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I quiet like the look of KFL but it seems that they are trying their very best to talk the price up!
KFL
04/05/2006
FLLYR
REL: 1533 HRS Kingfish Limited
FLLYR: KFL: Updated Commentary
Please find a slightly updated commentary to accompany the Full Year Results
released earlier today.
Second year of strong performance for Kingfish.
Kingfish Limited ("Kingfish") announces a second year of strong performance,
increasing the value of the company net assets an impressive 64% since
listing in April 2004. Kingfish's Net Asset Value ("NAV") per share
increased from $1.2852 at 31 March 2005 to $1.5888 as at 31 March 2006, or
24%.
Kingfish Chairman, Rob Challinor said that "the increase in NAV was
substantially ahead of the Benchmark Rate of 14.43% (being 7% plus the change
in the NZX 90 day bank bill index for the year), reflecting the successful
efforts of the Manager, Fisher Funds Management Limited ("Fisher Funds"). It
is worth noting that the 24% annual increase in NAV was ahead of the
comparable 4% gain in the NZSX Smallcap Index and the 13% gain in the NZSX
Midcap Index".
Kingfish also announces an audited net surplus after tax of $18.8m for the
year ended 31 March 2006, a 12.95% increase over the previous year.
Kingfish has today declared a fully imputed ordinary dividend of 2.5 cents
per share which will be paid to shareholders on 16 June 2006. The record
date for the dividend is 5pm on 2 June 2006. Kingfish is investigating the
possibility of qualifying as a collective investment vehicle under the tax
changes proposed to come into effect on 1 April 2007. If it does qualify,
there would be no restriction on its ability to distribute gains from sale of
its investments. This should have a favourable impact on the level of future
dividends paid.
The Management Agreement with Fisher Funds provides for a payment of an
annual performance fee if returns are achieved above the Benchmark Rate. In
accordance with the Management Agreement subsequent to balance date, half the
value of the performance fee payable has been subscribed by Fisher Funds for
357,782 Kingfish shares at an issue price equal to the audited NAV per share
of $1.5888 at year end. The NAV is after the deduction of the performance fee
and Treasury Stock.
As at 31 March 2006, the Kingfish portfolio held 12 stocks which made up 97%
of total assets. Core stock holdings are: Freightways, Metlifecare, Waste
Management, Pumpkin Patch, Mainfreight, Michael Hill and Ryman Healthcare.
The Kingfish Nursery portfolio includes the following stocks: Comvita,
Kidicorp, NZ Exchange, Software of Excellence (Mandatory Convertible Notes)
and Cadmus Technology.
Seven of the 12 stocks in the portfolio posted share price gains during the
year, some of them quite spectacular. The four main performance contributors
were Freightways (+26%), Mainfreight (+77%), Ryman Healthcare (+76%) and
Waste Management (+39%). Carmel Fisher, stated "Profit results of the core
companies over the past year have been generally better than expected, while
certain companies have made very positive progress in executing their
expansion strategies. For example, Ryman Healthcare reported a 54% gain in
September 2005 interim profit and its management team was sufficiently
confident to predict at least that rate of growth for the full year.
Mainfreight's international businesses continue to go from strength to
strength, to the extent that the company now generates around 45% of its
earnings outside NZ. Turners Auctions 43% share price fall was the main
detractor from the portfolio performance."
The past 12 months has seen a resurgence of merger and takeover activity in
the NZ market, which has indirectly involved Kingfish. Offers were made for
all the shares in Metlifecare and Waste Management. The Kingfish Investment
Manager, Fisher Funds, declined to accept the Metlifecare offer and is still
in the process of assessing the merits of the Waste Management offer. Five
holdings were sold during the period: Turners Auctions, Turn
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TSB, I like KFL too, a share buyback is grossly underrated as a means of increasing shareholder value & shows managements faith in the company going forward.
Also the share price to NAV is at a significant discount, providing a rather nice "margin of safety".
Dividend is a tad low, but with a low P/E ratio both the heads & warrants look cheap.
Disc: Am looking at buying into both heads & warrants, but currently not a holder
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Junior Member
Well here's the thing: I think kiwis who play the stock market are too much into DIY to get into a LIC (listed investment co) like KFL. Which is why the stock has always traded at such a discount to NAV - there just isn't the demand that, in a perfect world, there should be for such a share.
ALso - if you like KFLs holdings, why not just buy them directly? ie mainfreight, pumpkin patch, ryman, and metlife?
Slightly off-topic: Here's a list of LICS on the ASX:
http://www.asx.com.au/investor/pdf/LIC_NTA_Report.pdf
They have a lot of LICs, most of them trade at a discount to NAV, but some actually trade at a premium - WAM is a good example and in my opinion worth investing in.
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They are jsut a unit trust but listed on the NZX. Most people who invest in unit trusts will avoid the stock market.
The likes of IFT and GPG have a hands on apprach rather than just an active management of KFL.
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Member
This company has been a favourite of mine in recent months and have accumulated. The discount to NPV is far too severe especially considering they seem to be good stock-pickers.
Yes, you could hold the underlying stocks, however at the nav discount this is a cheap entry, plus someone is watching the stocks for you and making astute changes to the portfolio.
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The market seems to like the decision for Fisher Funds to exit WAM, so where to park the money now?
Up 5c today to $1.20, was kinda hoping this would stay under the radar for a wee bit longer.
Wonder if NZO is in the mix for there nursery stocks as a means to get into Pike River?
Perhaps grab some "cheap" TEL?
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Member
quote: Originally posted by funkyman
if you like KFLs holdings, why not just buy them directly? ie mainfreight, pumpkin patch, ryman, and metlife?
If you like KFL's holdings (and importantly, like all of their holdings) why would you buy them directly when you can get exposure to them at a significant discount by buying Kingfish?
I always like the idea of buying a dollar for 80c.
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Isn't part of the 'discount' to NAV the present value of future management and performance fees .... in KFL case quite high .... esp the peformance fee for any excessive returns..... look at what they got last year
Agree KFL is trading at a discount to NAV but probably not to the extent you think ... when such a valuation methodology is applied
”When investors are euphoric, they are incapable of recognising euphoria itself “
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My thinking was that 10%..15% discount is probably about right, in terms of NPV of future management fees, but to some extent this depends on quality of management, as if say Warren Buffet was the manager, then you could say then no discount at all was appropriate.
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Junior Member
Although it sounds good to buy kingfish because it is a discount to the shares it holds value such as the buying a dollar for 80cents this is pretty irrelevant is it not?
Because unless the discount margin changes your holding in kfl will always be about 20% lower than the market value of the individual shares so its basically the same.
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