SOL (ASX) Ann: WHSP 2023 AGM Chair Address

Originally posted by timbowls: ↑

Hi Guys,

I thought I would take advantage of the public holiday and have a crack at a spreadsheet to calculate the current NAV per share so we can assess the approximate current premium the SP is trading at and discuss what constitutes good value.

All of the valuations given in the last annual report (which equated to 10.834 billion in NAV) were as at July 31st so it was clearly quite easy to backtrack and adjust some of the valuations from there which I've broken down section by section as follows along with some commentary on the findings that jumped out at me:

Strategic Portfolio: TPG and NHC are both broadly flat in the past 6 months while BKW has appreciated strongly (nearly 9 percent) so the big three have been decent overall keeping in mind how much NHC has shot up over the past 3 years. I was surprised to see how much Tuas has popped up (it's almost doubled) whereas Aeris has been smashed and lost more than half it's value.

I don't know anywhere near enough about Tuas other than David Teoh being heavily involved but it would be nice to see them start to generate some income from what is now a 359 million dollar chunk of the overall portfolio in the medium term.

I ended up with the strategic portfolio increasing by 5.43 percent to almost 5.6 billion dollars which is completely locked in and the part of SOL we can be most confident in valuing as all of the stakes are at current market value (I even went and looked at Apex which is listed in Malaysia and converted that back to Australian dollars).

Large Cap Portfolio: To make an adjustment here I simply looked at the change in the ASX 200 from 31st of July to today which is almost exactly a 2% increase and applied it to the portfolio value. There is some potential upside if they've beaten the market but if we assume they've matched it the portfolio increases by 2% to just over 2.35 billion dollars

The holdings are in BHP, Macquarie and CBA here along with BKI so to be more thorough I could look at those companies performance since July individually.

This is where it gets most tricky as the rest of the portfolio is quite opaque.

To be safe I simply maintained the values for Structured Yield, Cash (Less Debt), Property, Private Equity and Emerging Companies as they were reported at the end of July.

In reality you would hope there might have been a 5% upside in private equity and emerging companies.

Another item I haven't accounted for is the much larger stake in Perpetual. I would imagine the cash balance has reduced and the strategic portfolio (if that's where they are going to class it) has increased to reflect this.

This method gave me a total portfolio value of 11.28 billion dollars which is a projected pre tax net assets per share figure of $31.26 putting us at a 6.5% premium to the current share price.

In reality I think we need to establish a range to try and value SOL as there's quite a bit of possible variance. For example let's say the private equity and emerging company portfolio have been performing well. and actually increased by 5% at the time of the next report. This would result in an additional 92 million in NAV which adds 25 cents to our NAV per share (there could also be a write down coming in either of those portfolios that we don't know about so there is downside risk too).

It's definitely not like an LIC and I can see why their reluctant to go down the path of monthly NTA announcements for this reason.

I think we could safely say that current NAV per share is between $31 and $32 dollars.

Another thing I was a little surprised to find is just how much of the total income last year came from the dividend bonanza at NHC... It was 42%.

There's quite a bit of breathing space to accommodate the significantly higher dividends as they pay out ratio was actually only 75% when you take it from the income and don't factor in changes in portfolio valuation. As long as the coal price stays elevated I think they'll be fine to keep gradually stepping it up from here (I would like to also project the income for FY24 at some stage but haven't got to this part yet).

Having done this deep dive I consider SOL to be around fair value currently and think an investor could do a lot worse than to buy it at a 6% premium as the long term history of out performance justifies this valuation.

Personally I'll hold off and hope that it gets swept up in a market correction at some stage this year which then presents a buy opportunity around the $30 mark. Due to it's well deserved great reputation and increased market profile and scale in recent years chances to buy SOL at a discount haven't come along very often and I would expect that trend to continue in the future.

Expand

comprehensive and detailed analysis fantastic work.

l happened to note the last Quantitative Analysis from Morningstar has fair value slightly higher (meaning the share was not trading at a premium - sp is almost exactly Fair Value).

the brokers on average do agree with your analysis and the consensus is that the SP has a 7.4% premium in the price meaning it is above fair value.

I will read Morningstar report this weekend to look for the difference. I am only noting what I read not making any kind of recommendation.

No.	Vol.	Price($)
3	1239	$42.16

No.

Vol.

Price($)

1239

$42.16

Price($)	Vol.	No.
$42.41	1088	4

Price($)

Vol.

No.

$42.41

1088

No.	Vol.	Price($)
2	884	42.160
5	1593	42.120
1	654	42.070
1	1189	42.050
2	70	42.000

No.

Vol.

Price($)

884

42.160

1593

42.120

654

42.070

1189

42.050

42.000

Price($)	Vol.	No.
42.410	1088	4
42.500	25	1
42.800	270	1
42.820	1000	1
42.860	10000	1

Price($)

Vol.

No.

42.410

1088

42.500

42.800

270

42.820

1000

42.860

10000

(20min delay)
Last $42.16		Change -0.360(0.85%)		Mkt cap ! $15.50B

Open	High	Low	Value	Volume
$42.52	$42.69	$42.06	$18.75M	442.2K

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