KFL - discount to diluted NAV

[alokdhir]

A potential near term Warrant issue is another current attraction for buyers of KFL currently.

Someone earlier in this thread asked if there is any (IRD) concern if Warrants are issued too frequently that impinges on the Managers ability to do so. I didn't see a response to that. Is it only acceptable once every two years, which seems to be pretty much what happens in practice? Does anyone have any insight?

KFL will most likely bring out another warrants issue as soon as SP crosses $ 1.50 ...so that exercise price is just under 1.40 ...which shud make warrants very attractive and almost assured full participation in a years time ....when most likely KFL SP will be over 1.60 or so ....

[Snoopy]

My observation was mainly based on stocks in the KFL portfolio ...ie FPH / IFT / MFT / AIA / SUM ..etc ....Most of them are attractively priced individually too ....then getting them at 8.5% discount to current market prices ...makes them extra attractive to me at least .

Based on market Closing Prices 26th April 2023

Cheap?	FPH	IFT	MFT	AIA	SUM
PER	63.360	14.630	16.640	147.1	7.060
Dividend Yield	2.017%	2.791%	3.274%	0%	2.713%

SNOOPY

[JeffW]

My observation was mainly based on stocks in the KFL portfolio ...ie FPH / IFT / MFT / AIA / SUM ..etc ....Most of them are attractively priced individually too ....then getting them at 8.5% discount to current market prices ...makes them extra attractive to me at least .

History has shown KFL being a retail stock gets into limelight when markets are buoyant and looses its shine in downtrend which adds to further attractiveness at the moment .

KFL was trading at 22 cents premium in Jan 2021 ...market peak ....now it's at almost 13 cents discount ...in itself it's almost 20% gap to close as and when it gets closed in next 2-5 years ...while one waits ....we get dividends or distributions based on NAV and not current SP ...

In my opinion, the dividends are a complete red herring. The dividends can only be sourced from two sources:

1. Dividends received on the underlying investments, which will not be anywhere near the 8% or so that's paid out.
2. From effectively paying out capital (maybe from gains on sale of underlying investments) as dividends

The former is fine, but the latter is a little counter-productive, although admittedly less so being a PIE compared to an ordinary company as there is no DWT leakage

[alokdhir]

Based on market Closing Prices 26th April 2023

Cheap?	FPH	IFT	MFT	AIA	SUM
PER	63.360	14.630	16.640	147.1	7.060
Dividend Yield	2.017%	2.791%	3.274%	0%	2.713%

SNOOPY

Only FPH seems pricy but it was always a market darling stock ...if u compare to valuations on Jan 2021 date then u will notice the difference ....plus these being large caps growth stocks ...u need to ignore their dividend yield ...

KFL is an efficient tool to convert growth stocks portfolio to dividend stream for income

KFL NAV has outperformed overall market in long term

https://kingfish.co.nz/investor-cent...o-performance/


PS. : Expecting a NAV of 1.405 today

[ronaldson]

Alokdhir - The outperformance table you have included in your post tells its own tale, being good news for holders.

But what is not included (I understand) is any benefit obtained by holders over the period identified from the regular Warrant issues. That benefit would be variable among individual holders according to whether warrants were exercised at a beneficial price on any occasion or alternatively were sold on market for value before the exercise date. In my time as a holder I have done both those things, with the result on each occasion of a positive outcome on a non-taxable basis in addition to the normal pie dividends paid quarterly.

The calculation will therefore be different for each holder but this extra benefit from KFL (indeed MLN and BRM too) should not be overlooked when measuring how this investment is performing.

[Rawz]

Chris Lee gave Fisher funds a bit of a serve in todays 'taking stock' news letter. Im sharing below for anyone that wants to have a read and doesnt subscribe to it. Maybe KFL will lower its fees? A bit in there about KFL's dividend policy. Anyways sharing is caring:

------------------------------------------------

THOUSANDS of NZ investors will be rejoicing at the news that the fee-hungry KiwiSaver funds run by Fisher Funds have been coerced into abolishing the absurd bonuses previously claimed.

The Auckland-based fund manager, having recently bought the Kiwibank KiwiSaver ledger, has announced that it is voluntarily ending its double dipping, explaining that it now has sufficient scale, after the Kiwibank purchase, to cope without second helpings of fees.

Of course the decision had absolutely nothing to do with market regulator signals that the regulator would be focusing on such fees with growing disrespect.

The ''voluntary'' cancellation of an utterly unreasonable, indeed rapacious, fee structure is good news for investors.

For Fisher Funds the proactive move solves a potential problem. Fighting regulators is expensive and unwise.

Formed decades ago by a then ground-breaking young woman (Carmel Fisher) with some corporate and fund management experience, Fisher Funds set out with a business model that somewhat resembled that of Money Managers.

For two decades, beginning in the 1980s, Money Managers had filled the pockets of its founder Douglas (Somers) Edgar, dominating a blue-collar retail market. It advertised heavily and invested heavily in Edgar's personal brand. Its fees were breathtakingly extravagant.

The Fisher Fund model was similar in that it relied on heavy advertising, the personal ''brand'' of its founder, charged hefty fees, and made headway by exploiting the media, both Edgar and Fisher becoming almost daily commentators on financial markets in much the same way that the Simplicity KiwiSaver founder Sam Stubbs does today.

Money Managers ramped up property syndication, in-house funds management and third-tier money lending, enabling Edgar to carve out sufficient rewards that he could retire as what some, vulgarly, refer to as a Rich Lister.

