Barramundi ( BRM )

[winner69]

still around the 50's and NAV in the 70'c

Paper today says some taking action to have BRM delisted so they access NAV

Interesting

[biker]

still around the 50's and NAV in the 70'c

Paper today says some taking action to have BRM delisted so they access NAV

Interesting

MLN not BRM

[COLIN]

I have moved most of my investment activity to the ASX these days as there is far more scope for profitable opportunities over there, particularly amongst the junior miners - provided you watch your portfolio like a hawk.

However, I have been steadily accumulating BRMWB over recent months, and it surprises me that there is not more interest shown by astute contributors on this forum. At an exercise price of 75c and a heads price of 82c, the options are "in the money" to the extent of 7c, yet that is all they are being bid at, at the moment, and yet they still have a whole year to run! Unless you are of the view that the Aussie market one year hence will not be any higher than it currently is - an unrealistic view, in the opinion of most, I would reckon - then an investment in the options would provide you with 10 times the return of an investment of the equivalent outlay on the heads.

The one "fly in the ointment" is the fact that BRM pays out regular dividends, which of course does not attach to the options but, even allowing for this factor, I see BRMWB as very attractive indeed, at its current price.

And no, I don't see these comments as "talking up my book!"

[Catalyst]

What would happen to the BRM share price in one years time (exercise date Nov 2011 for BRMWBs) if:

1. The BRM share portfolio appreciates 10% in AUD terms over the next 12 months;
2. NZD/AUD appreciates from 76c today to 82c over the next 12 months; and
3. The discount to NAB goes from 10% today to 15% over the next 12 months;
(All realistic scenarios in my view.)

Answer:
1 and 2. BRM NAB goes from NZ$0.90 (A$0.684) today to NZ$0.92 (A$0.752);
3. This equates to a BRM share price of NZ$0.78 at 15% discount.

Therefore the BRMWBs theoretical price would be 3c at the exercise date next year (exercise price of 75c) compared to 7.2c market price currently.

I have looked at BRMWB's recently too Colin but I was burnt by the KFLWA warrants a year or two ago when the discount to NAB blew out to 20%+. I would feel more comfortable investing in BRMWBs if a) the NZD/AUD wasn't so weak; and b) the discount to NAB was higher.

[COLIN]

What would happen to the BRM share price in one years time (exercise date Nov 2011 for BRMWBs) if:

1. The BRM share portfolio appreciates 10% in AUD terms over the next 12 months;
2. NZD/AUD appreciates from 76c today to 82c over the next 12 months; and
3. The discount to NAB goes from 10% today to 15% over the next 12 months;
(All realistic scenarios in my view.)

Answer:
1 and 2. BRM NAB goes from NZ$0.90 (A$0.684) today to NZ$0.92 (A$0.752);
3. This equates to a BRM share price of NZ$0.78 at 15% discount.

Therefore the BRMWBs theoretical price would be 3c at the exercise date next year (exercise price of 75c) compared to 7.2c market price currently.

I have looked at BRMWB's recently too Colin but I was burnt by the KFLWA warrants a year or two ago when the discount to NAB blew out to 20%+. I would feel more comfortable investing in BRMWBs if a) the NZD/AUD wasn't so weak; and b) the discount to NAB was higher.

Well, if one has negative feelings about BRM's prospects then one wouldn't be interested in BRMWB, I guess. And your second point would apply to any Aussie dollar investment, which is a view I don't share, given the much better prospects for the Australian economy versus NZ, both short and long term - aside, of course, from today's one-off slippage of the Aussie dollar, due to their lower CPI figure than forecast.

And I doubt if the discount to net asset backing will widen out again to any significant degree, given the lively nature of many of the individual stocks in their portfolio.

[Beagle]

I have moved most of my investment activity to the ASX these days as there is far more scope for profitable opportunities over there, particularly amongst the junior miners - provided you watch your portfolio like a hawk.

However, I have been steadily accumulating BRMWB over recent months, and it surprises me that there is not more interest shown by astute contributors on this forum. At an exercise price of 75c and a heads price of 82c, the options are "in the money" to the extent of 7c, yet that is all they are being bid at, at the moment, and yet they still have a whole year to run! Unless you are of the view that the Aussie market one year hence will not be any higher than it currently is - an unrealistic view, in the opinion of most, I would reckon - then an investment in the options would provide you with 10 times the return of an investment of the equivalent outlay on the heads.

