Mirrabooka Investments Boosts Dividend Amid Strong Small-Cap Outperformance

Steady Profit and Outperformance

Mirrabooka Investments Limited has delivered a consistent half-year profit of $4.6 million for the six months ending 31 December 2024, matching the previous corresponding period. The company’s portfolio return, including franking credits, was a robust 11.5%, significantly outperforming the combined Small Ordinaries and Mid Cap 50 benchmark return of 7.5% over the same period.

This performance underscores Mirrabooka’s focused investment approach in small and mid-cap companies, which has yielded strong relative gains, particularly from holdings such as Gentrack Group, Pinnacle Investment Management, and Temple & Webster Group.

Dividend Increase Reflects Confidence

Reflecting its solid performance, Mirrabooka has declared an interim fully franked dividend of 4.5 cents per share, up 0.5 cents or 12.5% from last year’s interim dividend. The dividend is fully franked at 30% and is sourced entirely from capital gains on which the company has paid or will pay tax, providing potential tax benefits to shareholders through the LIC capital gain component.

The company also offers a Dividend Reinvestment Plan and a Dividend Substitution Share Plan, both priced at nil discount to the volume-weighted average price, allowing shareholders flexible options to increase their holdings.

Portfolio Management Amid High Valuations

Mirrabooka’s portfolio activity was subdued in the half-year, with approximately $47 million invested across new and existing holdings, reflecting an annualised turnover rate of about 14%, below the usual 20-25%. This cautious approach is driven by elevated valuation levels in the small and mid-cap sectors, which have limited compelling investment opportunities.

The company prudently trimmed positions in several large holdings such as Pinnacle Investment Management and Gentrack Group to manage risk amid stretched share prices. Meanwhile, it exited investments like PSC Insurance following a takeover and reduced exposure to Domino’s Pizza Enterprises and JB Hi-Fi due to valuation concerns.

Net Asset Growth and Cash Position

Net asset backing per share before tax on unrealised gains rose to $3.41, up from $3.06 a year earlier, signaling strong underlying portfolio value growth. Mirrabooka has also built a modest surplus cash position of approximately 3% of the portfolio, reflecting its patient stance in awaiting more attractive investment opportunities.

Outlook and Market Commentary

The company remains focused on delivering medium to long-term capital growth and income through disciplined exposure to high-quality small and mid-cap equities. While global equity markets showed strength in 2024, sector performance diverged, with industrial growth companies outperforming resource sectors, a trend that has favored Mirrabooka’s portfolio composition.

Mirrabooka’s management emphasizes valuation discipline and risk management, particularly cautious about stocks propelled by recent enthusiasm around artificial intelligence and subscription-based software companies. The company expects ongoing market volatility and remains committed to its investment philosophy rather than attempting market timing.