KFL - discount to diluted NAV

[winner69]

In FY24 Re DRP they issued 10,451,141 new shares and used 539,322 shares from Treasury stock (the buy backs)

They also paid $23m in cash divies ….if they didn’t have enough cash they would have some sold somebofbtheirbholdings.

[sideline]

Firstly they issue new DRP shares from treasury stock bought via buybacks, then for the balance they simply print new shares, the cost of which is offset by the forfeited cash dividend ie. DRP participants are buying shares with their div cash. The new shares result in the total asset pie being sliced more thinly across the total share count meaning all shareholders own a little less of the pie per share, ie their holding is diluted slightly due to more shares on issue (NTA÷total shares on issue). Presumably however they then use the cash to buy more assets against the additional shares issued balancing the equation.

Sorry, but the 'total asset pie' size changes accordingly - if a dividend is reinvested the corresponding cash stays in the kitty of the fund rather than leaving it as a dividend.
The real question is whether the new shares are issued approximately at NAV - then no dilution occurs for the other holders. If the issue price is far below NAV then some dilution might occur for existing holders. Issue price is usually the weighted average trading of five days after ex-date minus a 3% discount.

[SPC]

Sorry, but although the cash stays in the COMPANY (it is not a fund), the company issues liabilities against the cash in the form of new shares. More over, the new shares are issued frequently at a significant discount to their underlying asset value due to the practice of tying the issue price to the market rather than their true value, meaning the company is bleeding value. (Obviously smart shareholders aren't going to pay for shares at NAV when they are cheaper on market so the company has to match the market price, with a small discount to sweeten the deal).
Shareholders are the company.
Additionally the cost of cash dividends (the total cash/non cash dividend) has frequently not been paid from company profits as the profits have either not been there or are inadequate to meet the liability. On these occasions the company is selling assets to cover the distribution cost.
KFL is a black box. It is not a (unit) fund that exchanges unit holder cash for equivalent assets, it's constantly juggling paying unders and overs. It really needs regular cash injections to keep the black box functioning and grow the asset base.
But that's why I like it. I'm an active holder of the stock not passive.

[alokdhir]

https://fisherfunds.co.nz/funds-and-...nd-growth-fund

KFL is a listed copy of this fund ( mostly as it holds some extras like Xero and SKO ) ...and this fund doesnt pay dividends but only growth and is open fund so one can buy and redeem at NAV ...KFL modified this fund to include regular dividends for making it regular income fund as maybe they thought it makes it more attractive to larger audience ...being listed on stock exchange one need make it useful to as many as possible ...as SP is not purely NAV based but on demand supply also on any particular day and for large parts of rates cycle etc .

So to find if invested in a fund of almost similar portfolio is more attractive or convenience of listed KFL ....one can compare KFL with DRP on returns with this funds returns ...KFL will score higher as it gives DRP shares at much higher discount to NAV mostly as they are SP based ( which is mostly trailing NAV ) . Here one will see that KFL DRP holders gain little extra returns at the cost of cash dividend holders where as NZ growth fund all are on same footing and all on growth option and all transact on actual NAV basis . KFL brings rewards / pitfalls of LISTING . NZ Growth Fund is much bigger fund then total assets of KFL

[alokdhir]

Out of curiosity I had a look at Kingfish financial statements for FY24. Quite interesting.

Basically this is what happened over the year -

Sold $74m of investments and bought $53m

Received $7m of divies and interest

So net ‘trading activity’ was a net income of $28m

Cash expenses were $5m (mainly to Fisher HQ)

Paid out $23m in cash as divies (another $13m paid by DRP) and spent best part of $1m buying their own shares

So that’s the Kingfish money go round

And at the end of the year the investment portfolio was $453m which was the same as the beginning of year ….even though they recorded a change in fair value of $16m

Can’t help thinking that The Style Council were very perceptive -

Watch your money-go-round; watch your money-go-round
But I just can't help being cynical
Watch your money-go-round; watch your money-go-round
Do like I say, make me wonderful

$ 453 million is portfolio value and $ 5 million is management costs for the year ? ...so its just over 1% ? $ 23 million is cash outgo while $ 13 mil is reinvested which is minuscule compared to total value so reinvesting $ 13 mil at say even at 10% discount to NAV will result in very little loss to overall NAV ...not worth worrying about ...lol

They managed to retain $ 13 mil out of $ 36 mil dividend outgo possible ...hopefully they can retain more as it makes more sense to holders also to get DRP shares and encash on market thus win win for both ie holder and KFL company ?

PS : 1% management costs compares well with NZ Growth Fund's 1.5% ...making a positive for KFL vs NZ Growth Fund !!


Typically cash shortfall on account of dividends is $ 23m plus $ 5 mil costs - $ 7 mil cash dividends etc = $ 21 mil which is 21/453 = 4.63% ...which means if portfolio grows more then this then it GROWS after dishing out dividends also !!!

[alokdhir]

6.7% VGL in present day portfolio which is going gangbusters ...they surely have some hidden gems too not just stars

Nav well above $ 1.39 at. present

[mike2020]

6.7% VGL in present day portfolio which is going gangbusters ...they surely have some hidden gems too not just stars

Nav well above $ 1.39 at. present

What will it be tomorrow? I'm guessing around $1.43+

[alokdhir]

What will it be tomorrow? I'm guessing around $1.43+

Its going to be very close to $ 1.42

[Toddy]

I bought another 30,000 shares just before close yesterday.

It was just fear of missing out. Yes, it was an emotional purchase as the green showed on the screens.

[alokdhir]

If KFL was doing what MFT is doing at present ie anticipating better times ahead then. it should be at PREMIUM ...just like p/e expansion happens for discounting bright future which blue chip growth stocks do at first sign of rates reversal