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Thread: Marlin

  1. #461
    Hunting for more dog food 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.
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  2. #462
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    Given the exercise date is so close and the 86c declared they should trade at approx the ordinary share price - 86c so more like 30c

  3. #463
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    The elephant in the room tim23 is that the last reported NTA was just on $1.10 but if all warrant holders exercise their warrants at 86 cents the new adjusted NTA will be just (4 x $1.10 + 1 x 0.86) / 5 = $1.05. The shares closed at $1.18 yesterday so this would be a 12.3% premium to NTA.

    Granted BRM closed at a similar premium to NTA of Friday and both funds are outperforming at a similar extraordinary rate, (so you could make the argument based on the current spot price of BRM this sort of premium is warranted and therefore the warrants are worth $1.18 - 0.86 = as much as 32 cents) but north of 10% price premiums to NTA for these funds have not proven to be durable in the past and I would think them unlikely to be durable in the future. Maybe a 3-4% premium to NTA is not unreasonable given their proven management expertise which suggests a fair adjusted price on warrant exercise of $1.08 - $1.09 which suggests a fair warrant price of 22.5 cps. The close yesterday at 24.5 cps given obvious near term election risk looks a little overcooked to me...but who knows, we live in extraordinary times and maybe warrant holders are expecting a strong bounce back in the US markets post election ?
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  4. #464
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    Thanks Mr B

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    Quote Originally Posted by Beagle View Post
    The elephant in the room tim23 is that the last reported NTA was just on $1.10 but if all warrant holders exercise their warrants at 86 cents the new adjusted NTA will be just (4 x $1.10 + 1 x 0.86) / 5 = $1.05. The shares closed at $1.18 yesterday so this would be a 12.3% premium to NTA.

    Granted BRM closed at a similar premium to NTA of Friday and both funds are outperforming at a similar extraordinary rate, (so you could make the argument based on the current spot price of BRM this sort of premium is warranted and therefore the warrants are worth $1.18 - 0.86 = as much as 32 cents) but north of 10% price premiums to NTA for these funds have not proven to be durable in the past and I would think them unlikely to be durable in the future. Maybe a 3-4% premium to NTA is not unreasonable given their proven management expertise which suggests a fair adjusted price on warrant exercise of $1.08 - $1.09 which suggests a fair warrant price of 22.5 cps. The close yesterday at 24.5 cps given obvious near term election risk looks a little overcooked to me...but who knows, we live in extraordinary times and maybe warrant holders are expecting a strong bounce back in the US markets post election ?
    Probably my point was that you sell your shares just before warrants cease trading and buy the same number of warrants and then exercise them, a very profitable exercise!

  6. #466
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    Yes that would have been profitable on this occasion for sure but it has not historically been this way. Today there seems to be a lot of 'new' cash going in to the market which is really pushing up the market price/NTA disconnect of these particular funds. Hold all three since IPO... hasn't always been rosey. Recent manager appointments and buying decent stocks rather than obscure 'growth punts' have lifted their game..

  7. #467
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    Originally Posted by kiora
    I have been thinking along the same lines as alokdhir for a while now regarding how it will end for all their funds.
    I invested in their KS & listed funds in the early days but switched a few years ago.

    For a portfolio for someone approaching retirement with little savings(not me) I split a third of the funds into 5 listed shares in 2007 at $10,000/share

    2007 $10,000 MLN value now $9520.It has received quarterly dividends of around
    8.5 c/year https://marlin.co.nz/assets/Uploads/...nd-History.pdf
    Adds about $10,400 ?
    Total value $19920 slightly more if dividends were reinvested
    According to the investor center value would be around $33000 now
    https://marlin.co.nz/investor-centre...o-performance/
    2007 $10,000 IFT value now with DRP $46,367 plus a few other dividends
    As it turns out 2007 was a good time to invest in IFT
    https://infratil.com/for-investors/
    2007 $10,000 FPH value now with DRP $136,360

    It would be interesting to have done the same with MFT & EBO in hindsight

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