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Tuesday 12 March 2019

The naked truth about Perpetual Equity Investment Company Limited (PIC)


Investing Recommendation: The high fully-franked dividend is often chased and also keeps the discount from getting too much above 5%. The NTA performance lags VAS by 2% a year. I would not invest long-term.

Trading Recommendation: Short term only if discount is at least 3% greater than recent (1 to 6 months) average. Minimum discount advised is 5%

Actual Performance:

In its Feb 2019 monthly report PIC reports this performance comparison with an Inception To Date figure of 7.9%:



Using Excel's CAGR formula I've computed the actual Inception to Date (ITD) performance using the IPO NTA after offer costs ($0.973), 28 Feb 2019 Pre-tax NTA ($1.102), Dividends (14.3 cents), Franking (6.12 cents) and Option value at expiry (0 cents).



Actual Compound Annual Growth Rate for Pre-tax NTA: 7.27% 

- PIC's NTA performance includes dilution due to capital raisings at discounts


Actual TSR Comparison with relevant benchmark ETF:

Using Sharesight and a performance report period of 18 Dec 2014 to 28 Feb 2019 you can accurately determine like-for-like Total Shareholder Return annualised performance between investing in the PIC IPO and investing in the closest index fund to the benchmark.

- PIC has an annualised TSR of 5.64%

- VAS has an annualised TSR of 9.3%


Performance Impact on NTA Discount/Premium:

The difference between the VAS TSR of 9.3% and PIC's 7.27% NTA CAGR has driven the discount to around 5% and the PIC TSR to be 5.64%.

It's likely the discount is less than it would normally be due to PIC high level of fully-franked dividends which is driven by the stocks it invests in.