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Two massive Australian mergers | Roblox & Tencent updates

HOSTS Alec Renehan & Bryce Leske|11 July, 2021

We’re seeing some big mergers in the listed investment company space, so Alec and Bryce unpack what is happening and what it means for shareholders. First, Washington H. Soul Pattinson have made a $4b takeover bid of Milton Corporation and then you might have heard our previous guest, Geoff Wilson, declare WAR on LIC discounts. His Wilson Asset Management Global fund has declared its first target: Templeton Global Growth Fund.

Also, there’s very important Equity Mates news… they’ve written a book! Preorder Get Started Investing on Booktopia or Amazon now.

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Bryce: [00:00:14] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going bro? [00:00:29][14.9]

Alec: [00:00:30] I'm very good. Bryce I. I'm sure you can hear from this crisp, quality audio that you're listening to on your headphones right now that I am currently under a blanket again [00:00:42][11.8]

Bryce: [00:00:43] back under the blanket. Unfortunately, yes, we are here lock down recording on the 1st of July. Happy new FY twenty two, by the way. Exciting times for us in finance. [00:00:53][9.9]

Alec: [00:00:56] You do. And we didn't have an end of financial year party. [00:00:59][2.9]

Bryce: [00:01:00] Well, we it was a bit hard when we went in lockdown. But you must take note that when we're out we should go and celebrate the end of FY 20. [00:01:08][8.3]

Alec: [00:01:09] Yeah, but look, we want to start this episode by just, you know, saying our thoughts are with everyone, you know, around Australia that's in lockdown. It's a it's a tough time, you know, to to be locked down again. But, yeah, hopefully hopefully it's all over soon and and we can get back out there and actually an maybe on end of financial year party, but a live event and say everyone again. [00:01:36][27.7]

Bryce: [00:01:37] So yes. Yes. No, I couldn't have said it better Ren. So we do have a couple of live events coming up, but we're excited for. But we will hold fire on chatting about that until we do have a bit more clarity on what is going on around Australia with Lockdown's. But one very exciting thing we can talk about before we get into discussion around mergers and listed investment companies and an update on the stock of the year. [00:02:01][24.5]

Bryce: [00:05:46] So let's get stuck into this episode. We're seeing Ren. We're seeing some big mergers in the listed investment company space at the moment. And we are going to unpack what is happening and what it means for shareholders. We are recording this on the 1st of July. As I said, so some of this has has been in the news. But we wanted to to just go a little bit deeper because, yeah, we've spoken to actually a number of a number of key members of some of both of the listed investment companies that we're going to be talking about today. [00:06:16][29.7]

Alec: [00:06:16] Yeah, and given the pace of mergers in the listed investment company space at the moment, there may be another one before we even release this episode. Sure. But look, let's take a step back. We hate jargon here at Equity Mates. So let's start with a bit of a pardon in the jargon for people that aren't familiar with the term. So Bryce what is an LIC? [00:06:41][25.2]

Bryce: [00:06:43] No, absolutely not your best. But I listed investment company, otherwise known as an LIC, is an Australian closed end collective investment scheme similar to investment trusts in the UK and closed end funds in the United States. So instead of regularly issuing new shares or canceling shares as investors join and leave the fund, investors buy and sell to each other on the ASX so that, yes, they are different to an ETF. [00:07:11][28.3]

Alec: [00:07:12] Maybe in in more simple terms, it is a company that has a bunch of shareholders, and rather than using the money that the company has to make a product or service or do anything that a company does, it uses the money that it has to invest in other shares. And so shareholders make the company makes money by, you know, being a good investor and making money on their investments. And as a shareholder in that company, you make money when the company makes money. [00:07:43][31.1]

Bryce: [00:07:44] Yeah, we hope so. You also make money if the the manager for the listed investment company is very good at marketing and creates a bit of. All right, listen, [00:07:53][8.9]

Alec: [00:07:54] let's put it in that for now. And I think you started you started to ask the question, how is it different to an ETF? And I think that's important. So if you if you're a if you're an investor in Australia and you want to invest in an actively managed fund, a fund where there's someone making decisions about what stocks to buy and sell, you can invest in a listed investment company or you can invest in an active ETF. What are the differences between the two? [00:08:25][31.5]

Bryce: [00:08:26] So the main difference between an ETF is and an LLC is the structure, as we mentioned. So it's I mean, open ended versus closed ended. [00:08:34][8.6]

