Wednesday, August 09, 2006

MMC Contraian Investment Fund

Company profile

MMC Contrarian Ltd is a Listed Investment Company (LIC) which listed on the ASX in December 2003. The investment portfolio is managed by MMC Asset Management Limited, however HGL Limited is also involved by providing investment advice
Company Strategy

MMCs seeks out investment opportunities that may develop due to sentiment or market driven mispricing. The emphasis of the research process will be on the long term operating performance and outlook of a business. The company identifies investment opportunities that are at a discount to what the manager deems to be their intrinsic value. Goals include a strong philosophy towards capital preservation and a focus on a superior rate of capital appreciation over the medium to long term. The objectives of the company are: to exceed the return of the All Ordinaries Accumulation Index over the medium to long term; pay regular franked dividend; and preserve the capital of the company. MMC Contrarian reported that the companys portfolio returned 6.6% during the quarter ended 30 September 2005. By comparison, the equity component of the companys portfolio returned 12.7%. Core holdings performed strongly during the quarter including Babcock & Brown Japan Property Trust (+33.1%), BPC (+24.2%), and Babcock & Brown Infrastructure (+11.0%). MMC Contrarian reported NPAT of $16.6m for the half-year ended 31 December 2005. Revenues from ordinary activities were $4.84m, compared to 4.57m from the same period last year. Diluted EPS was 7.71 cents compared to 0.94 cents last year. The net operating cash outflow was $1.22m compared to an inflow of $2.49m in the pcp. The interim dividend declared was 3 cents compared with 1.5 cents last year.

Why Purchase this stock ?
This stock uses a contraian point of view to purchase stocks out of favour. It has a good management team and has a good track record of selecting the right stocks for good medium to long term growth. They have a reasonable Dividend yeild for an investment trust and should continue to grow this in the future. They are always actiavely seeking to buy back stock when their own stock is at a NTA discount. NTA is net Tangible Assets and is a good way to determine the price for listed equity funds. Usually they run at somewhere between a -12% and -15% to the NTA.

MMC has identified numerous stocks which are both high growth and high yeild investments. This has allowed some good gains in ceratin stocks. Their portfolio iscurrently weight with PMP (9%) and BBI (5%), ABP(4.7%) and NSW(4.5%). This shows they are not putting all their eggs in one basket but they are taking a good stake in each company that they feel is a worthy investment.

The current dividend yeild for the stock is approx (6c / 93c ) = 6.4% fully franked. The company policy is to create a growing stream of income for investors. This is always nice to see from an investment company.

The price is currently undervalued with the NTA appearing to be approx 119 or $1.19 pre dividend. The share price currently is 93c. This is the highest the NTA has been and the share is at one of its lowest points m,aking it a wise invesment choice.

Risks to this company are the usual invesment risks of all people who buy shares. There is alweays a chance they could drop or a major crash could occur. In this instance I believe the incvome stream will buffer the stock from dramatic falls, and if they do fall the income stream will be a nice handy addition to the portfolio through the decreased capital period.

Personally I own this stock and bought in at 0.93c. It does not move much but should provide long term income streams that add a great value to my portfolio. It is one of the safer stocks which fits into my style of investing.

For further information you should read their June Investment Update...

Good Luck investing ...

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