Cadence Opportunities Fund returned a gross performance of -3.8% in August, compared to the All Ordinaries Accumulation Index which was up 0.4% for the month. The top contributors to performance during August were Westgold/ Karora Resources merger, Netflix, Energy Fuels and Meta Platforms. The largest detractors from performance were Whitehaven Coal, QBE Insurance, Austin Engineering, Cooper Energy, Stanmore Resources and Acrow.
We last wrote about Westgold Resources in our March 2024 newsletter. Since then, Westgold has completed its merger with Karora Resources, taking its gold production from 225 koz per annum to around 500 koz per annum. This makes Westgold the fourth largest gold producer in Australia with a relatively low cost of production when compared to similar mid-cap listed gold companies in Australia. Westgold’s production is fully unhedged and it strongly benefits from rising gold prices. Westgold’s PE ratio is currently low compared to historical norms, and like Resolute Mining (which we spoke about in last month’s newsletter), we believe that Westgold’s share price needs to ‘catch up’ with the gold price increases that we have seen over the past year.
While gold performed well during August most other commodity prices fell. Growth in China appears to be slowing with the property sector dragging on the economy and causing weak consumer and investor confidence. Energy and materials stocks rolled significantly during the last two months as indications of the significant Chinese slowdown emerged. This slowdown is particularly important for steel and its constituents iron ore and coal (amongst Australia largest exports). This follows on for the base metals, oil and gas as well. Coal, oil and gas prices all fell during August. These price falls, along with the concerns about growth in China, impacted on our investments in Whitehaven Coal, Stanmore Resources, Cooper Energy and Beach Energy. The market will be watching closely to see whether the resources and energy rollover is a lead indicator or not.
Fully Franked Year-end Dividend
On 16 August 2024, the Company announced a 7.0 cents per share fully franked year-end dividend, an increase of 0.5 cents on the interim dividend, bringing the full year dividend to 13.5 cents per share fully franked. This full year dividend equated to a 7.8% fully franked yield or a 11.2% gross yield (grossed up for franking credits) based on the share price of $1.722 per share on the day of the announcement. Importantly this equated to a 7.1% dividend yield based on the pre-tax NTA of $1.91 on the day of the announcement, due to the Company shares trading at a discount to NTA. After paying this dividend the fund still has 15.5 cents per share of profits reserves to pay future dividends.
The Ex-Date for the dividend is the 15 October 2024. The payment date for the dividend is the 31 October 2024.
The dividend re-investment plan (DRP) will be in operation for this final dividend. We would encourage shareholders to participate in the DRP as an efficient mechanism to add to existing holdings in the fund. The DRP will be priced at the weighted average share price over the relevant DRP pricing period. The Company will buy-back the shares it issues under the DRP. This buy-back will operate when the CDO share price is trading at a discount to the Pre-Tax NTA.
If you are not registered for the DRP and you would like to participate, please contact Boardroom on 1300 737 760.
Year-End Webcast
Please click here to watch the recently released CDO Year-End Webcast. In this year-end webcast, Karl Siegling first provides an update on the Company’s full year results, the 7.0c fully franked final dividend, the portfolio’s current composition and feedback from the recent reporting season. Karl Siegling and Chris Garrard then discuss the company’s investments in Resolute Mining, Westgold Resources, Meta Platforms, Netflix, Alumina and Whitehaven Coal and finish off with the outlook for the rest of the year.
Discount to NTA and On-Market Buy-Back
At the time of writing this newsletter, CDO is trading at a pre-tax NTA discount of around 4%. CDO has implemented an on-market buy-back to buy back the shares it has issued under the DRP. This buy-back will operate whilst the CDO share price is trading at a discount to the Pre-Tax NTA.
Fund NTA
Fund Performance
Historic Portfolio Exposure
Portfolio Sector Analysis
Portfolio Market Capitalisation Analysis
Franked Dividends Declared
After paying the final dividend the company will have around 15.5 cents per share of profits reserves to pay future dividends.
News
To view all previous Cadence webcasts and interviews please visit the Media Section of the website.
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