Alec: [00:08:35] And what does that mean? [00:08:36][0.5]

Bryce: [00:08:36] An LIC has has limits on how many shares that they issue. And every time that you're purchasing and say on the ASX, you just trading the shares on the ASX, whereas if you're buying into an ETF, it's open ended. So you're actually getting new units issued within from the ETF provider or the market maker. Every time that you buy into an ETF, they create more and more units. You're not just trading the same amount of units that have been created. So that's the the major difference, I think, between an ETF and an LIC. [00:09:10][33.8]

Alec: [00:09:11] So if a if a LIC has 100 shares issued, it's got 100 shares issued and the price of those shares is set by the supply and demand of investors buying and selling those hundred shares. And regardless of the value of the the the investments that the say holds, the actual share price is just set by supply and demand because there's 100 units on issue and they're being traded back and forth with an ETF. There's not a set number of units. The price reflects the value of the investments. And as investors buy and sell, the ETF issuer is essentially expanding and contracting the number of of units or shares on issue to meet supply and demand. Yeah, okay. So that's that's part in the jargon. Now, there have been some big mergers in the listed investment company SpaceX recently. Um, Washington H Soul Patison, not the chemist. But I listed investment company that was that has grown out of the the original kemmis chain, it's now one of the bigger listed investment companies in Australia. ASX Ticker S.L is merging with Milton Corporation, which is also a very old and established Australian listed investment company, ASX Ticker MLT, and that's an eight billion dollar company merging with a four billion dollar company. And then secondly, Wilson Asset Management, the Global Fund ASX Ticker JP, which is valued at 600 million, is acquiring Templeton Global Growth Fund ASX ticker tape GE, which is valued at three hundred million. So the there the two mergers that have been announced in sort of the last month and we're going to unpack both of them, what happened, what it will mean and what it means for both groups of shareholders in this episode. But before we do, we should sort of zoom out and just talk about the LDC landscape in general, because there's a bit of a trend that we're seeing in the same market that's worth paying attention to. [00:11:25][134.4]

Bryce: [00:11:26] Yeah, according to the IFR and Morningstar, at the start of 2020, there were one hundred and eight Elyse's on the ASX. But by the start of June 20, 2001, there were only 98. So the trend seems to be that there's acquisitions or mergers taking place. [00:11:46][20.8]

Alec: [00:11:47] Yeah. [00:11:47][0.0]

Bryce: [00:11:48] And as well as as well as, I guess, some of these. Elyse's also converting into active ETFs as well. You know, there's the Monash Absolute Investment Company, ASX May one is an example of that. [00:12:03][15.5]

Alec: [00:12:04] Yeah, ETFs are really the the IT product of the moment, aren't they? They're really in vogue at the moment ever on a lot of investors choosing ETFs over Elyse's. And I think, you know, some of these fund managers are taking note and making decisions about is the I say the right structure for them or would they prefer to be in an active ATFP instead? So, yeah, the the L I say options are, you know, there's still plenty ninety-eight is still more than enough to choose from. But there's the it's a it's a shrinking opportunity set there. So it's an important trying to take note of and it's one that well who knows if it will continue or not. But there's some interesting stuff happening in the space. The second merger we'll talk about, it's a story of underperforming Elyse's. So, yeah, we'll see what what plays out over the coming coming months. But let's let's talk about those two mergers. There's definitely shareholders in the Equity Mates community on in some of these days. Elyse's so let's start with Washington H. Soul Patterson and Milton Corporation. What happened? [00:13:21][77.5]

Bryce: [00:13:23] What happened? Well, Soul Soul Pattinson ASX ticket as well, as we said, is in a four billion dollar takeover of Milton to create just shy of an 11 billion dollar listed investment company. So an incredibly large investment company. They are two of the country's oldest investment houses. Milton was founded in nineteen thirty eight and listed in nineteen fifty eight. So it's been kicking around for quite a while now. So what's going to happen? Well, Sol will acquire the remaining share capital that it doesn't already own in Milton. So it's worth noting they already have about three point three percent stake in Milton prior to this takeover. And and they're going to be buying back the remaining ninety six point seven per cent of that to QuickDraw to form to form this listed investment company. So Rob Milner, who chairs sold patents and board, and he's also chair of Milton's Elyse's board. And they both hold shares in each other. We've actually spoken as well to the to Tom Milner, who's involved with Brickworks and so and has family history through all of this. So side note, go and go and listen to that episode. If you haven't [00:14:48][85.5]

