Boardroom battles for small LICs (HHY & NGE). APW & GJT updates.

NGE – The proposal to establish a LIC is set for later this month. If they had of gone about this the right way (e.g. combine with some cornerstone investors to double the size paying NTA, detailed presentations highlighting management expenses and investment strategy) perhaps I could have supported this.

The recorded performance for Kentgrove capital is impressive and I have seen many LICs still amazingly raise plenty of capital despite it being a mugs game for investors participating in IPOs in this space. However, they seem to be taking an arrogant approach to the way they have suddenly thrusted this vote on shareholders by surprise and without much explanation or details. If the LIC is going to be a small size and I assume the management fees will not be cheap, then I guess this new LIC will probably trade at the same discount to NTA that I bought these shares in the first place, about 22-25%. So my inclination is to vote against. Maybe later they can then buy more shares on market to get their own LIC to play with, and therefore pay closer to NTA to get more control. So I may well prefer this proposal to be rejected at this stage.

HHY – I consider this a not a holding anymore after selling at 11 cents not so long ago, despite having a tiny amount of units.  A few months back I wrote a piece about HHY being a good buy at 10.5 cents.

It’s pleasing to see that I was partially correct in that Geoff Wilson would turn his attention here if he started to lose the battle on KBC. Disappointing though that I did not really capitalize on it!

Unfortunately, I sold virtually all my position at 11 cents when their large position in CSE was very weak, and when I felt the shares were at only a very small discount to NTA, given I purchased at close to a 20% discount. What has occurred since is that Wilson requested a meeting for a wind up. The shares have been trading at the NTA of late which is quite unusual. I should have thought of this earlier but I didn’t, in that Aurora / Keybridge have been happy to accumulate shares to try and influence the vote. I recently said that I shouldn’t get involved when they are near the share register but I suppose in this case I could have made very good gains if I pondered their games a bit more and reached the correct conclusions.

So the holding I have is extremely trivial and more exists because it was with a broking account I don’t use as much and I almost couldn’t be bothered selling. It was useful in the sense it got me an invite to the wind up vote meeting. I am trying to spend more time at various meetings when I come back to Melbourne. I thought this would be worthwhile to perhaps better understand what Wilson has in mind, and the games the Bentley/Keybridge/Aurora etc. etc. play!

Let’s just say it was worth me showing up for entertainment value alone. It was hardly a capacity crowd with myself and about 3 other unit holders. After that we had Geoff Wilson and another representing an institution. Then a Mr Bolton, remember Nicholas Bolton the large stake holder of Keybridge, well maybe just maybe he was related. Literally with in the half hour of the meeting starting Aurora announced a scrip bid for the HHY units. I read it on my phone whilst I was waiting and mentioned it to Geoff who was yet to check his messages so all this took place about ten minutes before the meeting started! This was enough to adjourn the wind up vote. Geoff asked all the relevant questions and I was not very impressed with the answers given. I also would have liked some popcorn to be available at the time to sit back and more enjoy the tense nature of the meeting :). Seriously though if I had a real position in HHY, announcing a takeover bid half an hour before the wind up meeting would have been irritating to say the least. The response was that it was just a co-incidence that it would get announced so close to the meeting time. It was difficult not to laugh at such responses in the meeting in the small room with the small crowd!

I doubt I will have anything of note resting on this outcome of HHY in the future as the shares still trade at NTA. I do however wish a good outcome for HHY unit holders by way of either a wind up or perhaps somehow through a bid from Geoff Wilson, who at least is someone in the room I can say has a track record of looking after shareholders.

APW – I have been critical of management neglecting to buy back shares a couple of months back, and also saying they had scope to pay larger distributions. Since then they did announce an on market buyback. This week the quarterly distribution showed an impressive jump also. Whilst I don’t think they are aggressive enough on both these measures it is nonetheless a positive step compared to what they have done over the last year. The jury is still out on the buyback. They are at least making small purchases on market. I cannot be too critical here just yet since there is never much stock to mop up on the sell side. Whereas at times over the last year it has felt there is a persistent large seller about. I made a similar comment on the price action of UOS recently and then the share price enjoyed a nice bounce so maybe this can occur with APW in the short term. My recent buy price was 1.24, now they are 1.315 bid after going ex a 2.14 cent distribution. So after my lengthy piece I wrote on APW they have had a nice bounce of 8% in less than a couple of months with the sell side depth looking thin now. I will be quite interested to watch what they do with the buyback if we happen to get some large sell orders come out in the 1.40-1.50 range later this year. If the company is happy to accumulate there with the buyback it may in some way address some of my earlier criticisms.

GJT – They announced the details of the major final distribution at $2.61 for late October. After that we can expect about another 10 or 12 cents to wrap things up. I haven’t mentioned it for a while because there is not much to say we were more or less just waiting for this time to come around, it’s been that way since March. It was back on January 27 I wrote on the blog about buying this at $1.96. So this should be the last time I note it here, I also got paid about 9 cents in August so in total should receive about $2.80, returning around 43% in that time.

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