Good day, and thank you for standing by. Welcome to Djerriwarrh Investments' H2 Financial Results briefing. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Questions will be taken through the webcast. If you would like to ask a question, please click on the Ask Questions at the bottom of the webcast window. Please be advised that today's conference is being recorded. I would now like to hand the call over to Mr. Mark Freeman, Managing Director. Thank you. Please go ahead.
Okay. Good afternoon, everyone. I'm Mark Freeman, the CEO and Managing Director of Djerriwarrh Investments, and welcome to this H2 result briefing. I'd like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today and pay my respects to their elders, past, present, and emerging. I have joining with me today on the webinar, Brett McNeill, the Portfolio Manager for Djerriwarrh; Olga Kosciuczyk, who works alongside Brett, managing the portfolio; Andrew Porter, our CFO; Matthew Rowe, our Company Secretary; and Geoff Driver, who's our General Manager of Business Development. Before we start the presentation, a bit of housekeeping on the webinar. This briefing is based on the material available on the company's website. If you are using your computer to access the presentation via the webcast, the slides will change automatically.
Finally, please note, following the presentation, there'll be time for questions and answers. You can ask a question via the webcast. Turning to the presentation, starting on slide 2, just our usual disclaimer to say we're here to talk about the company. We're not giving any advice on any matters. So to the agenda on the next slide, I'll give an overview of the objectives of the company, then I'll pass over to Andrew Porter to give a summary of the half year. Brett and Olga will then talk through the results and portfolio, and Brett will give some comments on the outlook before we go to questions. So just turning to slide 5, which is an overview of the company. So just to remind everyone, Djerriwarrh is one of the largest income-focused LICs on the market.
We've been listed since 1989, and shareholders get the full benefits of transparency associated with being an LIC, as well as the high governance standards delivered by an Independent Board of Directors. The Djerriwarrh shareholders own the management rights to the company, so there's no fee leakage to third parties and no additional fees. Djerriwarrh is part of a broader group of LICs, which includes the Australian Foundation Investment Company, or AFIC, AMCIL and Mirrabooka Investments. This supports a broader research approach, and it gives scale to the operations of the business. Moving to Slide 6, just to remind everyone of the objectives of the company.
So we're seeking to provide an enhanced level of fully franked income that is higher than what is available from the market, and in this case, what we use, the S&P/ASX 200, and we deliver it at a low cost to shareholders. So the slide below is sort of typical of what we're looking for. When you include franking, if you invested in the index, you would get a yield of around 5%, and Djerriwarrh has been producing, at this point, 6.4%, so that's an enhanced yield of 1.4%. We target just over 1%, and so at the moment, as I said, we're at 1.4%. So this demonstrates the high yield you will get from investing in Djerriwarrh. That's using an NTA assessment.
Because the shares are trading at a discount, obviously, that would be even higher than that. And on the right-hand side, we also aim to provide shareholders with attractive total returns, so that's when you include the growth in NTA plus the dividends, and you can see we're very pleased with the performance over 6 months and 1 year. Three years, we're just behind the index, but again, we've been able to achieve that with better yield than the market. And pleasingly, we don't have on this slide, but as most of you will remember, we did a bit of a strategy reset about 3.5 years ago. Where we looked at some of the features of the portfolio.
That number's not there, but we are exceeding our total return targets, we're exceeding our yield over market targets, and we've been able to grow the dividend solidly since that point. So since that reset on the strategy, hitting all of our objectives, which has been very, very pleasing. And then on to the last slide from me, just looking at where the share price now sits against the NTA. So the last NTA we published was for the thirty-first of December. You can see, it was AUD 3.33, the share price at AUD 3.04. So nearly a 10% discount to the NTA. That's where the share price is sitting at the moment. So with that, I'll pass over to Andrew Porter, our CFO, to talk about the half year in summary.
