Soul Pattinson on the hunt for bargain buys

Washington H. Soul Pattinson chairman Robert Millner says the conglomerate continues to look at opportunities in Australian equities.

Robert Millner says Washington H. Soul Pattinson is proud of its dividends history. Picture: Hollie Adams

Washington H. Soul Pattinson chairman Robert Millner says the conglomerate continues to look at opportunities in Australian equities where businesses can be bought at reasonable prices, but says the investor is avoiding white-hot segments of the market such as “buy now, pay later” fintech plays.

Mr Millner said Soul Pattinson, for the first time in its 117-year history, had borrowed money to invest, and its willingness to pounce on a good deal was reflected in its recent $550m takeover offer for aged-care provider Regis Healthcare, with the industry reflecting attractive economic and demographic trends.

But the investment company would also be happy to take money off the table if the right offer came along, such as the partial selldown in its large shareholding in coal play New Hope announced to the market late on Tuesday night that will raise about $75m.

Addressing shareholders on Wednesday at the company’s annual general meeting, Mr Millner said Soul Pattinson’s long-term performance through economic upheavals and the current pandemic ensured that it stood out among hundreds of companies on the ASX.

“Washington H. Soul Pattinson is now the only company in the top 500 listed companies in Australia to have increased its dividend every year for the last 20 years,” Mr Millner said.

“We are extremely proud of the fact that the company has never missed paying a dividend since listing in 1903. Despite difficult periods such as the GFC and COVID-19, we have been able to continue to grow the dividend paid to our shareholders.”

Mr Millner told The Australian that investors were living in uncharted territories given COVID-19, low interest rates and working from home, but the equity market was something investors could get a return out of.

“We used to think that 14 was a pretty good price-to-earnings ratio (P/E), now the market is about 23 or 24,” he said. “If we can get the growth with the high P/Es and get the earnings up, we have done quite well from our trading portfolio.”

Soul Pattinson was avoiding fintech plays such as Afterpay, because “they don’t pay a dividend”.

Other industries were more ­attractive, prompting Soul Pattinson’s $1.85-a-share bid for Regis Healthcare.

“That’s why we have put some money on the table for Regis. We just think this sector has been a bit unloved and there are opportunities there for us. We are all going to end up there one day,” Mr Millner said.

“Obviously, take the opportunity if you can get something down there at the bottom, where it was. The whole sector has been unloved, what with the royal commission etc, and Regis has a good track record and are good operators.”

Mr Millner said he was disappointed the offer had been rejected. “It has been very in­appropriate I think for the [Regis] board to knock us back, because we went there when the shares were $1 and without us today the shares could still be around that $1 or $1.20 level,” he said.

Soul Pattinson is also happy to sell into a rising market, and this week sold 50 million New Hope shares to raise more than $75m, reducing its stake from 50 per cent to 44 per cent.

“Someone just bid us, we weren’t actively in the market, we were bid for that stock and happy to let them go,” Mr Millner said.

He said the selldown of its New Hope stake did not reflect a lack of confidence in the future of coal, with Mr Millner believing it had a future alongside renewables.

“The coal industry will still be with us for a long time; they are still building high-end, low-emission power stations; there is still 14 per cent of the world who haven’t got running water or power,” he said. “We agree there is a place for renewables and there is going to be a place for gas and coal as well.”