Alec: [00:14:49] the Milner family, one of Australia's biggest investing families. Yeah. Rob Milner sitting on both of these boards or chairing both of these boards on. So that is what happened. I guess the question is, what does it mean? And also why why this merger like an eight billion dollar? I say, does it really need to take over or merge with a four billion dollar? Oh, I see. And I think that the key reason is Washington H Soul Pattinson. Let's just make an agreement that we're just going to call it soul parts from now on because it's too long and [00:15:27][38.6]

Bryce: [00:15:28] I'm actually going with soul. [00:15:28][0.9]

Alec: [00:15:29] OK, all right. I'll back you on that. All right. So Soul has a number of longstanding investments. New Hope Corporation, which is a big minor, and Brickworks, which is a big brick maker and also has a number of investments. And they they want to invest in new opportunities. But it would be incredibly that would be a big tax burden if they just sold some of these holdings, because I've held them for so long and there's been such capital growth while they've held them. So so this merger for Souls is is actually incredibly tax efficient. It doesn't have to sell some of these long standing investments, but it expands its capital base. And so it's able to invest in some of these new opportunities that that it's looking at. [00:16:24][54.4]

Bryce: [00:16:24] Yeah, this is just going to really give them they want to get more involved in property, into private equity, into debt. And this is going to allow them to get the capital base to do so and start investing in more asset classes, as you said, Ren, without having to to sell and liquidate existing assets. So it makes a lot of sense. And, you know, if you're a shareholder of both Milton and Subparts, it certainly seems like a decent idea. So let's have a look at what it actually means for Milton shareholders and for so patents and shareholders. Let's start with Milton shareholders. It seems to be a pretty great deal for Milton shareholders because the deal itself is offering Soul Pattinson shares at a 10 percent premium to Milton Sprey adjusted pretax net tangible assets. And the reason that they can do that is because because subparts does own about three point three or three point eight percent of of Milton, then they don't actually have to buy the shares back. And and those just, I guess, disappear. And therefore, you're going to get that return on equity because of the the the reverse of a dilution, [00:17:45][80.8]

Alec: [00:17:46] a concentration, [00:17:46][0.2]

Bryce: [00:17:47] a concentration. [00:17:47][0.1]

Alec: [00:17:48] So that's the technical term. But what you like for people who found that confusing, it's literally just like if I had a company in Bryce had a company and I own 10 percent of Bryce company, and then I acquired all of Bryce this company, that shareholding that I had, I like I can't own shares in myself. So those shares just get erased basically. [00:18:12][24.0]

Bryce: [00:18:13] Yeah. Yeah. And so those shareholders of Milton will essentially get entitlement to some to some shares through a script offer in. So it's it doesn't seem like it's a one for one deal. [00:18:27][13.7]

Alec: [00:18:27] There's you've just multiplication effect. You've just used a term that that we should probably explain scrip. [00:18:35][7.3]

Bryce: [00:18:35] So a scrip in Australia is a bid for a takeover offer where shares are offered partly or wholly in place of cash. So in this situation, there's a multiplier effect. So if you own X number of million shares, but you can at times that by the multiplier effect and it will result in X number of sold, such as pretty straightforward. [00:18:58][22.4]

Alec: [00:18:59] Yeah. Yeah. So can they opt to take the cash, the militant shareholders or do they, is it just they get the shares or they sell sell shares in the public market. [00:19:10][10.6]

Bryce: [00:19:11] Good question. Good question. Yeah, I don't have the answer. The other good thing for a million shareholders is that they are going to be entitled to receive three fully franked dividends totaling 52 cents per share. So they're getting a premium, they're getting a fully franked dividend, and then they're going to be getting the offer to convert shares to to sell parts as well. So that's what it means for Milton shareholders, [00:19:34][23.3]

