BRM - New Warrant Issue for Barramundi

[snapiti]

sorry NAV up 12% in 4 weeks.....I did not see you as a short term trader with this one Beagle....I got a 10 year strategy with this one....seems to fit in well with my portfolio and longer term goals.....the discounted DRIP fits in nicely with the 10 years plan as well

[Basil]

Fair enough, (good healthy debate), but that ~ 12% bounce was off the lowest point of the year when trump threw his toys out of the cot.  Possibly worth noting the S&P 500 is up 19% since then.

Earlier today, just out of curiosity I had a look back at BRM performance relative to the index right from the inception of the company.  They've done okay and earned their fees overall, (their management expense ratio is quite high) but performance was much better in the earlier years.

[snapiti]

pro's and con's in any fund, I think it is poor form they are not holding more cash.
I have been a holder for just over 12 months with a low entry point and BRM do give me some of my exposure to the ASX with out the FIF tax BS, really want to stick my 10 year strategy and are quite happy if the SP is the same in 9 years time whilst collecting discounted DRIP.
8% after tax returns, compounding with the DRIP allocations
Of course only a piece of the wealth creation puzzle plan
SP @68 cps only off 3% from the start of the Donald Duck trade war sell off

[Basil]

pro's and con's in any fund, I think it is poor form they are not holding more cash.

To be fair, they have said more than once at annual meetings they leave asset allocation including the size of one's cash holdings to investors to decide for themselves and are fully invested most of the time.  Should be a great day on the ASX with international developments overnight. 

[snapiti]

yep that is a fair call, just as well I do keep my own allocation balance then

[snapiti]

SP closed today at a level making up all the lost ground/carnage Trump trade nonsense did to the market....very pleasing, got a divi ann coming soon as well

[Basil]

NAV has actually snapped back to be ~ 5 cents above where it was on 31 March 25 69.99 cents announced today v 65.01 cents at the end of March.   Up nearly 10 cents from the low.  Holders must be very relieved.  KFL also recovered in a very similar way.

[snapiti]

it is quite interesting having conviction in a stock and a 10 year horizon, for me it means sell off events don't seem that big of a deal, it's more like grab yourself a bowl of pop corn and watch the nonsense unfold. I think short term investors feel more relief than long term investors.
 

[Ferg]

Whoops:
https://www.nzx.com/announcements/451726

Discount amended to 0.7% from 7.0%

[Basil]

Whoops:
https://www.nzx.com/announcements/451726
Discount amended to 0.7% from 7.0%

Marked as a price sensitive announcement, a simple misplacing of a decimal place....go figure.

[Basil]

it is quite interesting having conviction in a stock and a 10 year horizon, for me it means sell off events don't seem that big of a deal, it's more like grab yourself a bowl of pop corn and watch the nonsense unfold. I think short term investors feel more relief than long term investors.

Fair enough mate, we all have different investment objectives and time horizon's.
I'm posting this for the benefit of those looking for income.  People can make their own judgements about whether its a good long term investment in terms of capital appreciation or not.

For me its all about income and the tax free 8% income (worth 12% gross) to replace work income as I gradually move to full time retirement is very appealing BUT only if it isn't declining over time and on average over time, some of it isn't being paid out of capital.

From my perspective the jury is out on BRM and MLN but it would appear management know their home market pretty well and KFL have substantially outperformed over the long run.  Not only have KFL beaten the market (NZX50) over the long haul after their fees the value of NAV has grown from $1.0012 in July 2009 when they initiated the 2% quarterly payment system to be over $1.41 this week.  Inflation (source (RBNZ inflation calculator) means the $1 back then should have grown to $1.45 so not only have they paid the 8% tax free but they have also been able to maintain that $1 in real inflation adjusted terms, meaning your payments are not going down in inflation adjusted terms.  The long term evidence suggests KFL is an ideal investment vehicle for those who want very high income that grows each year in line with inflation, an ideal retiree's stock.

Things look far less rosy for Barramundi.  They initiated the 8% payment policy in August 2009 when the NAV was 79.83 on 3/8/2009, (source Barramundi website).  Since then, NAV has reduced to 0.6999 cents this week, a loss in nominal terms of ~ 12% but in inflation adjusted terms of 39.5% such that people's purchasing power from the dividends in significantly eroded over time.

Marlin has also suffered a 10.3% nominal loss in NAV since initiating the dividend policy in August 2010 and dividend income has lost 38.3% of its real inflation adjusted value over time.  MLN has also materially underperformed the S&P500 over that timeframe.

Conclusion.  Kingfish is a standout performer of the trio, both growing its NAV over time, soundly beating the NZX50 over time and contemporaneously paying very high dividends that have over time increased in line with inflation.  I suspect management know their home market a heck of a lot better than overseas markets and that confers a significant advantage that's reflected in the significant superior long term performance we've seen.

Anyway...that's what I have observed and I thought I would post it if in case anyone is interested.  DYOR that suits your own investment objectives and time horizon.

[Dolcile]

Good analysis, Basil. And well made points re the importance of inflation eroding the principal.

I'd be interested to know over the long term how much the DPS has varied year-to-year.  In retirement I'm also looking for the predictability / stability of the dividend flows.   

I don't hold KFL currently, but it has performed very well and I'm consider switching out of my NZX50 tracker fund to KFL.

[Dolcile]

For KFL I guess you wouldn't be happy if you purchased in 2021 and have seen the share price and dividends drop roughly 30%.

[777]

For KFL I guess you wouldn't be happy if you purchased in 2021 and have seen the share price and dividends drop roughly 30%.

Yes but you would be particularly happy if you bought in six weeks ago at 1.19.

[Basil]

Hey Dolcile, there's a truck load of information on Kingfish's website https://kingfish.co.nz/investor-centre/.  Time doesn't permit me to do a detailed study of variances in income level's over the years, suffice to say I am happy over the long run dividends are keeping up with inflation.

I think its also probably worth noting that as dividends are paid based on NAV, if you get your timing right and buy at say a 7% discount, your net dividend becomes 2% / 0.93 = 2.15% per quarter.  You can further boost this by taking shares in lieu of dividend at a 3% discount so that 2.15% becomes 2.15 / 0.97 = 2.2165% tax free per quarter. 2.2165% compounds quarterly to be worth an annual return of 9.165%.  For 33% taxpayers that's worth 9.165 / 0.67 = 13.657% gross.  The value of free warrants issued from time to time is additional to that.    Each hundred thousand of capital invested generates $9,165 tax free per annum that is likely to go up with inflation.  Pretty cool don't you think?