Thank you, Mark, and good afternoon, ladies and gentlemen. So the first figure that's on that slide, the top left, that's the statutory profit for the half year, AUD 12.8 million. Significantly down from last year's AUD 21.7 million. And this is because this figure includes open option positions, which are valued at the market price or fair value … as these haven't actually been booked yet, we don't actually know what we're going to make out of those. We tend to exclude those when we look at setting the, the dividend. The paradoxical nature, actually, of these open option positions mean that the, the bigger the loss, the more likely you are actually to end up booking income, but that's, that's a lesson for another day. Last year was actually a small unrealized gain on those positions, so that just shows you how much it can swing around.
So we exclude that in terms of looking at the net operating result for the half year, which is that second figure of AUD 21.9 million over AUD 21.3 million in 2022. So that was a small increase, and bearing in mind, and Brett and Olga will go through the details of this later on. Bearing in mind, the decrease in dividends that we received, as expected from some of the large previous dividend players, such as BHP, that's a, that's a good result. The dividend maintained at 7.25%, as Mark has said, and that meant, as we've gone through, that we were able to maintain a higher yield than, than the market at 6.4% above that, at 5%. So Mark talked about being a low-cost portfolio.
The MER, the Management Expense Ratio, is a calculation of what the cost is, and that is the cost of running the company as a percentage of the average portfolio value. That's AUD 0.40 for every AUD 100 that you have invested in the company. Now, that is considered still to be a low cost, judging by and taking into account the amount of work that's involved in writing the options in particular, means that it tends to be higher cost than some other larger LICs, but 40 basis points is still very much regarded as low cost. Now, that figure is up on last year, and we discussed that at the AGM and the shareholder meetings, for those of you that were there, that it was likely to be higher this year.
The actual expenses for Djerriwarrh have stayed the same, but the profit from Djerriwarrh's investment in the management company, AICS, is a lot lower this year due to the fact that it was artificially high last year due to the rewinding of some incentive schemes that were in place there. So again, happy to go through that in detail now or at shareholder briefings, later on in the, in the year. So the total portfolio return, Mark's been through at 9.3%, including franking, and as you saw on the previous slide, that meant that the discount to the NTA had slightly narrowed over the six months in the year. But happy to take any questions at the end. I'll pass over to Brett.
Thanks, Andrew. Good afternoon, everyone. So in this section, I'll look to give some more detail behind our financial results. Firstly, on the composition of our net operating profit, and then on our two key sources of income, which for Djerriwarrh, are the dividend income that we receive and the option income. So starting with the net operating profit result on slide 11, what we've done here is set out a simplified profit and loss statement to show how the profit and dividend were derived for this period. And the focus here is on the net operating profit result for the reasons that Andrew just mentioned. So starting at the top of the table, if we look, our dividend and distribution income grew 6% for the period, from AUD 18.4 million last half year to AUD 19.4 million this half.
Our option income was also up 12% in this case, from AUD 8.4 million to AUD 9.4 million. So overall, when we include some small amounts of other income, Djerriwarrh's operating income for the H1 financial year 2024 was up 7% to AUD 28.9 million. In terms of our expenses, finance costs were up 75% to AUD 2.8 million. This was largely a result of higher debt costs during the period, and our administration costs are up 19% to AUD 1.8 million, again, for reasons that Andrew just touched on. So this delivered an operating result before tax expense of AUD 24.2 million, which was up 2% on the prior corresponding period.
After deducting income tax expense of AUD 2.3 million, this is how we get to Djerriwarrh's net operating profit result of AUD 21.9 million, which was up 3% on the H2 2023. So in per share terms, when we take into account a small increase in the average number of shares over the period compared to the previous corresponding period, that net operating result of AUD 21.9 million equates to AUD 0.0836 per share, down 1%. The dividend per share has been maintained at AUD 0.0725 per share. We'd make the point here, just to note, we think it's very important that the dividend per share is well-covered by net operating profit.
