Barramundi ( BRM )

[SilverBack]

I sold out of BRM at 62c a year ago after buying in at the same price 6 years previously. Today they sold between 62c and 63c. Zilch increase over 7 years in other words. Of course the dividends were good and my overall gain with dividends over the 6 years was 44%. The actual annual return was OK but not wonderful but only when compared to a term deposit. I have not bought in again, preferring to invest in the ASX directly and obtain a capital gain along with a few dividends. One of my ASX stocks has a yield of 7.3% and has produced a capital gain of 7.9% over the past 18 months. Not a wonderful gain but it is a defensive stock. Another blue chip ASX company gives me a yield of 6.0% and has provided a capital gain of 28.9% over 15 months.
In summary, if you do not want to actively invest in ASX then BRM is OK as a fund and gives a reasonable return (for a stock market fund) but if you are an active investor then you can do better. I think there is a place for BRM in terms of diversification, even if you are an active investor, especially if you are not active on the ASX. Nevertheless, keep in mind that you are exposed to a capital loss if the overall ASX market has a downturn.

[Beagle]

Appreciate your post. My calculations show if one invested in $100,000 of Barramundi now at 63 cents with an NTA of 70 cents per share, (buying at a 10% discount to NTA) and the NTA stayed exactly at that level for 6 years and Barramundi paid their 8% PIE tax free dividend per annum quarterly and the investor took shares in lieu of dividend at the 3% discount each quarter and compounded this four times a year for 6 years then at the end they would hold $172,000 worth of BRM shares, all without tax implications and all this assumes the fund achieves enough return each year just to pay the management fees and the dividends. ASX returns have been poor over the last five years for sure.

[Joshuatree]

I'm normally not a fan of companies that pay divs out of capital. However, as I argued some time ago on the MLN thread, in this case I find it quite useful (I hold MLN, not BRM).

I don't consider BRM or MLN as a share in itself, but as a managed fund. In my view, managed funds are a shortcut for the bits of your portfolio you don't want to spend a lot of time on and are willing to pay someone else to spend the time. For those that invest in managed funds via some kind of platform or adviser, using MLN may be no more efficient than any of the other funds available. However, for those who don't want to pay for an adviser or platform on top of their management fee, MLN (and BRM/KFL) is easy to buy and sell on-line and offers the tax advantages of a PIE structure. Furthermore, for the large proportion of investors that draw down against their portfolio, a regular, reliable high dividend yield is ideal. Yes, it may come out of capital to some extent when annual returns are below the 8% returned but this SHOULD over time become income-smoothing rather than depleting - having listed at the peak doesn't help.

Try keeping a semi-consistent income while having your share portfolio tied up in the usual selection of low/no dividend funds and you would have to make quarterly sales of small parcels to get the same cashflow - a move which is probably both time consuming, impractical and possibly expensive.

Overall, I think there is a niche for this model. I'll be disappointed if Fisher Funds are ever influenced by the critics to drop the dividend policy in exchange for a lower or more fluctuating model. If you don't need the dividend for income, take the DRP and get the re-investment growth in your holding that way.

The one set of complaints I can relate to is whether their share-picking ability is any better than average. Though in the short term, enough discount to NAV can cover a few mistakes...

Just refreshing lizards usual commonsense post. Have held BRM for sometime for the above reasons.

[Beagle]

Just refreshing lizards usual commonsense post. Have held BRM for sometime for the above reasons.

Thanks for reposting. A lot of high quality posters have been lost to ST over the years for a range of reasons which is a real shame.

[Beagle]

Warrant exercise date is approaching and I have backed up the truck. NTA is 72.3 cps as at last Thursday.
Warrant holders buying at 3 cps pay an exercise price of 59 cps on 25/10/19 are effectively buying a well diversified portfolio of Australia equities for 62 cps with an NTA of 72.3cps, a 14.25% discount to NTA.

Recent estimates I have read have the Australia market on a forward PE of just over 17 v N.Z. at around 29 so there's more value in their market.

Net divvies going forward at 8% (PIE so tax free), will be boosted by the discount to NTA one is getting 8 / 0.8575 = 9.33% net. For taxpayers on a 33% tax rate this represents an effective gross yield of 9.33 / 0.67 = 13.93%. Those electing to get their dividends through reinvestment in further units enjoy a 3% discount so its possible to crank this yield up by another 3% to 13.93 / 0.97 = 14.36% Gross effective yield.

Apart from this exceptional effective running yield the average discount these trade at has been about 9% according to the Kingfish group so there's a quick delta of about 5% for those looking for a fast buck.

