M&G High Income Share Discussion Threads

[coolen] 10/10/2013 20:27

Thanks for that. Link worked fine.

[coolen] 09/10/2013 22:04

What are most likely factors to push the nav back to positive .....equity markets generally or higher bond prices ?

[aleman] 09/10/2013 21:35

4.12p under.

(Link won't post)

[aleman] 09/10/2013 21:09

Yes. About 3p underwater, I think.

[coolen] 09/10/2013 21:02

Are the capital shares are back to negative nav ?

[yieldsearch] 21/5/2013 23:12

done my maths based on the very good fool.co.uk link reported above. Am i rigth Seems that capital shares are currently trading well above any fundamental option value?
also why such a bad bid ask on these?

[timbo003] 07/5/2013 18:46

>>>coolen
Yes, that's a good point, in the past I have held a number of split caps until wind up/rollover, but I have never held a class of share at wind up which has no intrisic value, so I have no precedent to refer back to on that, but yes, the cap shareholders will presumably get a vote regarding rollover options and they are not going to vote for a rollover unless there is something in it for them. A good question for the AGM, which I intend to go to this year. I hold the caps and units BTW

>>>Aleman,
Agreed, the caps should now be showing a bit of NAV, someone at M&G needs to look at the speadsheet which churns out these daily NAVs.

[aleman] 07/5/2013 18:04

Here's last time the capital shares were in the money, with no separate ex-income NAV:

18 June 2008
M&G High Income Investment Trust P.L.C.


The Board of M&G High Income Investment Trust P.L.C. announce that the net asset value at 12:00 noon today was £70.3 million.
Income Shares 75.32p



Capital Shares 0.43p



Zero Dividend Preference Shares 55.52p



Income & Growth Units 75.75p



Package Units 131.27p


The net asset values have been calculated on a cum-income basis, with dividends payable deducted from net assets on the ex-dividend date. Financial assets are valued on a mid-market price basis.


END

[coolen] 06/5/2013 22:40

Timbo, many thanks. Especially for the TMF link, which I shall go away and study.

I admit to holding a slug of both the incs and caps.

My (speculative) angle is:

If the fund performs sufficiently well by 2017 to cover the prior charges, ie. zeros and incs, and plans a rollover. Even if the caps have no instrisic value in 2017, presumably they would get a [class ?] vote in a rollover and thus gain a further option-value run ?

[timbo003] 06/5/2013 08:15

coolen

The quoted NAVs for all classes of M&G shares, except for the package units (MGHP), are fairly irrelevant until we get close to wind up (March 2017).

I think the best way to look at it is to consider the Zeros to be worth their redemption value at all times (i.e. 122.83p/share) and then consider what the other shares would be worth now, if the company was wound up now and the zeros were paid out in full.

If you do that using Fridays NAV value for the package units
NAV (including income): 157.44p
NAV (excluding income): 155.31p



Then:

MGHI (income shares) would be entitled to 32.48p (plus 2.13p income)/share.
Therefore real NAV (now) = 34.61p/share

MGHU (one income share plus one capital share) would be entitled to 32.48p (plus 2.13p income)/share
Therefore real NAV (now) = 34.61p/share

MGHC (Capital shares) would be entitled to nothing and it would require growth of 37.52p in the value of the package units in order to qualify for any payout
Therefore real NAV (now) = -37.52p/share

Obviously there are option values you can add to the value of both MGHC and MGHU (and indeed MGHI), but you cannot work those out from the published NAVs, you need to apply appropriate mathematical models, such as Black-Scholes, to obtain fair value for that element, as I have tried to do here:

[coolen] 05/5/2013 23:05

Thanks Aleman. I'm happy to go with your figure.

That small negative is a big improvement from previous (I think).

Why oh why can they not do the sums for us ?

With thanks, again.

[aleman] 05/5/2013 22:56

I make it -0.78p. WHere did you get -6.48p from? It's reported as 0.00p because the C shareholders do not have to top up the income shareholders to 70p (and maybe even prefs as well if things got bad) on winding up. If they did have to, a net liability would get reported.

[coolen] 05/5/2013 22:49

So the NAV for the Capital Shares is nil.

I reckon it to be negative, at -6.48p

I must be wrong: M&G have carefully calculated it to 2 decimal places, viz. "0.00p". They would not have made a mistake, shurely ?

[coolen] 15/4/2013 20:31

Yes, 3 separate Class meetings would be needed. And each would need to approve, possibly by 75%. A tough one !

The Cap holders could be given Warrants: better than nothing.

As to the Prefs and Incomes, it would depend whether the new Rollover Trust might stand at a premium. If Yes, then maybe enough holders would opt for a share option (rollover) instead of cash (liquidation).

To get the premium, the trust may need to move to a new stable. Miton (per previous post) runs Diverse Income Trust which stands at a 2% premium.

But, in 2017, will punters still pay a premium for income, I wonder ?

[aleman] 15/4/2013 19:22

THe package units (all 3 classes combined) trade at a 7.5% discount, so I imagine that makes it a bit more likely to wind up. Negotiations to get a deal to extend between 3 classes of shareholders could be tricky. I currently think the prefs are a bit pricey (15% premium) and income shares a bit cheap (31% discount) so I'd expect the former to want an extension and the latter to want to wind up. The latter would make a 45% instant gain if they wound up at current NAV. Obviously dsicount/premium will come together over time but they will still be pulling different ways at decision time. How would you square the opposing views to extend? Who would outvote whom?

[coolen] 15/4/2013 16:18

Given the present premiums for some income funds (I think of the Gervaise Williams camp), can you not see a rollover scheme coming ? I reckon Miton would love the opportunity to secure the portfolio.

[aleman] 15/4/2013 15:44

I don't know what happens there. I've not been through a winding up before. Different classes of shareholders will have different aims, and so will the fund manager. I would imagine it could be interesting.

[coolen] 15/4/2013 15:34

Thanks again.

If we fast-forward to 2017, what do think the scenarios are (given that fund managers seem hesistant to slaughter cash cows) ?