The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (WHSP) share price is down even though the update about the FY23 first quarter was promising.
WHSP is an investment house that is invested in a wide variety of ASX shares and private businesses, including TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited
(ASX: NHC) and Tuas Ltd (ASX: TUA).
WHSP FY23 Q1 update
The company’s first quarter is from 1 August 2022 to 31 October 2022.
In the three months, it saw its pre-tax net asset value increase by 1% to $10.05 billion. In per-share terms, it increased by 1% to $27.84.
Management noted that it has continued to actively manage its investments as central banks increase interest rates to reduce inflation.
There is also a tight labour market, ongoing supply chain issues, increased cost of energy and disruptive weather events which are “creating a difficult operating environment for most businesses”.
This could lead to slower economic growth, but it is also providing “interesting opportunities for WHSP’s portfolio”.
In the first quarter, the business made a net sale of $205 million of listed equities, increased its net working capital by $44 million to $318 million, increased its investment in private equity by $73 million to $727 million and increased its investment in ‘structured yield’ by $181 million to $432 million.
The business said that it had cash of $473 million and undrawn debt facilities of $328 million, as well as “significant liquid assets” in the portfolio.
Asset sale and investments
The company noted it had sold a property in Castle Hill, originally bought for $19.5 million, for $88.48 million.
In structured yield, it invested the $181 million across four new investments and it still has a pipeline of opportunities. It’s looking to secure attractive returns while protecting downside risk if there are adverse market conditions. The current yield on this portfolio is over 10% per annum.
It has also completed the acquisition of Kubank Citrus and Manna Farms, which are 147 hectares and 56 hectares, respectively. WHSP is looking to create larger citrus aggregations in regional NSW and Victoria. It wants to take advantage of the global demand for premium citrus, particularly in the northern hemisphere off-season. It has a pipeline of another $300 million of potential investment.
WHSP also pointed out that it recently acquired 100% of Ampcontrol, an Australian business involved in engineering and manufacturing for electrical, electronic and control solutions across areas like mining, renewables, infrastructure and industrials. It’s looking for bolt-on acquisitions that can help accelerate Ampcontrol’s growth in targeted areas.
Final thoughts on the WHSP share price
I think WHSP is one of the most interesting businesses on the ASX. The fact it can invest in almost anything that it wants to is a useful feature. It’s investing in areas that have attractive long-term futures, which can benefit shareholders as well.
In my opinion, it’s a useful long-term buy.
