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30-10-2020, 06:17 PM
#461
Originally Posted by FatTed
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 06:19 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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31-10-2020, 09:28 AM
#462
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
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31-10-2020, 09:44 AM
#463
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 ?
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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31-10-2020, 10:03 AM
#464
Member
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22-11-2020, 06:57 AM
#465
Originally Posted by Beagle
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!
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22-11-2020, 09:45 AM
#466
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..
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27-11-2020, 08:53 PM
#467
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04-02-2021, 12:24 PM
#468
Junior Member
Hi,
Wondering if anybody can advise is there is any additional tax requirements for an individual investor for holding these or Baramundi ie. FIF(due to international holdings) ? Or essentially no different tax wise than holding KFL or another PIE fund.
I have contacted Marlin directly but no reply yet.
Thanks in advance.
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04-02-2021, 12:28 PM
#469
No different to KFL or BRM. FIF not an issue.
Originally Posted by Stylerz
Hi,
Wondering if anybody can advise is there is any additional tax requirements for an individual investor for holding these or Baramundi ie. FIF(due to international holdings) ? Or essentially no different tax wise than holding KFL or another PIE fund.
I have contacted Marlin directly but no reply yet.
Thanks in advance.
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04-02-2021, 12:51 PM
#470
Originally Posted by Stylerz
Hi,
Wondering if anybody can advise is there is any additional tax requirements for an individual investor for holding these or Baramundi ie. FIF(due to international holdings) ? Or essentially no different tax wise than holding KFL or another PIE fund.
I have contacted Marlin directly but no reply yet.
Thanks in advance.
AS they are PIE's then no requirement to include distribution on your tax return. However if your marginal tax rate is 17.5c (Gross income less than 48,000) or 10.5c (Gross income less than 14,000) then you can declare the gross amount and claim any tax paid, including imputation credits. Ignore the excluded amount on the notice.
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