THE prominent funds manager Geoff Wilson has warned that profit expectations for the Australian sharemarket in the coming year are too high and that analysts will have to make revisions in the next few months.
However, the "difficult market" could offer "a great buying opportunity", he said.
Wilson Asset Management Capital yesterday posted an 80 per cent fall in full-year net profit to $4.3 million, reflecting accounting treatment of the return on its flagship fund, which fell to a return of 4 per cent, from 17 per cent last year.
Mr Wilson said the company holds "a conservative view" on equity markets for the next 12 months. "We believe analyst earnings forecasts are too high for [financial year] 2013, given the current low growth environment," he said.
"These earnings forecasts will be revised downward by analysts over the coming period."
The company's outlook statements at the forthcoming reporting season would be "very negative", he said.
Global ructions such as the European debt crisis meant that investors in the local sharemarket would have to expect lean returns in the medium term. Equity market returns "may not be as high as experienced in previous periods", Mr Wilson said, because the global economy is in a period of paying down debt, "which we think will continue over the medium term".
However, he said attractive investment opportunities were emerging and "there is the prospect of one or two more interest rate cuts" this year.
WAM Capital's revenue fell by 72 per cent and its net profit was $4.3 million. Last year it was $20.4 million.
Mr Wilson said the size of the fall resulted from accounting standards that require changes in the value of investments to be recorded in the company's profit and loss statement.
The company announced a 5.5? final dividend, up from 5?. Mr Wilson said the fund had outperformed the ASX accumulation index by 11 per cent. Earnings per share was 4? compared with 19.1? last year.
"We are pleased that in this tough environment we can continue to deliver strong outperformance."
The best stocks in WAM Capital's portfolio included Signature Capital, Aristocrat and Breville, while the worst were Centrepoint Alliance, Symex and Austar. Its shares closed 1.5? higher at $1.575.
Frequently Asked Questions about this Article…
What did Geoff Wilson warn about profit expectations for the Australian sharemarket?
Geoff Wilson warned that profit expectations for the Australian sharemarket are too high for the coming year. He said analysts' earnings forecasts for FY2013 will likely be revised downward given the current low-growth environment and global debt issues.
Why does WAM Capital expect analysts to cut earnings forecasts?
Wilson said the low-growth environment and global ruckus such as the European debt crisis mean corporate profits are under pressure. As a result, analysts will probably lower earnings forecasts over the coming months.
How large was WAM Capital's full-year profit fall and what drove it?
WAM Capital reported a full-year net profit of $4.3 million, down about 80% from the prior year. Management said the size of the fall largely reflected accounting treatment that requires changes in the value of investments to be recorded in the profit and loss statement.
How did WAM Capital's flagship fund perform compared with last year and the market?
The company’s flagship fund returned 4% this year, down from 17% last year. Despite that decline, WAM said the fund outperformed the ASX accumulation index by about 11%.
Did Geoff Wilson see any positives or buying opportunities in a sluggish market?
Yes. Although he held a conservative view on equity markets for the next 12 months and expected leaner returns, Wilson said the difficult market could offer 'a great buying opportunity' and that attractive investment opportunities were emerging.
What did WAM Capital say about dividends and earnings per share?
WAM Capital announced a final dividend that rose to 5.5 (from 5). Earnings per share fell to 4 (compared with 19.1 last year), reflecting the weaker fund returns and accounting impacts.
Which stocks were highlighted as the best and worst in WAM Capital’s portfolio?
WAM Capital identified Signature Capital, Aristocrat and Breville as among the best stocks in its portfolio, while Centrepoint Alliance, Symex and Austar were listed among the worst.
What is WAM Capital’s outlook for interest rates and medium-term equity returns?
Wilson suggested there was the prospect of one or two more interest rate cuts that year. However, he warned medium-term equity market returns may be lower than in past periods because the global economy is in a phase of paying down debt.
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