Alec: [00:19:35] then for souls shareholders. I mean, in some ways, nothing changes. Like if you own 100 shares of Salz today and you own 100 shares of Souls a year from now, you know, you still own 100 shares. But there's obviously more shareholders. So you own a smaller percentage of the company, but you own a smaller percentage of a company that's that's a lot bigger. So in terms of what it means for souls, so there are currently about ninety first in the index in terms of biggest companies. This merger will, it's estimated, will take them up to number 54 in the index, which means a bigger market cap means bigger index weightings. So, you know, ASX 200 ETFs, the their their shares will be more of that index. And so all of our ETFs will buy a little bit more of souls because they're going to be bigger. So that's that's one thing. But really, for souls, the story is around the additional liquidity so that the company is saying it's going to turbo charge. I actually don't think that's the terminology they used. I think that's the terminology you put in the notes. I would be surprised if Robert Millner was saying it would turbo charge, but it's going to it's going to just help them with their strategy of investing, diversifying their investments away from some of their core holdings. So as a Soldats shareholder, you should see a different investment opportunities being realized by by these guys. I guess the question is a shareholder is whether they're going to be good investments or not. But soles, for those who are unfamiliar with the company, just has this unbelievable record of paying a dividend and increasing its dividend. And so as the sole shareholder, chances are, that's a big reason of why you own them. So you've really got to assess, you know, the dividend story, because that's why so many Australian investors love that stock. [00:21:41][126.3]

Bryce: [00:21:42] Yeah, well, that is that's what's happening with the Washington, Sopot and Milton Corp takeover, two of Australia's largest Elyse's joining forces to create a mammoth one. So before we move on to what's happening with Wilson Asset Management and Templeton Global Growth and have a look at our Stock of the year, we're going to take a quick break to hear from our sponsors. OK, Ren, so Wilson Asset Management Global and Templeton Global Growth Fund, we recently had Jeff Wilson on the show to talk about his war on Elyse's. So what's happening here? [00:22:17][35.4]

Alec: [00:22:18] Yeah. So if you haven't listened to our interview with Geoff Wilson, go give it a listen. It's a it's a cracking interview. And he's you know, he's got a long and storied history as an investor. I think his company, Wilson Asset Management, has eight Elyse's in listed on the ASX. So he is Mr. Ellis. Say we actually should have called in that in the interview. Now a missed opportunity, but his his latest listed investment company is called Wilson Asset Management Strategic Value. And the ASX ticker is War WJR. And he has come out and said he's declaring war on underperforming Elyse's. I'm noticing that. I've had to say performing a lot in this episode, which I'm sure is annoying some people. So I'll try and try and avoid saying that. But look, there is a phenomena, I guess, on the ASX of listed investment companies trading below the value of their assets. So according to Morningstar, across the 98 Elyse's trading on the ASX, 82 traded at a discount at the end of May. Twenty twenty one. And this is also, according to Morningstar, the average discount among these 82 Elyse's was ten point eight percent. And so what that means is if I am running an LLC and I own 100 dollars in shares, my share price is only, you know, ninety dollars. As an investor, you can see that the LHC has assets that are worth more than the share price that anyone's willing to buy that share of EUFOR. And so that's really frustrating for Félicie investors because they they want their share price to reflect the value of the assets that it holds. Now, Geoff Wilson has a track record of not having his his elissa's trade at a discount and full credit to him. He is you know, he engages with retail investors, institutions alike. He he does what a roadshow every year and he hits I don't even know how many cities, but he he does the work to make sure that investors know the value of their shares and to to close any discount that exists. But now he's taking that approach and saying every other allies say manager in the market, be on notice. You're letting your shareholders down if you just letting these discounts linger and you're not making active efforts to close that discount for shareholders. And the first target of his new war was this Templeton Global Growth Fund. So for context, Templeton is one of the world's largest fund managers. It's based in San Francisco. It manages about one point four trillion US dollars. And this Templeton Global Growth Fund was their only ASX listed. I say it's been listed on the ASX for 34 years. And in recent history it has just always traded at a discount. According to Bell Potter, it is traded at at a discount since December 2014 and the discount it was trading at at the start of June was eight point three percent. So, you know, for every 100 dollars in assets it held, it was its share price was ninety two dollars. So in October twenty twenty, Templeton announced a strategic review to address the gap between its share price and its net asset value as basically a strategic review into the discount and how they can close it. And Wilson Asset Management has been heavily involved in this. I say it initially invested six years ago, has been steadily increasing its stake over the years through its many different Elyse's Wilson Asset Management strategic value. That is that I say with the ASX ticker war owned fourteen point seven percent of Templeton, I say. And so basically Templeton has been underperforming. Well, it's had a discount for a while. They haven't been able to close that discount. Geoff Wilson's had the company in its sights for a while, has been steadily buying more and more. And recently, a couple of days ago, as of this time of recording, they've basically pulled the trigger and my. The announcement that one of the listed investment companies will be acquiring the whole Elyssa. [00:27:10][291.8]

