KFL - discount to diluted NAV

[Beagle]

That's my key concern too. The fact of the matter is the units have only traded at a premium to NAV when interest rates are at 100 year lows.
Already we are seeing Bank's offering 3% term deposit rates (e.g. Westpac 5 year term deposit) which is dramatically higher than what was on offer 6 months ago.

he inflation data out last month was an absolute shocker at 4.9% and it seems certain that interest rates are headed materially higher from here over the year ahead. The discounts you provided are very modest. At times they have traded in the teens, I recall up to 15% discount to NTA at one point and may have been higher going way back.

Buying KFL warrants on the assumption that the premium to NAV will remain where it is today feels like skating on very thin ice to me.

[tango]

That's my key concern too. The fact of the matter is the units have only traded at a premium to NAV when interest rates are at 100 year lows.
Already we are seeing Bank's offering 3% term deposit rates (e.g. Westpac 5 year term deposit) which is dramatically higher than what was on offer 6 months ago.

The inflation data out last month was an absolute shocker at 4.9% and it seems certain that interest rates are headed materially higher from here over the year ahead. The discounts you provided are very modest. At times they have traded in the teens, I recall up to 15% discount to NTA at one point and may have been higher going way back.

Buying KFL warrants on the assumption that the premium to NAV will remain where it is today feels like skating on very thin ice to me.

The discount to NAV calculation is confusing because KFL backs out the value of warrants so I picked dates where that wasn’t a factor. When warrants are on offer the discount is significantly greater - in the 10-15% range. Which is again why I am nervous about buying KFL at this time.

You only need to look at SPK which was bought as a dividend stock and has dropped heavily with only a modest increase in interest rates. SPK is looking like a buy right now if you are after dividend yields

[alokdhir]

Then that will go true for BRM as well MLN...they are the ones which trade at higher premiums . Also they dont have the luxury of having a sluggish year behind them like KLF does .

Also keeping in view the marked increase in worldwide debts of all including NZ ...I am pretty sure rates are not and cannot go much higher ...this cycle top will be 2.5% OCR max and that too in next 2-3 years .

Covid has devasted economies and people's finances ...

Regular income options will remain in demand and on premium for some time to come .

Let the time decide the final outcome .

PS : Added attraction of all these funds is PIE tax structure of max 28% ....most lucrative for HNI on 39% new bracket

[justakiwi]

This thread was started in December 2015, and here we are today, 6 years later, having exactly the same discussion. Which is interesting, to say the least.

[777]

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.

You got your wish. Showing cb for the last day.

[ronaldson]

Yes, after I posted I expressed my point of view via email to NZX, NZSA and key personnel at Kingfish including the Chair. Within 24 hours KFL had issued the Quotation Notice announcement for the warrants to NZX. I believe that action may have then triggered the attribution of CB ( not sure why one would use that - Cum Bonus - to describe the situation but may be the best of limited choice )to the listing, which acts as an alert. More important will be the use ( presumably ) of XB after the record date, although in this instance allotment follows promptly thereafter.

[Beagle]

Well done for making some noise about this.

[ronaldson]

KFLWG will be tradeable tomorrow ( may be from 11.00am? ). I wonder what price the ticker will open at? My guess 6c. Perhaps a preponderance of sellers initially given 79m on issue and the head shares are quite a bit ahead of NTA at the current $2.03?

[ronaldson]

First sale of the Warrants at 6.8c, and buyers are now at 7.1c. I guess on-market transactions will not really pick up until folk receive their holder statements after allotment yesterday and are more likely to enter the market on the sell side. Considering the warrant issue was on a 1 : 4 basis it is like a supplementary tax paid dividend of almost 2c per share if you sell right away - makes the effective yield on the head shares look pretty good!

[mike2020]

Ok, now large orders at 7.5c. If you said 14c after tax div between now and then means you are buying at 1.89+.075 makes todays purchase $1.965. KFL NTA is $1.84. In a rising interest rate environment would you be wise to buy, hold or sell? Is trading above NTA a long term thing or an anomaly?