So if we look now in a bit more detail at our two key sources of income, and on slide 12, we cover the dividend and distribution income. This is the income that we received from the companies that we invest in, in the portfolio, and as we mentioned, it was up 6% for this result, to AUD 19.4 million. We've put a couple of charts in here to show how this metric has tracked over the last five half-year financial periods. The chart on the left-hand side just shows the dollars of income and how it's recovered since the COVID lows of H1 2021.
So we've seen very good level of recovery in Djerriwarrh's dividend and distribution income received, which has been a result of the broad recovery in dividend payments across the Australian market that have occurred since the COVID lows, but also good growth in underlying dividends and profits from the companies in the investment portfolio, as well as the impact of a larger investment portfolio overall. On the right-hand side, we take that metric and we represent it in terms of a percentage yield. And so measuring the dividend and distribution income in dollars divided by Djerriwarrh's average portfolio value. That's the green bars here. And we compare it to the dividend yield of the broader share market, the ASX 200, which are the blue bars.
As we can see, for each of the last five half-year periods, Djerriwarrh's portfolio dividend yield has been at or slightly above the market level, and we'd expect this relationship to broadly hold in the near term. Moving on to slide 13, and we do a similar analysis of our option income. This is, of course, the income that we receive when we write call and put options against the companies that we invest in to Djerriwarrh. On the left-hand side, you can see the dollars of option income that we've received again, over the last five half-year periods, and it's been a strong positive trend over that time. For this result, the option income was up 12% to AUD 9.4 million.
And when we measure this as a percentage yield, in terms of dollars divided by the portfolio value, again, a good trend, and that for the last few years, the option income yield has tended to average between 1.5% and 2%. And again, this is a level that we'd expect to, to broadly hold and continue in the near future. So hopefully, this has given some extra detail and insights into how we've derived the profit result from the period and, and the dividend that's been declared, with the key drivers being, some good growth in our dividend income and our option income. So we're now going to give an update on the portfolio, and we'll start with what we've been doing in terms of our option activities. So for this, I'll hand over to Olga.
Thank you, Brett, and good afternoon, everyone. Our main investment objective is to pay our shareholders an enhanced dividend yield. To achieve that goal, we generate income by writing call options against select portfolio holdings. This slide would be familiar to our shareholders. It's the performance of the market, as defined by our benchmark, S&P/ASX 200 index, overlaid with the top-down view of our portfolio's call option coverage. We started the financial year with an option coverage of 32%, which is towards the bottom end of our normal range of 30% to 40%. As the market rose during August, we were increasing our option coverage to 40% in early September. The subsequent fall in the overall market from the start of September to the end of October enabled us to lock in a significant amount of call option income.
Our option coverage fell to 27%, as we chose not to rewrite call options, recognizing that many share prices returned to very attractive levels. Instead, we wrote put options in a number of our portfolio holdings, including CSL and Telstra. Our low option coverage positioned us very well for the market rally we saw at the end of the calendar year, 2023. We used the market's strong performance to increase our call option coverage substantially, and we entered the H2 of financial year 2024 with 39% of our portfolio covered by call options. We also have no put options in our book, as they expired late last year without being exercised. We are positive that our current option book positions us well to deliver on our investment objectives. On slide 16, we show our key recent transactions.
During the year, we exited small remaining positions in IAG and AMP. We also got exercised in a number of companies on the back of their share price trade: James Hardie, CAR Group, BHP, CBA, NAB, and Wesfarmers. We have reinvested the proceeds into high-quality companies at attractive prices. You can see the logos of these companies on the right-hand side of the slide. Our largest purchase during the H1 was Telstra. We believe that Telstra has the right strategy and is well-positioned to deliver sustainable earnings and a growing dividend yield. Pleasingly, we did the majority of our buying between AUD 3.90 and AUD 4 before they paid the August dividend and following a fall in the share price from its June 2023 high of AUD 4.42.
