Mirrabooka Cashed Up and Ready to Pounce

Melbourne-based listed investment company Mirrabooka Investments remains cashed up and ready to exploit what it says will be times when stocks “temporarily’ fall out of favour with investors in the coming year.

The company released its 2020-21 full year results yesterday with news of a 2 cents per share special dividend for shareholders, on top of the 6.5 cents a share unchanged final payout.

That made a full year return to shareholders of 12 cents a share after the 3.5 cents a share interim – 20% above the 2019-20 Covid-hit level.

Mirrabooka reported a full year profit of $6.4 million which was in line with the result last year. 

The market approved of the higher payout and the shares closed up 2.4% at a record $3.80.

“The fall in the contribution from investment income as companies reduced or suspended dividend payments was offset by an improved contribution from the Trading Portfolio,” the company said on Wednesday.

The trading performance saw a sharp rise in returns as Mirrabooka took advantage of rising prices to take millions of dollars in profits (which helped finance the special dividend0.

“Adjustments made to the portfolio though the period, reflecting the increased valuation risk in several holdings following very strong recent performance, produced realised gains after tax of $29.3 million, almost six times the $5.2 million made in 2019-20.

That helped Mirrabooka to a June 30 cash position of $27.8 million or 4.5% of the portfolio which will give the company flexibility to take a dip at any share that seems to be an opportunity.

But the company, which is linked to Australian Foundation Investment Co, currently thinks the market is “fully priced” at the moment.

The company said its 12-month portfolio return including franking was 50.9% and “was well ahead of the combined Small and Mid-Cap 50 benchmark return over the corresponding period, including franking, of 35.2%.”

“The outperformance over both the short and long term is a very pleasing result, and further highlights the resilience of our investment approach.

“Positive equity market sentiment, increased profit growth expectations and, in some cases, inclusion in market indices have been forces that have combined with strong business performance in driving many of our holdings to all time high share prices,” the company commented on Wednesday.

“This has led to several instances where we saw heightened valuation risk associated with these holdings. In this context, a number of positions were trimmed, with the largest reductions being in Objective Corporation, Reece and HUB24. The other material sales were the partial disposal of Qube Holdings and the complete disposal of Brickworks.

Funds from these sales and the successful share purchase plan in February of this year ” were deployed across a number of companies where opportunities looked more attractive at the time. This included NIB Holdings, Corporate Travel Management (both of which are new to the portfolio this year), FINEOS Corporation and Iress.”

“A feature of the market in the second half of the financial year was the re-emergence of the IPO market and capital raisings. In this regard, Mirrabooka participated in the IPO of PEXA Group, which was the largest addition to the portfolio for the year.

“While the pricing reflected the strong market conditions, the company appears well positioned as a long-term investment. The other high-profile IPO that Mirrabooka participated in was Nuix. However, this position was sold relatively quickly without loss following signs that it would not meet our initial expectations.”

Revenue from operating activities was $7.1 million, down 8.9% from the previous corresponding period.

 

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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