CTN - Microcap fund

[Damo79]

I thought this one might be worth a look currently. In particular, the options could be excellent in the short term. This is a diversified microcap fund that invests in companies with market valuations of 10-200 million. At the moment, they are one of the best performing funds on the ASX (just ask them .

Current net tangible asset backing of $1.18 after tax considerations. Up 3.6% from last month.

Todays close was $1.025, thats, about 15% below NTAB, so looks like a resonable purchase already.

Options available at 2.6 cents (not bloody many though). They expire on the 31st of September this year (2 months) at $1 even.

The graph is also on a nice uptrend that's lasted for 3 months so far. Here's a scenario. Share price increases by 3.6% a month for the next two months, making it about $1.10, not a huge increase and still below NTAB. Options, however, would be worth 10 cents, or 400% up on today. Not a bad return. To be even more optimistic (without being unrealistic), the share price could reach the NTAB level, making the options worth 18 cents, up 800% (and thats without any appreciation in assets).

Of course there's always the chance the share will be below current price in two months, making the options worthless, but then, thats the chance you take with options [B)].

With the NTAB so much higher than the share price and the recent uptrend, this could be a good short term speculative buy. A down side is this is only really possible on a very small scale, since the options are so cheap and there just aren't that many of them.

Make your own choices of course.

Cheers

Damo

[oxley]

Thanks for the info Damian.[8D][8D]

Will give this a go for just a small invest(25000 @ 0.026) and will pay for them with those VLL[xx(][xx(][xx(][xx(] shares that i kept.

Thought i was going to loose the lot on vll so the miserable amount left will just pay for these with a possible big win and only a small loss.[8D][8D][8D][8D]

Cheers Oxley

[OneUp]

Damo, there are 40.2m ordinary fully paid shares. Total assets are worth $50.29m, giving a pre-tax NTA of $1.25, and post tax NTA of $1.18.

However, there are 16.4m unexercised options that have not been included in official monthly NTA calculations. As these options are 'in the money', we should assume they will all be exercised (at $1.00). This would bring the total number of shares outstanding to 56.6m. It would also increase pre-tax assets by $16.4m (i.e. $1.00 x 16.4m options) from $50.29m to $66.7m. So, pre-tax the actual NTA of CTN is $1.18 (Total Assets/Number of shares = $66.7m/56.6m). After tax NTA fully diluted is about $1.11.

Hope this is useful.

[Damo79]

Thanks OneUp, thats a very good point. Should've been something I thought to work out.

Still, $1.11 is 10% above the share price. In general, do you have any idea why this would be? I've noticed it for a couple of other listed investment companies I've looked at. It almost seems like if you but shares in these kind of companies, you're getting 10% extra for free.

Cheers

Damo

[OneUp]

LICs have tended to trade at a discount, though there have been some such as WAM Capital (WAM) that have traded at a premium. It just depends on how sexy LICs are at the time, I guess! I bought some UK Listed Asian Investment Trusts a few years ago when Asian shares were in the dumps - then their discount to NTA was 15-20%, now that they're smoking it's 5-10%...which has provided a nice extra return. The discounts I have found tend to be larger during periods of underperformance, and smaller in times of outperformance. So if CTN have a couple of stellar months, then we might see a narrowing of the discount. Closing the gap completely might be a little optimistic though . Best of luck with it.

[Damo79]

I've been doing a bit of monitoring on this one over the last couple of weeks and think that the next monthly NTA report (due on about the second or third of September) is going to give it a boost. Here's why...

The last quarterly report listed the top 19 holdings by value. Since the net tangible asset backing is released every month, I put these companies into a watchlist, and input the purchase price at the value of that share on July 31st (the date of the last NTA report). As for the number of units, I normalized it so that each company was present as a percentage of CTNs portfolio. Using this watchlist, I can monitor how CTN is doing every day, rather than waiting fot the monthly update.

Quite simple, but I wonder how many people bother?

Anyway, although this only covers the top 50% of their portfolio, they are currently up over 6% in the 12 days since the last reported NTA. That's not to shabby in my opinion for a company that's diversified across 70 or so (?) companies. A few of their larger holdings (ie 2.5-6% of their portfolio each), and their change since 31st July are:

PGA + 12%
MDL + 23%
FKP + 15%
AZA + 13%
FEA + 11%
SDG + 10%
GCL + 7%
RIV + 6.5%
BJT + 6.5%

There are only 4 out of the 19 on my watchlist that are down. 3 are down by 0.5-2%, while AAQ is down 8%.

It seems this safely diversified investment company is having an excellent month, and if it continues, I'd like to think it'll be up 5% at least after the next report. Current SP is $1.04. So I'm pretty happy in predicting $1.09 or more. Not a huge gain compared to many stocks discussed here, but have another read of my initial post above concerning the options. Could be a nice trade.

Cheers

Damo

Disclosure: Hold options, intend to sell after next NTA report.

Edit: I'd better just re-emphasize that the companies I'm monitoring only account for half of CTNs portfolio. Let's hope the rest haven't all gone bankrupt

[Damo79]

RE: My first attempt at option trading []

Well announcement out today was just what I was hoping for (and expecting since I've been monitoring there holdings - see above). NTA before tax was $1.32 as of yesterday.

Up 9.1% this financial year (thats in 7 weeks). Not to shabby.

The CTN share price is now bid at $1.05 and offer at $1.14. The options (with an excise price of $1.00 in 5 weeks) are still only at 3.6 cents however... So although the last months results are what I wanted, the CTN options don't seem to have caught up yet. I'm hoping in the next few days, anyone wanting to invest in CTN will realized it's better to buy the options and just convert them. I'd think the options should be selling for at least 5 cents, I've just gotta hope someone else agrees or I guess they'll never get there...

Cheers

Damo

[Damo79]

I really hope there's no fault in my logic here, 'cause it doesn't seem to have worked so far . The monthly NTA report for CTN is due out in the next day or two (it's usually on the 1st, 2nd or 3rd of the month) and by my estimation, will report a 6-6.5% increase for the month to 31st of August. For a listed investment company, thats brilliant [:0].

However, this months coming excellent result should have been obvious from their chairmans comments press release on the 26th, which gave their NTA as of the 25th at $1.32. Even since then, the holdings that I've followed increased a further 2% by the 31st.

I can't see why a listed investment company can be valued at $1.02 when their NTA is $1.25, but then only be valued at $1.03 (today) when their NTA is $1.34 (my estimate of what it will be in the monthly report). Surely the report should get the attention of some sensible investors and put the share price up a few cents, and thus the options up a fair whack. I really wouldn't say no to a nice profit [].

Next day or two will tell all I guess...

[OneUp]

Damo, the dividend announcement the other day had a line at the end saying "As at the close of business on Thursday 25th August the Net Tangible Asset backing per share was $1.318 (before tax on unrealised gains)."

[Damo79]

quote:Originally posted by OneUp

Damo, the dividend announcement the other day had a line at the end saying "As at the close of business on Thursday 25th August the Net Tangible Asset backing per share was $1.318 (before tax on unrealised gains)."

I guess thats really my point OneUp. At close of business on the 31 July the pre-tax net tangible asset backing was $1.252. So since then there's been a 5.3% increase, plus quite a good week 'til the 31st August that will probably add another 1%. But the share price just doesn't seem to be following the NTA movement. That's whats confusing me.