The one "fly in the ointment" is the fact that BRM pays out regular dividends, which of course does not attach to the options but, even allowing for this factor, I see BRMWB as very attractive indeed, at its current price.

And no, I don't see these comments as "talking up my book!"

Hi Colin, I am with you on the point you've made and to my mind given the high degree of volatility in the world markets, its quite bizarre that the warrants today are trading exactly in line with the share price differential, as of today's closing price 83 cents for the head share and 8 cents for the warrants. Any objective analysis using the black and schoales option pricing methodology would value these warrants significantly higher than where they currently stand, even after accounting for the 8% dividend per year policy on BRM head shares.

Having said that, there are some grounds to believe that Fisher Funds track record is somewhat questionable and I think there's more than an ounce of truth behind balance's post of 2008 above regarding buying up illiqid stocks e.t.c. Of course Fisher Funds have acknowledged that mistakes were made e.t.c., e.t.c. and that new proceedues and practices have been implimented...whether you believe them entirely and trust them is a matter for each investor to decide. Call me a cynic but I retain some reservations otherwise I'd be in boots and all and have hundreds of thousands of warrants.

Nothwithstanding some concerns, I think Barramundi warrants have excellent capital gains potential and could easily double or potentially treble or perhaps even more in the coming months if the Australian market booms, on the other hand if the world goes into free-fall as some bears continue to predict the most you can lose is 8 cents, so yeah, I'm a cautious believer, allbeit with both eyes wide open.

Disclosure - I have owned warrants for a few months now and currently stand slightly above break-even.

[pierre]

I'm currently looking for a good yield stock and one that's not too volatile in terms of SP.

Does anyone have a current view on BRM (and BRM warrants). The heads are 79 cents today and the warrants are 2.7 cents - so are in the money. The shares are yielding a bit over 9% so that's a pretty good return in the current climate. Buying some warrants and exercising them in a couple of weeks time could be a cheap way in.

Or do you have a recommendation on some other stocks that might be a better proposition?

[ratkin]

Are they really yielding 9% though?

Remember Barramundi isnt actually a stock , its just comprised of a basket off aussie stcks, and they
are not yielding anywhere near 9%

[Catalyst]

Yes, Ratkin, BRM is yielding about 9.6% net currently. (4 quarterly dividend payments of about 1.9c = 7.6c / 79c share price = 9.6%.) Not sure about imputation credits.

BRM (and KFL) changed its dividend policy a year ago so that they both pay quarterly distributions of 2% of the avg NAV for the quarter, regardless of whether the basket of stocks pay any dividends or not.

Pierre, I would view BRM as simply a high yielding 'stock' and not count on any capital gain. It's performance since its 2006 listing has been very ordinary at negative 21% (plus some free options and some dividends).

I would view the warrants as quite risky with only five months to final exercise. Quite a lot could happen between now and then...two lots of 1.9c to come out of the NAV, the market could weaken, the discount to NAV may widen from its current 12%, the NZD/AUD could strengthen... all of which could send the share price from 79c to 75c or lower, rendering the warrants worthless. (Off course the opposite may occur but I am simply pointing out the risks.)

[macduffy]

A policy that pays out 2% of NAV each quarter, regardless of actual income, runs a grave risk of eventually paying out its "Capital stock".
As ratkin has pointed out, the stocks in the portfolio wouldn't be yielding anywhere near 9%, few Aussie stocks are. Given that a lot of BRM holders will have opted for additional units rather than cash, there is an element of the old BIL/GPG annual "bonus" issue technique here.

I'd be careful about investing in BRM for these reasons. As someone else mentioned, an alternative approach would be to research the individual stocks in the BRM portfolio and make your own selections/investments. It worked for me a few years ago when I bought AOE, AEV and RKN of the Fisher favourite stocks. AEV was a dud but AOE returned about 6 times its cost when it was taken over. I still hold RKN which has more than trebled in value from purchase.