I am happy to settle in for the long haul getting a 14.36% effective gross yield...I might retire sooner.

Those that took the trouble to come along to our Auckland gettogether Sunday week ago got a headstart on this tip just over a week ago.

[Joshuatree]

Where do you get 59c from Beagle

Barramundi Limited 25/10/2019 $0.64 Warrants

[Joshuatree]

Ok found it. thanks for that, it would have passed me by.

Barramundi Limited wishes to advise all Barramundi Warrant Holders (BRMWE)
that the final exercise price of the Barramundi warrants is $0.59.

[Beagle]

Where do you get 59c from Beagle

Barramundi Limited 25/10/2019 $0.64 Warrants

As you've discovered, the Warrant exercise price is adjusted for dividends paid on the ordinary shares during the tenure of the warrants.
Pretty cool yield don't you think ?
NB Australian market as a whole is up ~ 1% since NTA was last calculated at close of business last Wednesday so numbers are slightly better than I posted but I acknowledge NTA will be affected to some extent by warrant exercise itself. One warrant for every 4 shares and nobody knows what percentage of warrant holders will exercise them or not so its impossible to accurately calculate the extent of the minor NTA dilution through warrant exercise. My best guess is half warrant holders exercise them reducing NTA about 1.6 cps.

[Beagle]

Warrant exercise date is approaching and I have backed up the truck. NTA is 72.3 cps as at last Thursday.
Warrant holders buying at 3 cps pay an exercise price of 59 cps on 25/10/19 are effectively buying a well diversified portfolio of Australia equities for 62 cps with an NTA of 72.3cps, a 14.25% discount to NTA.

Recent estimates I have read have the Australia market on a forward PE of just over 17 v N.Z. at around 29 so there's more value in their market.

Net divvies going forward at 8% (PIE so tax free), will be boosted by the discount to NTA one is getting 8 / 0.8575 = 9.33% net. For taxpayers on a 33% tax rate this represents an effective gross yield of 9.33 / 0.67 = 13.93%. Those electing to get their dividends through reinvestment in further units enjoy a 3% discount so its possible to crank this yield up by another 3% to 13.93 / 0.97 = 14.36% Gross effective yield.

Apart from this remarkable effective running yield the average discount these trade at has been about 9% according to the Kingfish group so there's a quick delta of about 5% for those looking for a fast buck.

I am happy to settle in for the long haul getting a 14.36% effective gross yield...I might retire sooner.

Those that took the trouble to come along to our Auckland gettogether Sunday week ago got a headstart on this tip just over a week ago.

Just adding a couple more thoughts to this.
Been over 2 years since TSB Community Trust took ownership of the Kingfish group and appointed new investment managers for each of the divisions, Barrmundi, Marlin and Kingfish.
All offer the same PIE and exceptional yield structure so apart from the great yield how have they performed relative to each other, ? (easy enough to compare performance to the market with their monthly results announcements)
Last 2 years Kingfish yield plus 7.9% capital appreciation, (total capital appreciation not percent per annum)
Marlin, same yield plus 9.4% share price accretion
Barramundi 13% share price appreciation plus yield.

Forward PE's for the respective markets based on various articles I have read appear to be approximately
N.Z. approx. 29
USA approx. 18
Australia approx. 17.

Current discount to NTA as at last Thursday
Kingfish 5%
Marlin 8%
Barramundi 13% (Based on a share price of 63 cents valuing the warrants at 4 cents).

Of the three sister companies I think the best value and prospects lie with Barramundi at present.

[stones]

Just adding a couple more thoughts to this.
Been over 2 years since TSB Community Trust took ownership of the Kingfish group and appointed new investment managers for each of the divisions, Barrmundi, Marlin and Kingfish.
All offer the same PIE and exceptional yield structure so apart from the great yield how have they performed relative to each other, ? (easy enough to compare performance to the market with their monthly results announcements)
Last 2 years Kingfish yield plus 7.9% capital appreciation, (total capital appreciation not percent per annum)
Marlin, same yield plus 9.4% share price accretion
Barramundi 13% share price appreciation plus yield.

Forward PE's for the respective markets based on various articles I have read appear to be approximately
N.Z. approx. 29
USA approx. 18
Australia approx. 17.

Current discount to NTA as at last Thursday
Kingfish 5%
Marlin 8%
Barramundi 13% (Based on a share price of 63 cents valuing the warrants at 4 cents).

Of the three sister companies I think the best value and prospects lie with Barramundi at present.

Thanks for that. Certainly appreciate your professional insight