FY19 Report – Is The WHSP (ASX:SOL) Share Price A Buy?

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has reported its FY19 result to the market, is the WHSP share price a buy?

WHSP is an investment house business which has been on the ASX for over a century. Its origins are in owning and operating Australian pharmacies, which is where the Soul Pattinson chemist chain comes from, however, that business is now owned by Australian Pharmaceutical Industries Ltd (ASX: API), which WHSP owns 19.3% of. WHSP invests in a large number of companies across a variety of industries such as construction, resources and telecommunications.

WHSP FY19 Result

WHSP reported that its group regular net profit fell by 7.2% to $307 million and the group net profit after tax declined by 7.1% to $248 million.

The result was driven lower by WHSP’s resources division, Round Oak Minerals, which experienced an after tax loss of $54.1 million (FY18’s loss was $9.7 million).

Round Oak’s losses increased because of start-up development expenses for new projects, delays at all north west Queensland operations due to extreme weather, and a reduction in production volumes & increased operating costs at ‘Jaguar’ to “realign legacy mining sequence and open up new mining fronts”.

The performances of WHSP’s other holdings were varied. TPG Telecom Ltd (ASX: TPM) continues to suffer from NBN margin compression and had to cancel its Huawei 5G mobile plan. However, if the merger goes ahead with Vodafone, WHSP expects dividends from TPG to increase.

Brickworks Limited (ASX: BKW) reported a slight increase of continuing underlying profit. The Australian building products division was hurt by energy prices and a downturn in construction, but the US division exceeded expectations. And the Property segment grew regular EBIT (click here to learn what EBIT means) by 68% to $158 million.

New Hope Corporation Limited’s (ASX: NHC) net profit before tax grew by 3% and it continued to pay a large dividend to WHSP, although it’s still waiting for regulatory approval for the New Acland Mine Stage 3 project.

Any New Investments?

During the year WHSP made $32 million of investments into its unlisted portfolio including in Aquatic Achievers (swimming schools), Dimeo Group (commercial cleaning) and Duxton trusts (agribusiness).

WHSP also said that it has increased its exposure to direct lending and benefited from profits from its property portfolio.

But the WHSP investment team are actively looking at financial services supported by growing superannuation funds under management, WHSP is looking at the retirement living sector because of the ageing population, and agricultural investments because of growing demand from a growing global population and rising food consumption.

WHSP Dividend

WHSP is famous for its ever growing dividend. The WHSP Board increased the final dividend by 3% to 34 cents per share. This brings the full year dividend to 58 cents per share, an increase of 3.6%.

The dividend is funded by regular cash inflows (from dividends, interest etc) less regular operating expenses. WHSP calls this measure the net regular cash from operations, which grew by 18.1%. Meaning the dividend payout ratio decreased and it’s well positioned to keep growing dividends.

Is The WHSP Share Price A Buy?

The pre-tax value of WHSP increased by 0.6% over the year to $5.5 billion, so at the pre-open price it’s trading at a small discount to its total underlying value.

However, the main attraction for many investors is probably the sustainable growing dividend. The fully franked yield currently stands at 2.6% – not bad in this low interest rate environment.

I’m interested in buying WHSP shares at this share price, as I think it’s one of the few good investments you can put in the bottom drawer for a decade or more.

Combining a portfolio of WHSP and growth shares could be the way to beat the market into the future – so the shares in the FREE REPORT below could be what you’re after.

Disclosure: Jaz owns shares of Washington H. Soul Pattinson and Co. at the time of writing, but this could change at any time. 

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