Portfolio Update (03/08/19)

AU Portfolio

News

On Wednesday Wellcom Group Limited (ASX:WLL) received a takeover bid of $6.70 per share, a 27.6% premium to Tuesday's closing price. The company intends to pay 21 cents of dividends prior to the completion of the deal and the price will not be adjusted for this. Chairman, Wayne Sidwell, will retain his 15% stake in the company. I was slightly disappointed by the premium given some of the lofty valuations in the current market, but overall am happy since I only purchased the stock in June.

Trades

I bought Shaver Shop Group Ltd (ASX:SSG) and RXP Services Ltd (ASX:RXP).

Holdings

ACF - 4.21%
AKG - 4.56%
ANO - 4.57%
ASH - 4.39%
BWF - 4.31%
CWL - 4.44%
EAS - 3.99%
EZL - 4.32%
FID - 4.72%
GAP - 4.21%
HIT - 4.74%
ICS - 4.41%
JYC - 3.97%
KME - 8.35%
LBL - 5.74%
LYL - 5.33%
OTW - 3.41%
RXP - 4.68%
SSG - 4.94%
UCW - 4.74%
WLL - 4.97%

Cash - 0.99%

UK Portfolio

News

XP Power Ltd. (LON:XPP) released its half year results for 2019 on Thursday. When buying XPP I mentioned that I thought the company's recent foray into the semiconductor industry may have been badly timed and these accounts confirmed my fear. During the half revenue grew in all markets except for semiconductors which saw a 34% decline. Profitability was also impacted by the increase in US import tariffs on Chinese goods as XPP produces some of its power devices in the Middle Kingdom. The company opened a second Vietnamese factory in early 2019 and is rapidly transferring production of US destined products across the border. Although adjusted operating profit fell 12% to $18.2 million, dividends rose 6% to 35 pence reflecting management's confidence in the future. I share this sentiment because I think the issues that plagued this half are temporary. XPP maintains a strong competitive position thanks to its broad and expanding product range, advanced technical capabilities and deep customer relationships.

A "no deal" Brexit is looking increasingly likely which is weighing on the UK stock market, although the impact is greater on London property prices which are 10% to 15% off their peak. I hold M Winkworth PLC (LON:WINK), a London based estate agency franchise, because I expect a recovery once the implications of Brexit become clear (in the meantime it pays a 6.8% dividend). UK stocks are very cheap given extremely low interest rates and compared to Australia. A Brexit disaster is already "priced in", but my view, from listening to management of companies held in the UK Portfolio, is that the true impact of the split on these businesses is likely to be minor.

Trades

None

Holdings

AFM - 4.65%
ASY - 6.06%
AVON - 4.43%
BKS - 5.26%
BGO - 5.46%
CCT - 5.00%
CRL - 11.59%
D4T4 - 6.18%
EYE - 5.17%
JDG - 5.60%
MGNS - 4.81%
OXB - 4.71%
RFX - 5.56%
SDI - 4.69%
VTC - 4.43%
WINK - 4.63%
WJG - 4.40%
XPP - 5.11%

Cash - 2.27%

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