We also increased our holding in Woodside Energy when the share price fell more than 20% on the back of the market's concern regarding the company's ability to receive regulatory approvals to develop their Scarborough LNG project. These approvals since then have been granted. We also note that the medium-term outlook for LNG prices is positive, with the lack of investment in the oil and gas space, as well as intensifying issues in the Middle East. We believe this will translate to robust cash flows, and by extension, attractive, fully franked yield for our shareholders. We also increased our holdings in Macquarie Group, ASX, NAB, Transurban, CSL, and Region. We also made modest investments in two new companies, Newmont Corporation and Mineral Resources. Our position in Newmont resulted from its takeover of Newcrest Mining.
We bought Newcrest Mining prior to the deal completing, to receive a large special dividend that was paid as part of takeover. Newmont is the biggest gold company in the world, with high-quality assets in attractive jurisdictions. Our Newmont position adds gold exposure to our portfolio, while offering a good mix of income and growth. We also bought Mineral Resources, a high-quality, diversified mining company that gives us exposure to lithium. We like the long-term outlook for lithium, and we're watching this space closely, but we're only prepared to buy when we see good value. We bought Mineral Resources last October, when the share price sold off from AUD 96 to AUD 60. All these transactions position us well to deliver on our portfolio objectives.
Thanks, Olga. Turning to slide 17, we summarize the portfolio as of the end of December. Just as a reminder of our portfolio strategy, the key focuses for us are focusing on considering what we consider to be high-quality companies for the investment portfolio. We want to be diversified across stocks and sectors, and we want to achieve the right balance of income and growth. Given this, we've got some of the key portfolio statistics on the left-hand side here, across stocks and the options, and they produce an NTA of AUD 3.33 per share as of the end of December. The right-hand side shows the top 20 holdings in the portfolio by value. BHP remains the largest holding, followed by Westpac, CSL, and Commonwealth Bank.
Some of the key portfolio changes that Olga talked about are reflected here, particularly the higher weighting of Telstra and Woodside after our large purchases over the last six months. CAR Group and James Hardie have dropped out of the top 20 after the sales through the option exercises in the period. Moving on to slide 19, which is our outlook, and we list some short-term considerations there. Starting with our option income, we think we enter calendar year 2024 in a pretty good position. Call option coverage is at 39%, and we have no put option positions. Really, at a high level, that reflects our view on market valuations, particularly after the really strong finish we saw to the equity market in 2023.
The options book at the moment is in good shape in terms of the amount of premium income that we've already written for the H2 2024. The expiry profile is well diversified across stocks and across months, and we're comfortable with the amount of the option book that is currently in the money. So as we sit here today, if we get further option exercises, we believe that would give us a good amount of capacity to potentially reinvest at a later date if we got presented with some good investment opportunities. In terms of our dividend income, the H1 result was quite good, but market expectations are for overall dividend levels to be flat or slightly down over the full financial year 2024.
That's primarily driven by lower than expected dividends from the major resource companies after they had some very strong dividend payments in the year before. So the upcoming February reporting season will give us a much better idea and some more clarity on how our dividend income sits for H2 financial year 2024. Some of the key stocks that we'll be looking at there, the important ones for us, will include companies like Commonwealth Bank, BHP, Wesfarmers, JB Hi-Fi, and Woodside. So there's some of the short-term considerations for our two key income drivers, the option income and the dividend income.
Long term, though, we just reiterate, we've got a high amount of confidence in our investment strategy that's focused on identifying quality companies for the investment portfolio, getting the balance right between income and growth for the portfolio, and maintaining a strong diversification. Then in terms of the portfolio settings, we think we've got the right settings for our dividend income and our option income, particularly in terms of those average yields that we've achieved and that we're targeting for Djerriwarrh to achieve its long-term objectives, primarily the enhanced yield above the market dividend yield, but also to deliver dividend and capital growth over the long term. With that, I'll pass over to Geoff.
Okay, thanks, Brett, and it's time for some questions. So just to remind you, to ask the questions, can be asked through the webcast at the bottom of the webpage. So, the first question we've got here is: How does Djerriwarrh determine the level of dividend it pays for each period?
