It was almost 12 months to the day Alex Waislitz last paid us a visit. A lot has changed for us and Waislitz. Most importantly, the discount to net tangible assets (NTA) has closed in his listed investment company, Thorney Opportunity Limited (TOP), as his concentrated portfolio of stocks started to fire.
Since we initially recommended Thorney in September 2015 the share price has 're-rated' nicely and followed the fortunes of the underlying holdings. When we first looked at Thorney seven stocks made up 90 per cent of the portfolio, and that remains the same today. What does not remain the same is the discount to NTA. Given there is no discount, I am moving the call to a Hold.
The conversation continued after the cameras stopped rolling, and Waislitz reiterated his views on the core holdings that may appear expensive now:
AMA Group Limited (AMA): “AMA had a very strong profit result and there are significant synergies to be extracted from its recent merger. There are still plenty of opportunities ahead for the company because, even after the recent merger which made it the largest player in the sector, it still only has about 4 or 5 per cent market share. So it's very possible to see that they could double current market share within a few years.”
Money3 (MNY): “The environment for non-bank consumer lenders continues to improve at a fast rate as the major banks pull away from that sector of the market because of their own regulatory capital requirements. The new leadership from the board down is robust and focused on building a far more efficient and profitable and cash flow driven business with a rapidly growing order book in the automotive lending sector.”
Service Stream (SSM): “The continuing and accelerating roll-out of the NBN means Service Stream is in a great position for more growth. They are very well positioned with a nationwide workforce and good contract flow as was evidenced by their profit result. They have a strong balance sheet, which means they can fund growth through working capital.”
We also spoke about the investment that has yet to play out, and Thorney’s involvement in it:
- Austin Engineering (ANG): “The Thorney group helped lead moves to recapitalise the ANG balance sheet and put the company in a great position to largely repay its bankers. This will give the company sufficient runway to focus on operational improvements and complete its review of assets. The new leadership team at board level is currently reviewing CEO candidates and this will obviously help implement their strategy. It's not clear yet exactly where we are on the mining cycle but it does feel like the worst is over. We are certainly seeing more new orders and a much fuller tender book for ANG at present.”
There was also plenty more talk about the company's upcoming IPO, which we will have more information on once the prospectus is released. The new fund will be looking to replicate past successes in the Thorney private fund such as investing in Webjet pre-IPO at approximately 17 cents a share. HOLD