Investing Recommendation: From Jan 2015 to Feb 2019, TOPs NTA outperformed VAS by 2.72% annualised. Meanwhile its TSR has been much lower as at inception it was on a premium over 20%. Unless NTA underperformance takes hold, the higher end of its recent discount ranges are worthwhile trading opportunities but the fees make this LMI uninvestible long-term.
Trading Recommendation: Trade when discount is at least 3% greater than recent (1 to 6 months) average. Minimum Pre-tax discount advised is 12%.
28 Feb 2019 Discount/Premium: Pre-tax -12.75% Post-tax -Undisclosed
(Note: TOP may be reporting Pre-tax NTA as Post-tax. If so, it doesn't report Post-tax NTA)
Actual Performance:
In its March 2019 Chairman's Update TOP reports the following performance graph but no numbers to check:
Using Excel's CAGR formula I've computed the actual TOP Inception to Date (ITD) performance using the post-restructure NTA at 31 Jan 2014 ($0.475), 28 Feb 2019 Pre-tax NTA ($0.745 - TOP quotes $0.785 but this seems as if it may not include tax on realised gains), Dividends (4.4 cents), Franking (1.9 cents) and Options at expiry (0 cents).
- This is an impressive ITD figure especially given the outrageous fees but the query is whether there will ever be periods of such rapid NTA gains again.
- The true Pre-tax figure after realised gains ($0.745 or $0.785) will affect the result. I've used the lower figure till this is clarified.
Actual TSR Comparison with relevant benchmark ETF:
Using Sharesight and a performance report period of 7 Jan 2015 to 28 Feb 2019 you can accurately determine like-for-like Total Shareholder Return annualised performance between investing in the TOP IPO and investing in the closest index fund to the benchmark.
- TOP has an annualised TSR of 3.39% using its 31 Jan 2014 share price
- VSO has an annualised TSR of 8.61%
- TOP's ITD TSR has been massively reduced by the starting price of $0.585 which is a 23% premium to its Starting NTA.
Performance Impact on NTA Discount/Premium:
TOP has an NTA CAGR of 11.03% compared to 8.31% for VAS. Meanwhile, TOP's ITD TSR has only been 3.39%. Since inception, with more sensible entry prices, TOP TSR has been much closer to NTA performance.
I expect that, if it continues to at least match VAS, the higher end of its discount ranges will be good buying opportunities to trade. But the outrageous fees mean you should limit your holding period to short term trades.
Management and Performance Fees:
Management Fee
1.65% per annum (inc GST) of gross assets (not net assets!) calculated half yearly
Performance Fee
20% of the total (not excess to a benchmark!) increase in net asset value net of base fee for the year. No high water mark applies. Calculated annually.
These fees are among the most rapacious of any Australian fund, listed or unlisted. Thus, I would strongly advise against holding TOP or TEK for more than a 6 month period.
