Maintaining Our AUD 23.10 FVE for Soul Pattinson Following Fiscal 2021 Results Preannouncement

We maintain our AUD 23.10 per-share fair value estimate for no-moat Washington H. Soul Pattinson following the prerelease of full-year fiscal 2021 results. We have increased our fiscal 2021 net income aftertax forecast by approximately 134% to AUD 334 million, toward the top end of management’s guidance of AUD 316 million to AUD 336 million. The sizeable uplift in earnings is largely attributable to the current favourable commodity environment, which has resulted in Round Oak Minerals--a long-term investment holding of Soul Pattinson--reporting a solid profit following several years of losses. Round Oak contributes negligibly to Soul Pattinson’s enterprise value. Nonetheless, as a wholly owned subsidiary, Round Oak’s results are fully consolidated into Soul Pattinson’s financial statements. Therefore, the financial results of Round Oak have an outsize impact on the income statement relative to the many unconsolidated equity holdings.