Bryce: [00:27:11] There you go. I'm excited to see how this plays out, to see if Jeff's strategy for these days that he's going to slowly acquire is going to pay off. [00:27:20][9.5]

Alec: [00:27:20] But, well, I think I think we should say that it's not that his strategy is to just acquire a whole bunch of Elyse's. It's not like in L I say role up play. I think he's I think his ultimate strategy is to buy Elyse's trading at a discount, work with them to close that discount and then sell the Elyse's and move on to the next one. But yeah, it'll be interesting if he does start rolling them up. [00:27:47][26.9]

Bryce: [00:27:48] No, I mean, that that strategy where he works with them to, you know, help them market, help them get front of mind of investors, because that's what he's all about. So it'd be interesting to see how that plays out. What it means, though, is that Templeton's assets will now become part of Wilson Asset Management Global LLC, which is going to bolster their asset base by about 50 percent, from 600 million to just shy of a billion, nine hundred million dollars. So good news. I think if you're a Templeton shareholder, you're going to have either the choice of when global stock and options or you're going to be able to cash out at the full value of their holdings. And that's the important part here. Full value. You're not cashing out at the share price. You will be able to cash out at the net asset value, which would be pretty, pretty rare to be able to do that given its underperformance for so long. [00:28:41][53.8]

Alec: [00:28:42] Well, it's important to put yourself in the shoes of a Templeton shareholder. You know, you haven't been able to sell the shares at the value of the assets for about seven years. Yet if I have said nearly seven years or so for the first time in seven years, you have the option to sell at the value of the assets rather than at the share price, which has been trading at a discount. So if you've been someone who's been waiting for the right time to get out of Templeton, Geoff Wilson has really opened the door to to realize the full value of your holdings or, you know, you take the stock and you become part of Wilson Asset Management Global. And, you know, hopefully the days of your discounts are behind you if Geoff Wilson content can continue to do what he does. [00:29:33][51.2]

Bryce: [00:29:34] Absolutely. So in terms of what does it mean for when global shareholders. Not a whole lot. I mean, you're going to have more assets, but also there's going to be more shareholders. It's important to note, though, that, you know, even though Jeff is proven to be out of close discounts, engage retail and institutional institutional investors, you know, you wouldn't expect that Templeton's discount does carry over. However, there is there is a likelihood that it could. So I guess that's just something to consider and would be [00:30:11][36.8]

Alec: [00:30:11] heavy if it was a contagious discount and it just followed. But, yeah, it definitely, definitely could. I mean, there's plenty of reasons why they could have had a discount. You know, maybe investors didn't like the holdings. And so maybe we'll try to get a discount. But yeah, that would be heavy for Wilson Asset Management. It would also be heavy for Geoff Wilson, who's really staking his reputation on being able to close a discount. [00:30:35][24.1]

Bryce: [00:30:36] Yeah, I think the other thing to expect, though, is that this is not going to be the last of Geoff Wilson's War efforts. He's made it pretty clear that this is going to be his strategy for then for the next number of years. War has a position in Vagi Partners global investment, which is a nine hundred and twenty million dollar. Oh, I see. And this is a surprising one. Also, the Magellan High Conviction Trust, which is a listed investment trust, about eight hundred and fifty million. [00:31:06][29.4]

Alec: [00:31:06] Yeah, it is interesting. So two more will one listed investment company, one listed investment trust. Let's not get into distinguishing those now. But yeah, the the war footing of Wilson Asset Management continues. And it it'll be interesting to say I mean, I'm sure he's ruffled a few feathers in the asset management business. I'm sure they don't like spotlights being shone on those discounts for if, you know, if they're the fund manager. But it's you know, Geoff Wilson has a history of trying to stand up for retail shareholders. And, you know, for the shareholders of these funds, you would be pretty happy to see someone taking a really active interest in closing the discount and increasing the value of your shares [00:31:53][46.5]

Bryce: [00:31:54] so that we have it to two listed investment companies or two stories of listed investment companies merging or acquiring. So watch this space as it no doubt will continue to happen over the coming years, but as we said right at the top of the episode, we will be closing out this one today with an update on the stock of the year. It is the new financial year. So we're halfway through. [00:32:16][21.1]

Alec: [00:32:16] So I reckon we can just wrap here, actually. [00:32:18][1.3]

