is issued by the “Participants”, subsequent to this publication, IIR is under no obligation to provide further research unless commissioned to do so. Any opinions, forecasts or recommendations reflects the judgment and assumptions of IIR as at the date of publication and may change without notice. IIR and each Participant in the Report, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any opinion contained in the Report is unsolicited general information only. Neither IIR nor the Participants are aware that any recipient intends to rely on this Report or of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether opinions or recommendations (if any) contained in this publication are appropriate to their investment objectives, financial situation or particular needs before acting on such opinions or recommendations. This report is intended for the residents of Australia. It is not intended for any person(s) who is resident of any other country. This document does not constitute an offer of services in jurisdictions where IIR or its affiliates do not have the necessary licenses. IIR and/or the Participant, their officers, employees or its related bodies corporate may, from time to time hold positions in any securities included in this Report and may buy or sell such securities or engage in other transactions involving such securities. IIR and the Participant, their directors and associates declare that from time to time they may hold interests in and/or earn brokerage, fees or other benefits from the securities mentioned in this publication.

IIR, its officers, employees and its related bodies corporate have not and will not receive, whether directly or indirectly, any commission, fee, benefit or advantage, whether pecuniary or otherwise in connection with making any statements and/or recommendation (if any), contained in this Report. IIR discloses that from time to time it or its officers, employees and related bodies corporate may have an interest in the securities, directly or indirectly, which are the subject of these statements and/or recommendations (if any) and may buy or sell securities in the companies mentioned in this publication; may affect transactions which may not be consistent with the statements and/or recommendations (if any) in this publication; may have directorships in the companies mentioned in this publication; and/or may perform paid services for the companies that are the subject of such statements and/or recommendations (if any). However, under no circumstances has IIR been influenced, either directly or indirectly, in making any statements and/or recommendations (if any) contained in this Report. The information contained in this publication must be read in conjunction with the Legal Notice that can be located at http://www.independentresearch.com.au/Public/Disclaimer.aspx.

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