The Washington H. Soul Pattinson and Co Ltd (ASX: SOL) (WHSP) share price is on watch today after providing a FY21 update.
WHSP noted that the key drivers of success for its business is capital growth of the portfolio and a growing yield. While profit isn’t a key indicator of performance, there are a few things that have impacted and boosted the FY21 regular net profit.
The investment house pointed to three things that it wanted investors to notice.
First, New Hope Corporation Limited (ASX: NHC) disclosed in its 31 July 2021 quarterly report that the coal miner expects an EBITDA (EBITDA explained) of $372 million for FY21 as a result of thermal coal prices reaching a 10-year high. New Hope expects to release its full year result on 21 September 2021.
Next, Brickworks Limited (ASX: BKW) expects to report record earnings from its property division, driven by the continued increase of the value of its property trust. This result is due on 23 September 2021.
Round Oak, WHSP’s 100% owned mining business, expects a FY21 regular net profit in the range of $64 million to $68 million. That’s a significant turnaround from the FY20 regular net loss of $43 million as commodity prices, primarily zinc and copper, improved and a number of its mines turned into the production phase.
FY21 result expectations
WHSP expects its overall regular net profit to be in the range of $316 million and $336 million. That compares to $170 million in FY20.
However, the higher profit from New Hope, Brickworks and Round Oak will be partly offset by a reduced contribution from TPG Telecom Ltd (ASX: TPG), After the merger of TPG and Vodafone in July 2020, it no longer equity accounts its share of TPG’s net profit. WHSP received only one dividend from TPG amounting to $18 million in FY21 (compared to the equity accounted profit of $72 million in FY20).
The FY20 statutory profit included a one-off accounting gain of $1.05 billion from the derecognition of TPG as an equity accounted associate. This won’t be repeated in FY21, so statutory profit will be materially lower.
Summary thoughts about WHSP and the share price
It’s been a strong 12 months for the investment house, with the WHSP share price rising by 74%.
I think WHSP is one of the wonderful ASX dividend shares. It’s a good option for the long-term. But I don’t think today’s price represents good value – it’s probably priced expensively to the value of its portfolio and the WHSP yield has been pushed down.