Well, we look at the operating earnings to start with, and we've also, I mean, particularly with this result, it is a half-year result. If you look back at what occurred last year, we actually achieved a similar level of earnings in the H1 of last year.
So the dividend we paid for the half year was below the earnings, but then by the time we came through the full year result, we were able to pay 7.75 and land on a total dividend of AUD 0.15. So we still have that bit of a split between, I guess, a lower interim and a higher final. And given where we landed this time, a similar type of EPS and some, I guess, concerns about where dividends might go in the H2, we decided to maintain that dividend in line with last year, and we'll see how the balance of the year pans out.
But more importantly, and this is one of the things we, we talked about, when we reconsidered the strategy three and a half years ago, what we're trying to do is achieve a premium yield above the market. And so the dividends may move around a bit over the time, but our primary objective is to provide a better yield than the market, and so we still feel we're comfortably on track for that.
Thanks, Mark. Question for you, Andrew. I guess related to the previous question: How much is in the franking account, and how much a dividend could that amount support?
Well, the publicly available information at the end of last year, so the end of June 2023, after we paid the final dividend, as Mark said, of AUD 0.0775, we had roughly AUD 0.21 worth of dividend that could still be paid out of the franking reserves. As a rough rule of thumb, the operating earnings per share of about AUD 0.08 will give you some indication of what the franking is that that was generated. As the exact figure isn't public, but it'd be safe to assume that that level of about AUD 0.21 is being maintained once the interim dividend has been paid.
So the coverage is quite good at this point?
Yeah. Yeah.
Thanks, Andrew. Question here about whether we'll be raising any additional capital through our share purchase plan offering. I guess for this, how do we go about thinking about those sorts of initiatives?
Yeah, look, if you look back over the last three years, we completed a couple of SPPs, and really, the analysis was around, if we make the company bigger, we could essentially have a lower MER or lower management expense ratio, or lower cost to run the company. So we think that is of benefit to the shareholders. But we wanna make sure the company isn't too large, that it affects our ability to deal in the stocks we wanna deal in, and affect our ability to do the option income. Well, the team did quite a bit of work. It's probably a couple of years ago now, looking at that, we felt we could actually make the company bigger, and therefore drive down our costs.
But we need to do that when we can offer a price that's fair to all shareholders. So at the moment, with the share price being at quite a discount to the NTA, it probably makes it a little bit harder to do it, but I think it's something we have to look at on a consistent basis, and we think the opportunity is right, and we see the chances to invest the money-
That's right
... and to be able to offer at a price that's fair for everyone. I think it's still something that we would, the board will possibly consider.
Thanks, Mark. Got a question here about whether we invest in military defense industries. The answer is no, so it's a pretty simple,
Yeah
... response to that, question. You mentioned the strategy reset was done 3.5 years ago. Can we get an elaboration or appreciate an elaboration of this? What sort of emphasis on capital growth versus income was the outcome of that strategy reset?
Oh, well, the strategy reset we did, we should tell. I mean, it was really a review of where the company was at, because we had a period where, you know, interest rates were very low, which had impacted the price we were getting on options. We'd had a dividend policy that was really set around maintaining the dividend through the ups and downs, and we got a bit caught out, if you go all the way back to the GFC, of trying to maintain the dividend. And we're paying dividends out of capital, which was essentially shrinking the company. And again, we sought to maintain that.
Really what we did is went back and had a look at it and thought the yield we were producing as a result of paying out a lot of capital was way above the market, which was great if you wanted the dividends, but it was really affecting our total returns. The other thing we were doing is we increased the amount of portfolio we're writing options over, and it was getting over 50%, and again, that restricted our total returns. The yield looked good, but our total returns didn't. That balance between the two was really upset.
