Monthly Listed Investment Trust Report – Feb 2024

Australia | Feb 07 2024

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.

Note: For comprehensive comparative data tables for LICs and ETFs please see attached.

By Claire Aitchison, Head of Equities & Funds Research

LMI Market News

Welcome to the first LMI Monthly Update for 2024. This edition will take a look at the market news for both December 2023 and January 2024.

As a bit of house keeping to kick things off, we have reclassified some of the LICs. We have removed the Australian/International Mixed Classification, which previously included four LICs - CDO, CDM, CAM and HM1. CDO, CDM and CAM have been reclassified as Mid/Small Cap Australian Equities and HM1 has been reclassified as International Diversified.

WLE Seeks to Pick QVE Up at a Discount to NTA
On 31 January 2024, WAM Leaders Limited ((WLE)) announced its intent to make an off-market takeover bid for QV Equities Limited ((QVE)).

Under the offer QVE shareholders will receive 1 WLE share for every 1.4675 QVE shares held. Based on the WLE share price as at 30 January 2024, adjusted for the December quarterly dividend of 1.3 cents per share, the implied value of the offer is $0.95. While this represented a premium to the share price, the implied value represents a discount to both the pre-tax and
post-tax NTA.

WAM Strategic Limited ((WAR)) is currently the largest shareholder of QVE, with WAR increasing its stake in QVE to 14.9% during 2023. While the premium to the share price should be welcomed by WAR shareholders, the fact that WLE is trying to pick up QVE at a discount to NTA should be a concern to WAR shareholders.

In addition to the announcement of the intention to make an off-market takeover bid, WLE proposed entering into an agreement to acquire 100% of QVE shares via a scheme of arrangement. The QVE Board rejected this offer. In the response to the WLE offer, QVE stated that it will be commencing a formal review of strategic options for QVE with a view to maximising value to shareholders.

The Company noted that the review is consistent with the Company’s regular evaluation of opportunities to create shareholder value.

VGI and RG8 Increase Buy-Back Program
In December, both VGI Partners Global Investments Limited ((VG1)) and Regal Asian Investments Limited ((RG8)) increased the capacity of the buy-back programs. The Companies can now buy-back up to 25% of shares on issue under the programs.

Both VG1 and RG8 have traded at sizable discounts for a prolonged period of time. The increased buy-back capacity is the latest in a number of initiatives implemented by the Companies to address the discount. The discount narrowed for both Companies in December, however long-term attractive risk-adjusted performance will be the primary contributor to a sustained improvement in the discount to NTA.

QRI Raises $41 Million
In December 2023, Qualitas Real Estate Income Fund ((QRI)) raised $41 million through the issue of 26 million units to wholesale and institutional investors. New units were issued at $1.60 per unit.

The Trust took advantage of trading back around par value after trading at a discount for a period of time to expand the unitholder base and increase the size of the Trust. The capital raised is to be invested in CRE loans in line with the Trust’s investment mandate.

In its recent monthly update, the Trust informed the market that in December the Manager refinanced a number of fixed rate loans to variable rate resulting in 99% of the portfolio now exposed to floating rate loans.

The move to floating rate loans now aligns the portfolio with the target yield objective.

The Trust paid a monthly distribution of 1.22 cents per unit for the month of January 2024. The increasing interest rate environment and the transition of the portfolio to variable rate loans has seen the distributions increase 27.4% for the current financial year period compared to the pcp.

MXT Raises $304 Million
Metrics Master Income Trust ((MXT)) has raised $304 million in recent months through a number of placements. In December 2023, the Trust raised $196.4 million through a placement to institutional investors. In January 2024, the Trust completed the Unit Purchase Plan (UPP) announced in December 2023. The Trust raised a total of $76.2 million via the UPP. In February 2024, the Trust announced it had raised a further $31.5 million through a placement to wholesale investors. New units issued under the placements were issued at $2.00 per unit.

The capital raised will be distributed to the three underlying wholesale funds that MXT provides exposure to. IIR recently published a review of MXT which is available on the IIR website for those that seek further information on the vehicle.

GCI Seeking to Raise up to $97.3 Million through Entitlement Offer
On 29 January 2023, Gryphon Capital Income Trust ((GCI)) announced it is seeking to raise up to $97.3 million through a 1-for-5 non-renounceable Entitlement Offer to eligible unitholders. The Offer includes an oversubscription facility, in which eligible unitholders that apply for units under the Offer in full may also apply for additional units in excess of their entitlement.

Any units not taken up by eligible unitholders may be offered to new investors.

The Offer is scheduled to open on 8 February 2024 and close on 23 February 2024. New units will be issued at $2.00 per unit, in line with NAV. GCI, like many of the fixed income LITs, is taking the opportunity to raise capital with the Trust trading at a small premium. This provides an opportune time for the Trust to expand.

The Trust is undertaking the Offer for the following reasons:

-Provide additional scale to expand the Trust’s participation in the RMBS/ABS market;
-Improve liquidity for unitholders; and
-Reduce operating costs on a per unit basis.

If the maximum new units are issued under the Offer, the units on issue will increase 20% to 291.8 million.

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