Is the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (WHSP) share price good value after its annual general meeting (AGM)?
An AGM is the chance for a business to tell its shareholders how the company is performing, what it’s working on and its outlook.
WHSP valuation
For me, a key part of the presentation was outlining the impacts of the acquisition of Milton Corporation.
The investment house noted that as at 31 July 2021, had the merger been completed at that date, the pre-tax net asset value (NAV) of WHSP would have been $9.08 billion rather than the $5.8 billion that was reported.
Those numbers are after adjusting for the $300 million of dividends paid by Milton and excluding Milton shares already owned by WHSP.
The net cashflow from investments would have been $277 million, rather than $180 million. This is what funds the dividends for shareholders.
WHSP also said that the deal provides greater portfolio diversification and additional liquidity for future investments, as well as a capable investment team to add to WHSP’s existing capabilities.
Investments
Management outlined its different investments to investors.
The biggest is the ‘strategic portfolio’ worth $4.26 billion where it has large positions across a few large businesses in different companies: 12.8% of TPG Telecom Ltd (ASX: TPG), 43.2% of Brickworks Limited (ASX: BKW), 39.9% of New Hope Corporation Limited (ASX: NHC), 25.6% of Tuas Ltd (ASX: TUA), 29.9% of Apex Healthcare and 36.4% of Pengana Capital Ltd (ASX: PCG).
It recently sold its Australian Pharmaceutical Industries Ltd (ASX: API) shares and reduced the New Hope holding from 50.01% to 39.85% (it held around 60% of New Hope four years ago).
After the merger, the next largest asset group is its ‘large cap’ portfolio worth $3.47 billion. The aim here is to generate income and growth, with a long-term approach. Some holdings includes Wesfarmers Ltd (ASX: WES), CSL Limited (ASX: CSL) and BHP Group Ltd (ASX: BHP).
WHSP also invests in a number of smaller, emerging companies – both listed and pre-IPO. This portfolio is worth $545 million. Some holdings here includes Uniti Group Ltd (ASX: UWL), Siteminder Ltd (ASX: SDR), Retail Food Group Ltd (ASX: RFG) and Electro Optic Systems Hldg Ltd (ASX: EOS).
Private equity is another important area of growth. Investments here includes the copper (and other materials) miner Round Oak, agriculture, Ampcontrol, Aquatic Achievers and Ironbark Asset Management. It invested another $60 million in agriculture in 2021.
It has $360 million in a ‘structured yield’ portfolio, with a cash yield of around 7% with equity-linked upside. These investments are structured as loans and convertible notes.
Finally, it has a relatively small $169 million property portfolio across nine directly-owned properties. Industrial development assets are the focus here.
My thoughts on WHSP and the share price
I think that WHSP is one of the best ASX 200 (ASX: XJO) shares with extreme longevity. In my opinion, it’s a ‘buy and hold forever’ type of ASX share.
I like that it’s looking across a number of different areas for long-term opportunities including health and ageing, the energy transition, agriculture, financial services and education.
The WHSP share price is not cheap. I believe the ASX share is worth more than the total value of its assets, but I’m currently looking for a price around $30 to consider buying more.
I think it’s one of the best ASX dividend shares around, with a very reliable history.
