KFL - discount to diluted NAV

[alokdhir]

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?

Rising from almost 0 ...NZ interest rates will be at very very low levels compared to past for some time to come ...If u agree then u can do the maths yourself

[alokdhir]

1.25 Mil warrants buyers @ 10 cents ...seems like as anticipated its range will be 10-15 cents ...people taking a call on next years markets especially NZX which underperformed in a big way all 2021 .

[fastbike]

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?

The market did not agree with that guess.
Do you have some knowledge you could share with the forum ?

[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 ?

Maybe this assessment ...market liked more ...day one closing 13.5 Cents ...maybe 15 Cents possible ...but almost here . Warrants are a great long term Call options on NZX ...so has both time value and offer value attached .

Have seen market is valuing them pretty highly right at start ...same trend continues ...

But as mentioned here ...soon supply can come ...after all 79 Mil issued FOC

[justakiwi]

I haven't had an allocation email from Computershare yet. Should I have?

[Beagle]

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.

I called it but the price still surprises me. The real issue is not the value of the call option per se but the assumption that KFL will continue to trade at a 10-11% premium to NTA when their portfolio is so easy to replicate.

In addition there's the little known fact that I really only quite recently got on too that you can buy ostensibly the same portfolio through their unit trust at no premium to NTA. This also seems to apply to Barramundi and Marlin, see Australian and International Growth fund and go and have a look at the quarterly reports and compare shareholding disclosure of unit trusts with listed vehicles, they look pretty much identical to me ! https://fisherfunds.co.nz/investment...nd-growth-fund

From what I can see these unit trusts ostensibly replicate the shareholdings of the listed companies Kingfish, Barramundi and Marlin.
If you like the 2% PIE distributions each quarter its easy enough to withdraw 2% of your unit trust each quarter and mirror what the listed funds are doing.

Further, for those with $500K or more, you can set this thing up with their private wealth team and design whatever portfolio suits you and tailor a dividend withdrawal program monthly or quarterly, whatever you like e.g. 0.75% per month = 9% per annum.

So coming back to the premium to NTA question, why would you pay 10-25% premiums for the listed vehicles when the unlisted unit trusts holding the same investments trade at NTA ?

[SPC]

Yes Beagle you're right to point out the parallel unit trusts being available for purchase or sale at NTA. I prefer the listed alternatives as they allow an investor to buy or sell at times where be the market is not in tune with the NTA..discount or premium events. This can improve returns vs being locked to NTA.

[Beagle]

Yes Beagle you're right to point out the parallel unit trusts being available for purchase or sale at NTA. I prefer the listed alternatives as they allow an investor to buy or sell at times where be the market is not in tune with the NTA..discount or premium events. This can improve returns vs being locked to NTA.

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[SPC]

Yep but I haven't seen the unit trust offering warrants...

[alokdhir]

To me, invest in the unit trusts when the listed vehicles are trading at a premium to NTA and invest in the listed funds when they're trading at a discount to NTA. Why has the market accorded the listed funds such a huge premium ? The answer of course is the dividend yield of 2% tax free each quarter...but that's dead easy to replicate with a 2% unit trust withdrawal each quarter.

Its not as easy if u look at it from Tax angle especially for buy and forget type people and for people on 39% rate ...Simplicity and finality of listed PIE tax dividends is unparalleled . Main reason many in it for the long hauls ...they dont care about the premiums or discounts as regular income perpetually is their only goal .

Same as u said about people choosing to sell their homes and move to retirement villages ...