Bryce: [00:32:19] No, no, no. So we thought we'd take a look at both of the stocks that we picked at the start of the year. Now, massive caveat on this, as always, that we weren't doing this in any way for a buy hold or a sell recommendation. This was merely an opportunity for us to take take a look at a stock and put it on our watch list for the year just to see how it plays out as a bit of a fun and fun little game between you and I. Ren We'll [00:32:45][26.6]

Alec: [00:32:46] look. If anyone has has followed Equity Mates for a while, they would know that the stock of the year are picks are nowhere near a buy, hold or sell recommendation, because I always seem to be able to pick a company that loses a significant part of its value over the course of the year. Some say that being Ren stock of the year is the kiss of death for a company, and I thought I had avoided that this year. But hey, you know, it's happened again. [00:33:20][34.7]

Bryce: [00:33:21] And I know well, at least yours is at least it's still in the green. Often your stocks will end in a very, very dark red. But let's go. Let's kick it. Let's kick it off. Do you want to go first? [00:33:34][13.2]

Alec: [00:33:35] Sure. So I at the start of the year, I was looking at 10 cent for those unfamiliar. It's a Chinese tech company famous for WeChat, the Chinese social media platform WeChat, which is so much more than a social media platform. It's it's sort of you know, it's a super app. If people are familiar with that term, it's got everything from payments to a whole bunch of other companies that have been built on WeChat infrastructure. May, which is the uber of China, has been built specifically on weight. Shaoping Duoduo, a e-commerce play over in China. Similarly, WeChat is essential infrastructure in the Chinese Internet economy, and then it also has a raft of other investments. It uses the money it makes to invest globally. It owned like five percent of Afterpay, a bit of Spotify, bit of Tesla. I think it had like 700 Vaizey investments. It was. It has fingers in so many different pies. Tencent was up thirty four percent in sort of mid-February. And I was I was saying that we should just stop the competition now and just call it a day. But then what has happened is there has been a big sell off of Chinese stocks, especially Chinese growth stocks. And so now year to date, Tencent is up three percent. But to put this trying to sell off in context from the middle of February to sort of May this year, a lot of the big Chinese names fell off. So Tencent was down 23 percent from its year to date high. Alibaba was down seventeen percent. JD.com down twenty six percent, made Taiwan down twenty nine percent. Pinjarra down thirty four percent. So investors obviously falling out of love with Chinese stocks. And just just to sort of complete the picture for people in terms of some of the reasons why that's the case. First first thing to note was if people remember in March twenty twenty one, there was threats from the US government to delist Chinese shares from US exchanges. And they also have this like depositary receipt system where you can invest in like Chinese stocks through ideas. And there was threats to just delist those Chinese stocks. So that obviously put a lot of fear in the market. But some analysis I was reading from Morgan Stanley has said the Chinese China sell off. You know, it's a combination of factors. There's the inflation story and the fear of rising interest rates that's hitting global growth stocks. You know, around the world. We've seen it in the US, we've seen it in Australia. But there's also China specific concerns. There's a lot of concerns over China's growth path and whether it will be able to keep hitting the the lofty growth numbers that it has historically been hitting. And then then then there's also some questions over the future of Chinese monetary policy and potentially the fact that China will raise rates before the rest of the world. So that's from Morgan Stanley in terms of some of the reasons why. But yeah, Tencent, it had a ripping start to the year and had some really come back to Earth, so. One of the year to go, [00:37:04][209.2]

Bryce: [00:37:05] there is a lot of year to go, half a year to go, but the good news is, is that it is still up, I guess. [00:37:11][6.2]

Alec: [00:37:12] Yeah. And let's stop rubbing it in, still rubbing it in and get to all it [00:37:16][3.7]

Bryce: [00:37:16] needs is for those big stocks to turn around and it'll be roaring back to life, but. I don't think it really takes away from the underlying company that it is so, so to confirm up 34 percent back down now, up three. We will watch how it plays out. So Ren mine was roadblocks. And I took a bit of a gamble this year by actually choosing a you [00:37:40][24.1]

Alec: [00:37:41] know, and you are known for taking a bit of a gamble from time to time. [00:37:44][3.7]