And so what we did is said, "Actually, what we need is a certain yield, not set by maintaining dividend, but set as a relative level against the market." The result was, we did cut the dividend, but it meant it took the pressure off trying to earn too much income from options. So we're able to bring that option range back to 30% to 40%. That enabled us to capture more upside, and now we're getting a much greater, a much better balance between income and growth, and you're seeing that in the total return numbers that are coming through. And as I said, since we've done that, the team are hitting all their targets in sort of the total return we want, the yield premium to the market and growth in dividends.
Growth in capital, too.
Yeah.
Thanks, Mark. Just a reminder, you can ask questions, as I said, through the webcast on the bottom of the webpage. Question here about what are our thoughts on the Sigma Chemist Warehouse deal?
... One of the more interesting announcements late last year, so Chemist Warehouse is going to list on the ASX through a reverse takeover of Sigma. That will create an AUD 8 billion company with likely enough liquidity to be included in the ASX 200 index. We don't have much information just yet, but it's a high quality company. We know that the balance sheet is really strong and that the cash generation is very strong. It's a category killer, so we're very much looking to more information as they arise, and we will see how ACCC looks at the deal as well. We likely may have more information in the H2 of this calendar year.
Thanks, Olga. Brett, you were positive on the banks last year. What is your current view?
Yeah, and, pleasingly, it's played out well. So the banks have had a good run. I mean, we, we still like the fundamentals. So we think they're, they're really well placed. The balance sheets are strong, dividend payout ratios are sustainable, the strategies and their business models are much more kind of cleaner and simpler than they were 5 to 7 years ago. But the share prices have gone up a lot, so I think the valuation gap is definitely not there, anywhere near the same extent as what it was certainly back in April last year. But even for much of the H2 of last financial year. So, you know, you know, the case in point, NAB was really good value at AUD 26 to 27.
It's above AUD 31 now, so it's a good, good jump for a large bank. Still like the sector, but yeah, valuation's not as attractive as what it was, even just a few months ago. So we've been exercised on some call options recently in NAB, and I think that, you know, if the share price strength continues in the sector, that'll probably continue, and we'll probably own less banks, potentially in a few months from, you know, what we did late last year. But yeah, it's been a good one. It's played out well.
Yeah, so-
Dividends and capital growth.
As a context, you actually topped up quite a lot of the banks in April last.
We did, yeah.
Good.
Yeah, we did, which worked out well.
So just a reminder to please ask any questions through the webcast as you can, through the bottom of the webpage. A question here about, I guess it's about the health sector in general, but did you buy any ResMed when the share price fell sharply last year?
Yeah. No, we did. So it didn't... It wasn't on the slide that Olga talked about, the additions to existing holdings, slide 16, where we just listed the top 8 purchases. But there are a whole lot of purchases underneath that that were all, you know, meaningful when combined, and ResMed was one of those. So we did. It was a classic example of what we think is a high-quality business. Yes, there's, you know, potential issues there with the weight loss drugs and all of that, but we think it was well-- we thought it was well overdone, and we still do. And the share price was hit hard, so we did take the opportunity to top up, so we bought some more ResMed.
Similar kind of lines as well, behind CSL, which is listed on slide 16, that we topped up as well. Pleasingly again, those have worked out well for us.
Question for you, Mark. Any plans to close the share discount price in the near future?
Yeah, well, look, well, we are a listed company, so the market is the market. You know, I think what we do is we need to make sure we get out there and talk about the performance of the company, and I think the gap will close with you know, confidence around the performance and hitting all our targets, which is what we have been. So, you know, we do speak to market participants, financial planners and brokers, and we'll get out there again and talk through the story and you know, perhaps the gap will close on that basis. But, you know, we can't control the share price, and but I think sustained performance will be the thing that ultimately closes it.
Thanks, Mark. What is the weighting for the high-yielding part of the portfolio? So I guess it's the income-generating part of the portfolio. Is there any merit in increasing this weighting further with the objective that higher earning and distribution yields might be positively addressing partly the rather huge NTA discount issue?
