Stuck in the bin
MORE ACTIVISM LOOMING IN ASX LICs
Snippets from Feb 2020
Am pleased to see David Kingston and VGI Partners appearing to be busy keeping the boards of some a little more honest. Names mentioned in the below two links that I have already mentioned on numerous occasions with examples of questionable shareholder governance include ALF, TGG, EAI. The clock might be ticking for the lives of such LICs.
https://www.afr.com/street-talk/pen-pals-david-kingston-takes-on-geoff-wilson-over-alf-lic-20200221-p542z6
https://www.afr.com/street-talk/vgi-lics-lips-as-discounts-widen-20200218-p541r5
ANYONE STILL HOLDING 8EC SHARES OUT THERE?
Just curious if any readers might have over ten grand or more tied up in this still? I think shareholders might be able to realise close to the stated remaining NTA, rather than under 8 cents where the shares have been trading. Feel free to contact me at valueinvestingforaliving@gmail.com
LIC activism snippets from July 2020
BHD – Like 8EC, I became a shareholder in the tiny remains of BHD. The board has done a great job restoring around 30 cents of NTA. To continue such good work, shareholders should be able to realise very close to that 30 cents. After all, they could simply pay it out of cash now, and those shareholders who have suffered from the early days deserve to see some cash in their hands. The board was elected on a mandate to return capital to shareholders as per ASX announcement on May 8th, 2019. Shareholders can perhaps then choose to roll some of it into GC1 perhaps or all of it if that is what they feel like doing.
CIE- A similar point probably exists with CIE in a way. I missed getting filled on this in mid-June but am watching it and thought it was worth a comment. That is, Lanyon have made some excellent points here in their campaign. Yet CIE shareholders probably deserve the chance to exit at least a good portion of their investment via a cash return, should they prefer that to going into a Lanyon run LIC.
The writing was kind of on the wall here as I suggested in an old blog post here.
CVF – Reading the updates on the strategic review here, to me it seems a simple solution to most of the issues are for a scrip takeover from GVF.
APW – Shareholder return needs to be the focus, not size through related party transactions.
I have made numerous posts on this, first being back in mid 2016 here.
FRUSTRATED HOLDER OF APW (AIMS PROPERTY SECURITIES FUND)
BAF, KAR & OMN – As we begin the 19/20 FY I’m wondering whether the three just mentioned tickers in bold there should consider returning some capital to shareholders. Have been somewhat underwhelmed with their latest communication to shareholders. Not seeing compelling evidence they will allocate capital wisely going forward.
KAR UPDATE – as of March 2020 I ended up selling all my KAR, ended being an average exit mid 90s after getting set a few cents cheaper. I no longer have much conviction where oil prices are heading. Frustrating ride this one as I saw much higher levels earlier but didn’t sell.
OMN Update Sep 30 – https://www.smh.com.au/business/companies/lowy-s-onemarket-start-up-to-be-wound-up-20190930-p52w6d.html
ALI – Fees could be cut; shareholder buyback should be more than token words. Where is the marketing boost promised a year ago?
Seeking Alpha Cohen & Steers and Argo Global Listed Infrastructure.
Update July 1, 2019 – In the last week I have sold more than half my ALI in the high 2.20s. Discount has narrowed a lot since my buying. Thanks to falling bond yields and AUD, rather than the board’s strategy to narrow the discount. A year or so ago no one thought bond yields could go down and now no one thinks they can rise, so I am taking some profits here.
Further update 11/11/19 – sold the rest so no longer a holder.
YBR – Perhaps someone needs to be fired there?
WQGO – I only hold options here in case US markets keep going up. “Supervisory” fee should be fairer, the board hardly owns any stock. (As of April 2 I have now sold nearly all my exposure here. I’ll be an interested observer mostly from the sidelines to see if they play any underwriting games like EAIO if the options finish barely in the money).
WTP – Should be more proactive selling the civil & mining business and a share buyback. (Reluctant seller into takeover, will be remembered as a sin bin stock.)
ALF – I demoted ALF in the categories here after initially being pleased with their strong share buyback and marketing attempts. (ALI are you watching there, noting how many shares you can buyback?). However poor performance even during the October slump makes the future here questionable. There used to be one Watermark LIC, broadly long based domestic with low drawdowns from doing some shorting. Now it has unsuccessfully tried offshore investing and always market neutral. Do we then need this with the 2 other market neutral LICs they have now? Interesting upcoming AGM November 30.
TGA – This company looks likely to change its ways thanks to a fresh looking board of directors. The CEO is out and major shareholders Somers and Forager will be pulling the strings to see the best strategic direction for shareholder return. I became a holder just prior to the big rights issue. I took up my entitlement so my average cost is about a couple of cents above the rights price.
Am comfortable now that the largest shareholders have made this a much bigger bet for them and have significant skin in the game. They should be open minded about the future of the company and whether it should even continue in the medium term. At a minimum I suspect they might at least be more aggressive on store closures at Radio Rentals.
Potential Graduates
AIQ – Have taken a very long time to announce a restructure, awaiting further details. (update – I sold into buyback).
TGG – End of dilutive share issues. Effective buyback, very modest fees. Communications is finally improving so this can be a graduate if performance improves.
Come mid 2019 the discount is once again very large. They may not be given the time to see out their value style coming back into fashion. Investors may perhaps be better off getting NTA back quickly and reinvesting the funds in a similar style of global value equities product.
Not surprised to see them earn themselves another remuneration strike in 2019. Perhaps the portfolio manager here saw the writing on the wall in leaving..
EAI – This used to be in the graduate section when they seemed to start to understand what it takes to run a LIC. E.g. strong buyback and improved marketing efforts amongst other things and even performance was improving a little for a while.
Now I think their underwriting of the options (admittedly minor extra supply and dilution) was still not the correct way to handle things. If they had of actually managed to perform in line with their benchmark (not even beat it), they would have seen most of the options exercised. That should have been the chance for them to lock in future guaranteed management fee income in the closed end structure.
A warm welcome to City Of London Investment Management becoming a substantial holder in Oct 2019.
Recent Graduates
PAI – Improved performance, strong communications on future dividends. The premium has got too rich in mid 2018 so now my holding is near zero.
REF & TBR- Credit to management of these companies for releasing significant franking credits from cash / gold sales respectively to shareholders. Reportedly the sudden announcements came after many months of deliberation.
(Note I finally sold all my TBR in the back half of 2019 as mentioned in the discussion thread. REF turned out ok enough in the end from dividends paid out and eventually winding up and de-listing)
OMN Update Sep 30 – https://www.smh.com.au/business/companies/lowy-s-onemarket-start-up-to-be-wound-up-20190930-p52w6d.html
