I am catching up about writing a few more details on some of the companies I owned that have had some news of significance over the last couple of months. Here are some thoughts, forgive me if at times it appears I have written this a few weeks ago as this may have been the case in some instances.


MEL –Unfortunately they did a deal so a full wind up is not on the cards and not surprisingly the shares have weakened to about 5.5 cents. They still trade very close to my purchase price late last year and I would point out that they have invested less than 30% of funds available so a sizeable capital return or share buyback could still be well on the cards. As for the deal I am probably not smart enough to opine on, however to look on the bright side it is some exposure to a lift in oil prices down the track and done when the share price of BYE was struggling around mid-June. So I suppose it ticks some boxes that I am ok with, in terms of exposures to the energy sector and also in mid-June with companies that aren’t that liquid maybe suffering from tax loss selling. I will certainly admit though my experience in the stock market has taught me as a rule of thumb any company making an acquisition is more often than not probably making a mistake! So I won’t hide the fact I would have preferred them to hang onto the cash and eventually just give it back to shareholders. Having said that I am still quite content holding MEL whilst the NTA is about 7.2 cents, with more than 70% of that strictly cash.

KBC – Unsurprisingly Wilson Asset Management has taken the restructure plan off the table because Bentley Capital was blocking it. Bentley are trying to get board representation which I hope to fail and expect it should fail. However, you never know. If that is what happens I am not sure what happens next. The shares are probably around 25% below NTA and have some decent prospects in the portfolio mix. Possibly if the Bentley push for board seats fails hopefully WAM can organize some people to lead the company as an issue now is lack of direction from senior management. I have been quite negative about the fact that Bentley have appeared on the share register but I should note it doesn’t necessarily have to be all bad. Maybe even Bentley and WAM could agree on a slow wind up of the company, as the few larger investments get slowly realized they could return funds via capital returns and eventually leave a smaller shell company that one of the major shareholders could deal with in some way. At least there are some options still to perhaps see shareholders get closer to the 21 cents of NTA that may be there rather than the 16 cent level we are seeing on market.

This has been a bit of a saga that I have probably written too much about now in relation to my current holding, which I recently lightened up on. For those confused here is a news link on some of the recent events, an interesting collection of characters involved in this now! I neglected to mention above recently they have sold the Aurora Funds Management business, so the article gives the background to that also.


AIK – I have spoken about the positive NTA revaluation being in the bag many months ago and we finally saw it, rising from about 13.3 cents to 15.5 cents. I mentioned this was clearly on the cards when AIK was trading at 10.5 cents and that I would watch closely to see if something so obviously flagged eventually did filter through to the share price on the announcement. Interestingly it does look quite firmer at 12.5 cents at June month end. I was pleased because the valuation uplift was less about the reduced discount rate than I assumed. The discount rate was only moved from 21% to 19% so I actually expect more of a reduction can be more of a catalysts going forward. Other catalysts I expect in the medium term are changing the company structure away from a LIC, a share consolidation to get the price above $1, change in company name and eventually dividends. All of these measures I expect eventually to provide more appeal to other than the few smart institutions that seem to be onto this. All this may take some time and I expect to hold this stock possibly for years until all of these measures take place.


ELD – Elders came out with a rights issue to buy the ELDPAs so eventually they can resume paying dividends. I continue to hold a small position in ELD. I am a little disappointed I didn’t play this via ELDPA given I make it a point of mine to look at some of these hybrids for opportunities like this.


UPG – This has been one of my most pleasing results from a risk/reward point of view. Last I wrote about this just a month or so ago they were in very advanced talks to sell the main property and the stock was around $1.05, where I decided to keep holding. It has just formally announced the sale and a huge capital return. I just looked back at my contract notes and I bought some shares immediately AFTER the news announcement at the start on October 6. Amazing to think you could buy at 74 cents (with a very conservative NTA of $1.05) knowing management had already decided to put this asset up for sale and eventually wind things up. Whilst I hope to achieve many more winners that make more in percentage terms, am not sure how I’ll go in achieving many better buys from a risk/reward point of view compared to that time in October.
They now have an NTA of around $1.20 and are trading quite close to that cum the 80 cents capital return. The reason being is that after the capital return there is interest from a few parties to make a takeover for the remainder, which should have some taxation benefits for the acquirer. I still hold.

Update – After going ex the capital return, there looks to be a takeover offer for the remainder of the company at 47 cents as I write. (stock is in trading halt). This would bring the total return of $1.27 from buying at 74 cents, all likely to close within about 12 months at most, 72% return in what I thought was a low-risk buy.


AIQ – A little disappointing that the non-binding talks to acquire and restructure AIQ have failed. We will never know what the details were. Perhaps it is not so negative if the AIQ board responsibly rejected a fairly low ball bid. It could be a case of who they were talking to were feeling out this situation out first and may come back later with a better offer. In the meantime, AIQ may decide this year to make a capital return as the cash is building up inside of AIQ. I still hold.

Update – they did make a modest capital return of 1.5 cents (I thought they could do more here), yet a positive was there was still a hint that those talks of a restructure of some sort are still ongoing.


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