Bryce: [00:37:45] You got to be in it to win it. And I chose a company that actually hadn't listed when we started the competition. And that was a roadblocks it IPO in March. I think we first discussed this in February. So I was eagerly awaiting the IPO and I think it ended up doing a direct listing from Memory Roadblocks, develops and operates an online entertainment platform otherwise known in the gaming circles as a sandbox game. Essentially where you've got developers, it's like a two sided marketplace. You've got developers and also those that play the game and you go in and create an entire world and interact with each other. So it's huge. It's a massive game. I think at last count it was over. It was almost half. Now, half of the kids aged between nine and 12, I think, over in the United States play this game, which is just pretty phenomenal. But at the time of writing, the stock price was about eighty nine dollars, a market cap of fifty one billion and Ren since IPO. That takes it to being up just shy of 30 percent, twenty nine point four seven percent. And that has really come since mid-May. So I had a look at what was going on since mid-May. And the big question when we were speaking about this at the start of the year was, is the growth of this company and the uses that it's commanding? Was that really off the back of covid? And is it sustainable? How many people are going to return or continue playing once life in America returns to some form of normality? And they released their monthly metrics in May and the numbers were pretty staggering. So their daily active users is forty three million people. That is up twenty eight percent from May last year. The hours engaged each day is three point two billion sorry, in May was three point two billion, up almost 10 percent. And in terms of revenue, two hundred and nineteen million up twenty six percent on this time last year. So the growth story continues to be the USA's daily active users engagement and also revenue hitting some pretty solid numbers. So, look, I'm still backing it in subsequently up 30 percent. We'll see how it plays out. [00:40:19][153.4]

Alec: [00:40:19] The big question that I had at the start of the year was, you know, you were talking about how a third of children aged nine to 12 in the US were playing. And now you're telling me that number is half of children aged nine to 12 in the US applying [00:40:34][15.3]

Bryce: [00:40:35] maybe not quite. But yes, [00:40:36][0.9]

Alec: [00:40:37] my big question at the time, and I guess my question still is, once you get high school or middle school in the US, do you age out of this game like is this is this a game that that can grow beyond that pretty narrow band of nine to 12 year [00:40:55][17.8]

Bryce: [00:40:55] olds? Yeah, the main metrics didn't have that level of detail. I'm sure we'll get it in the results towards the end of this year or whenever the next reporting season is for the United States. So I agree with you on that question. It'll be interesting to see what the numbers show. But I think the part of the reason that they did the IPO as well was to try and start expanding their product range and also expanding into international markets because they're still pretty heavily overweight in the U.S. at the moment. So let's see how it all plays out. But up twenty nine percent. So it would have been neck and neck if Tencent had kept doing what it was doing. But alas, [00:41:32][36.8]

Alec: [00:41:34] alas, the curse of Ren strikes again. [00:41:37][3.8]

Bryce: [00:41:39] But anyway, that brings us to the end of today's episode. We have Covid Covid, plenty of ground. Just a reminder that plays if you are looking for a gift or even if you're looking for some reading. We have just launched our book, Get Started Investing feed. It is not just for those who have started their investing journey. We cover a lot of ground in that in the book as well. So we've taken excerpts from over one hundred and fifty interviews with our experts and a lot of the lessons that we've learned over the last four or five years during the podcast and tried to put it into a pretty easy and digestible book. So head over to book topia dot com today. You to preorder now it's launching in late August. We are. You're going to have some sort of a launch party, hopefully pending covid and all those sorts of things, but yeah, we might have a game that if you do manage to preorder and prove it, then we we could get some tickets to the party or something. We haven't discussed that with Ren. I'm just spit balling here, but [00:42:37][58.0]

Alec: [00:42:38] not like it. I like. But anyway, let's get let's get through this lockdown first and then let's think about a lot of events. So I hope everyone's staying safe and doing okay. And, you know, hopefully our constant stream of content can get you through this lockdown if you're ever looking for podcasts. There's plenty more in the Equity Mates stable Get Started Investing feed you're in good company. Comedian, Vae, economist, Mapei love. Honestly, we've got every day Covid. [00:43:09][31.2]

Bryce: [00:43:10] Absolutely. That's right. So look, join us on the Facebook discussion group as well. Follow us on all the social channels and make sure you signed up to our newsletters. Plenty going on in the world of Equity Mates. You can contact us at Contact@equitymates.com as well. But Ren always good to chat stocks and we will pick it up next week. [00:43:27][17.3]

Alec: [00:43:28] Sounds good. [00:43:28][0.0]

[2317.8]

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Meet your hosts

  • Alec Renehan

    Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

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