BRM - New Warrant Issue for Barramundi

[Dolcile]

See the opening line of post #100 above.   It is a final tax. The PIE structure keeps me out of the dreaded 39% tax scalping tax bracket so I am a very happy camper 

Thanks

Any idea of the tax treatment of the investments within the entity?   Do shareholders get the benefit of the franking credits on the dividends from the investments.  Or are they lost?

[Basil]

Sure did Toddy and added another ~ half cent to NAV, see post 79 here with latest updated NAV at close of ASX today https://stocktalk.co.nz/index.php?topic=105.75  76.84 cents NAV now, up nearly half a cent on 31 January.

Post 77 might interest some of you in terms of how much I have invested in BRM and the warrants BRMWH and my interest in adding a lot more to my Marlin investment..

Not going to update every day but seeing as it's a market holiday here tomorrow and the Aust market was down ~ 1% today I did update it for my and others peace of mind.  Updated NAV is now 76.73 cps, down 0.15% when the Au market is down 0.95% today.  Pretty content with that !

In answer to your question Dolcile, there's no investment vehicle whereby N.Z. residents get a credit for Australian franking credits I am aware of.  I just leave them to do their tax thing and know I don't need to include the PIE dividends in my tax return.

[Basil]

76.67 cps NAV according to my spreadsheet just updated, up slightly from last week's 76.38 cps.
Actual NAV announced tomorrow afternoon is likely to be slightly different due to changes to their portfolio since 31 December and the change in currency since last week.

[Sideshow Bob]

76.67 cps NAV according to my spreadsheet just updated, up slightly from last week's 76.38 cps.
Actual NAV announced tomorrow afternoon is likely to be slightly different due to changes to their portfolio since 31 December and the change in currency since last week.

Once warrants are exercised (presuming 100%), then based on latest NAV will drop to about 73 cps.

So about the current price.

[Basil]

Once warrants are exercised (presuming 100%), then based on latest NAV will drop to about 73 cps.

So about the current price.

Correct there is some dilution on exercise in late October 2024.
The math's would look like this, assuming all warrants are exercised, remembering its 1 warrant for 4 shares.
(4 x 76.67 + 63) / 5 = 73.94 cps.

P.S. Latest NAV is out.  76.57 cps.  https://www.nzx.com/announcements/425896 one tenth of a cent different to my calculation last evening.

[Basil]

Updated, 76.77 cps.

[Basil]

Aussie market flat but Barramundi portfolio had a very good day up almost 1%, updated NAV at close today 77.45 cps !

[Dolcile]

Basil, genuine question for you.  If you are looking for exposure to the ASX in general - why not just invest in say the Smartshares S&P/ASX 200 ETF? 

Are you taking the view that you think the active management will return in excess of the ETF, net of the  2% opex/management fee cost in BRM.

Thank you

[Basil]

Good question Dolcile and a fair one and as you know the expense ratio on smart shares ASX200 ETF is a lot lower but its not free, (from memory its 0.30% per annum).

Performance over and above the ASX200, over time after costs is exactly the view I am taking and its supported by the evidence over the medium term.  If you look at their most recent monthly report at the bottom of page 3 you'll see that the 5 year average return NAV to NAV, (so that's after their fees and costs to run the business) is 12.5% per annum whereas the benchmark index is 9.2% per annum.  A 3.3% per annum performance premium after expenses is very impressive.
https://barramundi.co.nz/assets/Investor-Centre/Barramundi-Monthly-Update-December-2023.pdf

Additionally, from time to time as has been the case recently and still is, the opportunity to buy BRM units at a decent discount to NAV presents which is an opportunity to get extra performance over and above the net increase in NAV over time, see the opening paragraph of post #94 above.

[Dolcile]

Thanks Basil, well made point. 

As someone looking to diversify away from the NZD, I do wonder how much of BRMs out performance is due to the currency hedging, as compared to the unhedged ETF.  Have you looked into that?

Thanks

[Dolcile]

Actually, I may have misunderstood. 

Does BRM hedge 70% of the currency exposure? In which case the benchmark adjust for hedging makes sense. 

[Basil]

I tried to get a straight answer from their corporate guy on the hedging subject a while back.  Best he could offer is their foreign currency hedging policy varies from time to time but was currently about 50%.  That was a couple of years ago.  I guess if they're benchmarking 70% that implies that's their normal average hedge rate.

As to how much of their outperformance is due to hedging, that's impossible to say as they don't declare that.  For what it's worth I wish they wouldn't hedge.  All hedging costs money, the banks don't provide this service for free and to my mind if you're investing in Barramundi you know you're investing in Australian assets so why not just let that flow and be in Australian dollars too ?  I guess they have some market research somewhere that hedging is what people want.

My view is its highly likely their outperformance is due to stock picking not hedging as the latter is a zero-sum game with the banks charging hefty fees.

[Toddy]

I agree. Maybe hedge the dividend cashflows but not the capital or capital gains.

Why. Because the risk is all in the Kiwi dollar. For example, a major event that destroys our dairy sector, or a decent earthquake in Wellington.

Leaving the fund exposed would mean offshore investments would benefit as the kiwi tanked.

[Basil]

Thanks for your thoughts guys.  Its a great question to bring up at the next Annual meeting and one I will undertake to do. Ask what the costs and benefits of hedging are, what profits or losses they've incurred and then maybe put it to the meeting, who wants hedging and who doesn't and ask for a show of hands so the directors get some feedback.   For those that don't know, there's ample free parking and they always put on a pretty decent lunch after the meeting so it's worthwhile attending.    Robbie Urquart, the investment manager is a good guy and there's always a decent queue of people lining up to talk to him so get in quick if you want a chat with him after lunch. 

[Waltzing]

NZD - tanked ....  hasnt it pretty much alway been tanking ...