Yeah. No, they're all, they're all good consideration stuff we think about a lot. I mean, we keep coming back to, we need the right balance in the investment portfolio, so it's not just income, and it's not just growth. Djerriwarrh has got the primary objective of enhanced yield, and with the portfolio mix at the moment, we're able to deliver that. If we went into more high-yield stocks, for instance, well, firstly, that might be just a short-term hit because we're not just after short-term dividend yields. We want companies that can grow their dividends over the long term, 'cause that plays into our objective of delivering capital and income growth over the, over the long term. And also in line with the, the options part, is the crucial part in delivering the enhanced yield.
Thanks, Brett. What are our thoughts on Dexus?
Yeah, it's good, good quality property trust. The share price has clearly been hit, not just the issues that are impacting the REIT sector overall with interest rates, but, the office real estate in particular. So their strategy is to diversify a bit away from office, but clearly, they're still gonna own a, a whole lot of office real estate. They've got a new CEO now, so it's an interesting time to start. I mean, we've had a look at it, definitely, but in this space, we've preferred Mirvac as the closest competitor. We think it's got a more diversified portfolio, particularly their exposure to the residential sector, that we think has some very good potential over the next few years. And we also sort of thought Mirvac had a, a more conservative payout ratio, and a couple of other considerations.
So we own that, and we own BWP and Region Group as our real estate exposure. So that's where we've tended to invest in that space rather than Dexus.
... Thanks, Brett. Question on healthcare again, do we hold any Ramsay Health Care, and what do we think of their outlook and hospitals and healthcare in general?
Yeah, we still own some. It's not a large portfolio position, but we've held onto it. Obviously, they had the takeover bid that fell away last year, and the share price is sitting there pretty unloved. So we're really keen to see them in this upcoming results period, given the recovery in their sector, the private hospitals has been pretty slow. It's lagged a lot of the rest of the economy, but we think overall it's still a good quality company, Ramsay. There's the potential to increase value by cleaning up the portfolio a little bit as well. Obviously, the overseas investments that they have haven't worked out as investors have been hoping for. So at the moment, we remain an investor, and we'll see what our next move is.
There's a question here about, oh, can we comment on the total return of the portfolio, including franking, based on net asset value and the share price compared to the benchmark? So I guess the question is, relative to... We've already presented the NTA numbers with franking, already. In terms of the share price, it has been stronger over the last six months in the portfolio. In fact, the discount's closed a little bit, but over the 12-month period, we've lagged the portfolio return because the discount's actually a little bit larger. But I don't know if anyone's got anything else-
Yeah, I'm not sure where the question's around, how we've gone or why we use that, so I might just quickly comment on both. What we think franking is an important part of the total return you get from the market. So what we do is when we look at how the markets perform, we add in the franking credits you receive from being in-- if you're in the index, so that's called a grossed-up return. And then we do the same for what Djerriwarrh has produced, so it's a like-for-like comparison. So we're checking our performance against the index when you include the franking credits on the index and the franking credits you receive from Djerriwarrh.
Given the nature of the way we run the business, usually when markets are strong, we may struggle to keep up, given our option coverage. But it's very pleasing, as I said, since the strategy reset and over one year, we've actually been able to do that, through good stock picking. And then we've been able to achieve the income objectives as well. So that's why we show both of them. We show our return against the index. The NTAs, so that's the net asset back in the portfolio. That's the bit we can control. That's really the analysis of how the operations of the company are being run.
And then the share price, as Geoff has pointed out, that can move around that NTA, and that's why you can sometimes get a different return from when you look at the share price against the NTA. But our view is, in the long run, the share price ultimately approximates the performance of the NTA. So, you know, our preference is to keep focusing on the NTA performance.
Look, and there's no doubt over the long term, over the last bit, you know, the share price is trading at a significant premium based on the factors that Mark spoke about earlier on, about the dividend obviously being too high relative to what was relative to the market. So there has been some pullback there, clearly. There's a question here about Origin. Do we own any shares in Origin, and what do we think is its future as an investment?
