WHC -1.63%: Reported 1H earnings this morning that were big as expected, plus they announced an 8c dividend, which was on the light side, plus a share buy-back. A few things to note here: The profit for the half was big at $341m v a 95m loss in 1H21, however we’re still seeing a lag between realised prices and spot prices. This takes time to filter through so expect 2H22 profit that is probably 2x the 1H number. Using spot would give something like $1.3bn for FY22. The cash generation in the half means debt is now all but paid down and affords considerable flexibility in regards to capital management. The 8c dividend represented a 25% payout ratio which is at the lower end of the companies guidance 20-50% range – some in the mkt were looking for more, but they also added in an on-market share buyback programme of up to 10% of issued shares (capped at $400 million in total), which makes total sense given how cheap the stock is. For context, WHC is currently capped at $3.1bn so it’s a proper buyback, not just a ‘marketing’ buy back. We like stocks with tailwinds, and we think WHC has a tailwind for the foreseeable future, that said, todays result + dividend + BB was already in the price, a classic case of buy on rumour, sell on fact.
MM remains long and bullish WHC in our Flagship Growth Portfolio
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