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  1. #11
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by FatTed View Post
    Beagle what do you think a fair price would be for BRM, MLN and KFL warrants?

    I managed to buy some BRM below NTA so happy with that.
    As I am sure you can appreciate fair value depends upon what the NTA is. I value them every week when the NTA is announced.
    Its getting much harder to put a fair value on Marlin and Barramundi warrants because its become apparent that the market for some months now has been prepared to pay a premium for entry into the shares of these funds based on the very substantial outperformance these have enjoyed relative to their respective index's. The persistence and size of the premium is not something I have seen before so the market appears to be saying the management expertise behind these funds is worth something in addition to NTA. Perhaps this is unsurprising seeing as these funds have outperformed their index's for the last three years and most especially in the last year with about a 19-20% outperformance.

    Whether this share price premium to NTA persists is very hard to predict and I think is intrinsically tied into whether the managers continue to outperform their benchmark's. I had a good chat with Robbie Urquhart after last week's Barramundi meeting and was quite impressed with him. I asked if he's ever beaten the Australian index by 19% before and he said he hadn't.

    Just leaving Kingfish aside as Sam Dickie and his team have beaten the index after fees by 2.5% per annum on average for the last 3 years and the market is saying their shares are not worth a premium to NTA, my valuation model as of yesterday gave a fair value of 22.2 cps for their warrants. That's easy to value and I'm happy with that one.

    Getting back to Barramundi, this presents as a real conundrum and I am starting to think my valuation model based on NTA, (which kicked out 11.0 cps yesterday) is too conservative. Today this closed at 85 cents against a last reported NTA of 75.17 cps. That's a whopping 13% premium to NTA not counting the exercise of the warrants, (probably exercise price ~ 64 cps). While this sized premium is extremely unusual, some premium in recent months has been quiet persistent and there are reasonable grounds to think this is justified based on the managers outperformance in recent years. It would seem Robbie and his team are well capable of beating the market and the market is acknowledging that.

    At this stage I would however prefer to be conservative and say that I am very comfortable that the teams in all three funds are at the very least on average earning their fees BUT the market is telling me this is too conservative a position. All I can say based on my model is Kingfish warrants are worth at least 22.2 cps and Barramundi at least 11 cps.

    I don't think the Marlin warrants which have to be exercised by 6/11/20 are quite worth what they're trading at on the NZX. Election risk looms large there and i think it is possible the market has overlooked the dilutionary effect on the NTA of warrant holders exercising their warrants at 86 cents. I wouldn't be a buyer of Marlin shares or warrants at this point and presently don't have an interest in Marlin but I am looking for an opportunity in them down the track as i think Andrew Gardyne and his team are doing a stellar job.
    Last edited by Beagle; 30-10-2020 at 05:19 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

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