Thanks, Geoff. No, we don't own any shares in Origin. Obviously, the takeover deal did not go ahead, as the shareholders didn't vote for the deal. The deal didn't go ahead, as shareholders thought that the, the takeover price did not fully value the opportunities that are ahead of the business. We're currently looking at the business ourselves. We're going to meet with management and see whether the, the future of the business can deliver any value for our shareholders.
Thanks, Olga. Brett, here's a question on Region. What's the basis for investing, holding onto a new investment in Region?
Sure. Yeah, so we think Region's a high-quality property trust, very attractive income yield, and it should deliver some good growth, we think, over the long term as well. So, we really like the fundamentals. The sector is very defensive, and it's been proven over a long period of time. So owning neighborhood shopping centers, where you're the landlord, effectively, to Coles and Woolworths, so it's a very stable income base that they get. High quality, valuable real estate. The structure of the property trust is very attractive. It's internally managed, so shareholders own the management rights to that. There's no fee leakage to third parties, so very good for shareholder value. We're attracted to that. Balance sheet's solid. We think management have done a very good job over a long period of time.
You know, the income yield at the current share price is around 6.5%. I think it's a very attractive income for Djerriwarrh. So that's one of those stocks that we put in that high-yielding basket, that's a key contributor to our dividend income. And then we also earn option income as well. We've written options against the stock over the last 12 months. Not only call options, when we felt the share price has been stretched a bit, but we've also written put option positions at a couple of different times, and they were a good contributor to the option income as well. So yeah, at the moment, the stock is very unloved, current share price, where it is. The sector's out of favor, but we think highly defensive and a really good income yield, so good holding for Djerriwarrh.
Thanks, Brett. So we're wrapping this up shortly, so if you've got any further questions, please submit them, now. A question here about our thoughts on the potential merger of Woodside and Santos... now you're positioned to take advantage if it comes to pass. So Olga, I'll pass this question to you. Thank you.
Thanks, Geoff. Yes, we do think there is merit in exploring the idea of a merger between the two companies. Woodside and Santos as a combined entity would be a very attractive and unique investment opportunity on a global scale, we think. It would have a market cap of around AUD 80 billion. It would make one of the biggest global oil and gas companies. We don't necessarily like mergers for the sake of scale, but we do know that scale is needed and important in this sector, especially in the context of energy transition challenges. It also probably would translate to more interest from overseas investors and improve access to capital. We do like asset base of both companies, which really shouldn't be a surprise, given we hold both companies in our portfolio.
We have just under 5% in our portfolio across the two companies. It's difficult to evaluate a transaction now without seeing the actual financials and how much premium would Woodside pay for Santos. Obviously, having a higher weighting Woodside, we wouldn't want Woodside to overpay for Santos. So we'll hold that thought until we see more numbers as they come out. We do see a merit in the merger.
Thanks, Olga. Thank you. Mark, I haven't any further questions to you, so we'll wrap it up here, I think so.
Okay. Thanks, Jeff, and thank you all for participating in this results call. It's really important that we do this for our shareholders, and everyone gets a chance to ask questions. The next update will be during investor presentations. Jeff, do you wanna quickly comment on that?
Yeah, so we're obviously doing the sort of physical presentations to shareholders in March over the course of the period. Details we mailed out, mailed out to shareholders and obviously included in the half year review that goes out to shareholders and also on the website. So that'll be the next point.
Yeah. So we'll be-
Okay.
We'll be doing Melbourne-
All the major capital cities.
Yeah, Sydney, Brisbane, Perth, Adelaide.
Yep.
Obviously, if you wanna come along to those, it'd be great to...
See you all.
To meet with you.
Yep.
Then the next webinar, our results will be the full year results-
Full year
... in July. So, thanks again for everyone for participating, and, we're keen to present.
See you.
See you in March or July. Thank you.
That does conclude today's conference call. Thank you for participating. You may now disconnect your line.