When Edgar was repositioning himself from a small Invercargill second-tier property investor to market guru, Fisher was at Prudential Insurance in the pre-1987 sharemarket, a trailblazer in that she was young, feminine, innovative and bright, carving out a bold approach to funds management concentrating on outsized holdings of illiquid stock. Risk taking was in her DNA.

By the time she founded her own company she had genuine experience and would have seen the success of Edgar's advertising concentration and noted his energy in developing a personal brand.

In later years she converted her company into an empire by using debt to acquire databases from the likes of Tower and Kiwibank.

Unlike Money Managers, her empire has been sustainable and now is her legacy.

She locked in large, repeating fees by cleverly listing various funds – Kingfish, Marlin and Barramundi – using the philosophy she had developed at Prudential, buying large chunks of low-cap shares, Pumpkin Patch being an example of a Kingfish target.

When anyone quickly builds a holding in an illiquid stock, they will initially record valuation gains. If you keep your finger on the ''buy'' button, you drive up the share price and will value your earliest, cheaper purchases at the last, high price that you have paid. The risk, of course, is that your strategy creates a market at an utterly unsustainable level, as happened with Pumpkin Patch.

Only for a short while did Kingfish, Marlin and Barramundi thrive under this model. Today, under the new management, the three listed funds have a different model, again unusual, in that Kingfish, for example, buys quality growth shares, collects very small dividends from those stocks, but pays the Kingfish shareholders high dividends, basing the dividends on the unrealised gains of the growth shares, not on income it receives.

This formula works well in a bull market, attracting shareholders who chase high dividends. Usually these are investors who have retired and need income.

The concept is hazardous in bear markets, an obvious issue being how such a model can fund dividends without leverage or dilution.

Kingfish's share price has fallen by 45% in the past two years, the market generally having fallen by less than half of that. Dividends must fall, by definition.

Fisher Funds, having been built on debt and acquisitions, has transitioned under its new owners, the American investment company TA and a TSB bank-developed Community Trust being the owners, TA being smaller but very much in charge.

The Community Trust investment is likely to be passive, with little strategic input on issues like fees, acquisitions and economic analysis. It is reasonable to assume TA's smaller shareholding has a full voice on all financial matters. Community Trusts are represented by people with social ambitions. TA is a hard, profit-focused organisation, with an American culture.

Carmel Fisher retired at a fortuitous time before the messes facing markets today had become simply toxic.

The new Fisher CEO is Bruce McLachlan, a mid-ranked banker, a divisional manager in the banks before a stint as CEO of the tiny Co-operative Bank.

McLachlan is not an analyst, a financial strategist, a sharemarket trader or an economist. He is a practical, pleasant fellow, well equipped to be the public face of an organisation whose American shareholders are best left to perform their work behind boardroom doors.

He will be highly attentive to the views of the regulators on such matters as bonus fees and incentive payments to executives, so may become an industry leader in addressing these subjects if he does so soon.

One has to hope all fund managers and KiwiSaver managers are paying attention.

The industry's annual fees are already extreme, even without the double-dipping bonus fees, especially in those businesses that perform no or minimal research, instead aping an index or double-intermediating by use of Exchange Traded Funds, a model that adds virtually no value.

Value-add must surely be the new mantra of all KiwiSaver and managed funds.

Prime Ministerial salaries and bonuses ought to be the victim of investor demands for a fairer balance between returns and internal costs.

The late Brian Gaynor's Milford brand has a significant appetite for fees but has regularly delivered value-add, though the current environment might be challenging.

Harbour Asset management has set the standards for genuine intellectual analysis (AND no bonus fees).

Perhaps Fisher Funds will now aim at a high tier of respectability by being the first to accept that bonus fees should play no role in an era of difficult conditions.

[SPC]

This rant is all a bit of a yawn. I've been to several CL presentations and his audience appeared very much to be of a certain generation and the messages catered for that group. It's all just a cup of warm Milo, the late Brian Gaynor dished up hot strong coffee.
I certainly know who I preferred.

[alokdhir]

All long term investors of KFL fully understand its Dividend or distributions policy ....I hope so ...it's not truly a dividend but a distribution based on 2% of NAV of that quarter which is funded thru actual dividends received with attached tax credits and capital transactions .

If one is worried about capital erosion in bear markets as mentioned by Chris Lee then one can opt for DRP which reinvests quarterly distributions into KFL shares at 3% discount to SP thus increasing holding numbers while NAV drops thus not resulting in any capital erosion at lower levels .

Its appeal to retired people needing tax efficient and hassle free income stream is supreme as it converts growth of large cap blue chip stocks to quarterly distributions ...fully tax paid in the hands of a NZ resident individual

Its distributions are based on NAV thus when NAV falls so does quarterly dividends

Just an example to illustrate how nicely it works ...if one invested in KFL on 1st April 2010 at 91 Cents ...when term deposit rates were 7% for 5 years ...one wud have got appox 10 cents dividends per year and still have some growth of capital at present SP of 1.30 ...it wud have worked much better then locking at term deposit rate of 7% pretax ...so buying at right time does matter ...which usually is the case when rates are high and SP is at big discount to NAV ...

I

[777]

Seems to me that he is more concerned that the people he is talking about have a higher profile than he does.

[SPC]

Yes reminds me very much of a Kris Faafoi opinion piece, alot about nothing in particular and generally after the fact.
I don't know why either gets printed...