Investing Recommendation: From May 2014 to Feb 2019, ACQ's NTA outperformed the Emerging Companies Index by 3.8% annualised which is substantial. Meanwhile its TSR (i.e. share price) has lagged. While outperformance continues, the higher end of its recent discount ranges are worthwhile investing opportunities.
Trading Recommendation: Trade when discount is at least 2% greater than recent (1 to 6 months) average. Minimum Pre-tax discount advised is 7%.
28 Feb 2019 Discount/Premium: Pre-tax -13.25% Post-tax -9.67%
Actual Performance:
In its Feb 2019 monthly report ACQ reports the following performance:
Using Excel's CAGR formula I've computed the actual ACQ Inception to Date (ITD) performance using the IPO NTA after offer costs ($0.9703), 28 Feb 2019 Pre-tax NTA ($1.254), Dividends (11.5 cents), Franking (4.93 cents) and Options at expiry (0 cents).
- ACQ's published ITD of 8.46% is before tax but ignores franking credits too. The 8.03% figure is more accurate and comparable. It's good to see its own figure isn't too far from the mark.
Actual TSR Comparison with relevant benchmark ETF:
Using Sharesight and a performance report period of 1 May 2014 to 28 Feb 2019 you can accurately determine like-for-like Total Shareholder Return annualised performance between investing in the ACQ IPO and investing in the closest index fund to the benchmark.
- ACQ has an annualised TSR of 4.93% using its IPO price of $1
- Using its first day closing price of $0.93 the TSR is 6.03%
- This example shows the ripoff most LIC IPOs used to be. You paid $1 for 97 cents of NTA and the options usually expired worthless. Yet, because most active funds underperform, LMIs tend to quickly trade at proportionate discounts to NTA based on underperformance and total costs. LMIs should only be bought after listing and when performance and discount ranges are clearer. ACQ has typically traded at a discount of 5 to 15% and the larger end of discount ranges have been worthwhile investing opportunities.
- VSO has an annualised TSR of 8.01%
- XEC (Emerging Companies Index) has an annualised TSR of 4.65%
- VAS has an annualised TSR of 7.15%
Performance Impact on NTA Discount/Premium:
ACQ's 8.03% NTA CAGR is significantly higher than XEC's 4.65% and almost identical to VSO's 8.01%. Meanwhile its TSR is lagging somewhat at 4.93% (IPO) or 6.03% (1st trading day).
I expect that, while it continues to outperform, the higher end of its discount ranges will be good buying opportunities. However, keep an eye on the comparative VAS return as the opportunity cost of investing in a market sub-index is investing in the major low-cost passive index funds.
Management and Performance Fees:
TBA...
Management Fee
per annum (inc GST)
Performance Fee
