KFL - discount to diluted NAV

[alokdhir]

Used to be rich pickings, (I got a bit fat on a size of some of the feeds) when these warrants within the overall Kingfish group started trading but sadly these days it seems people are far more aggressive with growth assumptions and if the most recent Marlin warrant listing is anything to yardstick against these warrants will start trading well above their intrinsic value.

I will run my dog food sniffer nose over them looking for a feed a little closer to listing date but I am not going to hold my breath.

Shares currently trading circa 10% above NTA and very easy to replicate their modestly diversified portfolio so that's pretty boring too.

Good part about these warrants is that they will get allotted on 23rd Nov 2022 and they are immediately eligible for Dec qtr dividend ...that will make them 3.6 Cents dearer as u are going to get almost 3.6 cents dividend back in 30 days time ...so the timing is great for warrant holders unlike last time when they had to wait almost 105 days before getting 1st divvy .

[Beagle]

Good part about these warrants is that they will get allotted on 23rd Nov 2022 and they are immediately eligible for Dec qtr dividend ...that will make them 3.6 Cents dearer as u are going to get almost 3.6 cents dividend back in 30 days time ...so the timing is great for warrant holders unlike last time when they had to wait almost 105 days before getting 1st divvy .

Well spotted and yes the timing of the last issuance of shares on exercise of the previous issue of warrants was a bit unfortunate.

[alokdhir]

KFL coming closer to going ex warrants next wednesday as record date is 12th Nov .

Thats pulling the SP up ...

Maybe before going ex KFL will make new high of 215 ....Depends upon what market thinks is warrants worth...Surely worth 15 cents or more ?

[ronaldson]

Has anyone else noticed that KFL is not currently quoted by NZX as CE ( cum entitlement ) or CW ( cum Warrants, although there seems to be no letter W allocated for Warrants ) and presumably won't be quoted XE or XW after the record date but before allotment, either. The same situation apparently applies for all Warrant issues and strikes me as a flaw in NZX process/procedure which could be a trap for the unwary.

[alokdhir]

Last 3 days to buy KFL cum warrants ...Warrants listing expectations are about 15 cents IMO

[Beagle]

Last 3 days to buy KFL cum warrants ...Warrants listing expectations are about 15 cents IMO

I can see how you got to 15 cents easily enough and concur that around there is their theoretical value based on where the shares are currently priced. No issues so far. The real question though is will Kingfish shares continue to trade at a 10-11% premium to NTA all the way through to November 2022 ?

I can understand a premium to NTA for the better diversified Barramundi and Marlin portfolio's especially when their performance above the benchmark in the medium term has been superior and investment in these effectively deals with all the FIF drama's of direct overseas investment but for a bunch of NZX shares that are easily replicated without foreign exchange or FIF drama's is such a premium justified and far more importantly is the premium expected to be enduring ?

I'm not convinced so to me the real value of the warrants is considerably less than their theoretical value.

Another issue I have with KFL is their top 5 holdings makes up 66% of their portfolio as per 3/11/2021 weekly NTA update. Poor diversification or smart investing ?, you folks be the judge.

[ronaldson]

Today KFL have released a Quotation Notice to NZX recording that 79.1m Warrants will be allotted on Monday 15 November under ticker KFLWG, I believe tradable from Tuesday 16th.

Not sure that addresses my criticism last Sunday ( see above ) re the basis KFL have been quoted on NZX since 18 October when the warrant issue was initially announced, but may be now the KFL ticker will be shown as CE until the record date on Friday?

Certainly the Quotation Notice could have been issued weeks ago, but perhaps that isn't how it is customarily done.

As I said, the situation is indicative of a flaw in NZX processes/procedures and is not consistent with how other share entitlements are treated.

[Beagle]

Poor housekeeping I agree.

[tango]

The real question though is will Kingfish shares continue to trade at a 10-11% premium to NTA all the way through to November 2022 ?

I'm not convinced so to me the real value of the warrants is considerably less than their theoretical value.

The premium is something I am not comfortable with. This has only happened since deposit interest rates dropped to below 1%
If interest rates come back up to 4%-5% I feel a lot of the premium will disappear.

Historically all of the Fisher Funds (KFL, BRM, MLN) shares traded at a DISCOUNT to NAV. With interest rates starting to creep up most other dividend stocks have dropped in price but KFL is still at a crazy premium to NAV. I can't see this being sustained if we get back to 4% in the bank. Of course, I could be wrong!

Date 18/12/2019
KFL NAV $1.6265
Share price close $1.59
Discount 2%

Date 11/12/2019
KFL NAV $1.6137
Share price close $1.57
Discount 3%

Date 6/11/2019
KFL NAV $1.5235
Share price close $1.50
Discount 2%

Date 31/10/2019
KFL NAV $1.5240
Share price close $1.49
Discount 2%

Another issue I have with KFL is their top 5 holdings makes up 66% of their portfolio as per 3/11/2021 weekly NTA update. Poor diversification or smart investing ?, you folks be the judge.

Warren Buffet would say smart investing. I like the fact that KFL have the strength of their convictions and an ability to pick winners

[alokdhir]

Premium to NAV for all Fisher funds is based more on interests rates too low and no other options to invest for regular income returns ...they are not too much dependent on what market perceives as better alternative so justifying 25% for MLN and BRM while not for KFL will be futile ...agree may not be same but will be there as usual . Market never gave KFL similar premiums like MLN and BRM but what it gave 10-12% will also stay as long as BRM and MLN premiums stay as all are related to 2% quarterly tax free returns .

IMHO keeping in view the marked underperformance of NZX to world markets ....KFL has better chance of doing well in 2022 then MLN and to some extent BRM

So my expectations of KFL warrant being worth 15 cents is justified as expecting KFL SP to be around 210-218 in next Nov and offer is around 188-89 ...thus leaving warrant price as 25-30 cents in Nov 2022