|Zero Preference Growth Trust
||GROWTH SHS 10P
||EPS - Basic
||Market Cap (m)
|Equity Investment Instruments
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Agree with your point, but currently, and surprisingly, out of the top 6 investments only REOZ has a share price significantly less than its NAV. I'd love to see that one catch up a bit, but it hasn't in over a year !
OT, what do you think of exchange traded funds to build a core portfolio - in a SIPP say ? Seems like a good way to manage asset allocation. Can't find a thread on ETFs.
|glynnef: Seriously though, I have been looking at the top 6 holdings that make up 50% of total assets. They are accruing NAV at between 7.75% and 9%, averaging about 8.25%. The mid prices of these zeros are tracking the NAV currently, apart from REOZ which is at a 9% discount. all 6 have a -ve hurdle rate to return the current share price. Also, PAGIT Securities zero is at a discount to NAV and matures in November, so the repayment should boost ZPG NAV.
So I think the NAV of ZPG will improve a bit from the current 1.8p after paying out the zeros in full. 4p seems about right. I mostly hold ZPGU anyway.
Slightly OT, JZ Equity partners issued a NAV statement last week. Why? It is the only one I have ever seen. A bit odd as most (90%+) of the portfolio is unquoted and is only revalued every 6 months. The NAV statement said the value of unquoted investments was as at 31st March. Bizarre !
Agreed, but with the CULS being classed as equity, the Z's are now ahead of that class.
I prefer to watch the Ord share price as my guide.
Back from St Andrews with three points in the bag.
The list that you first printed missed the holdings of Royal London(6th largest holding), JZ Equity(7th largest holding), and REO(10th largest holding)
Putting these holdings to one side, perhaps you would give me your ideas on how the managers will get the Growth shares to a 7p share price given the timeframe, and the current portfolio.
Information to hand, so here goes:
Life of ZPG - 19.4 months
Current net assets - £10.9m
Cost of Zero's redemption - £10.66m
To achieve a 7p payout for the Growth shares, net assets would have to rise to £13.06m by wind-up.
Adding on £100K for the expected uplift in EXSZ, I am starting with a net asset position of £11m. In order to reach £13.06m, assets will have to grow by a compound rate of 10.5% for the rest of the fund's life.
After EXSZ, the next 9 holdings by size, account for 50% of the current portfolio. The average GRY on these holdings is in the order of 7%. The only stock in the top 25 holdings capable of any meaningful capital growth is REOA, which accounts for only 2.1% of the portfolio.
Excluding EXSZ, a further 28.5% of the portfolio reaches it's wind-up within the next 14 months.
Given that there has been little movement in the portfolio over a period of time, I think it can be safely assumed that this is likely to continue, other than for natural redemptions.
With available yields generally in the 6-7.5% range, reinvestments are not going to achieve the necessary returns to warrant a 7p Growth share price.
So, the big question is, how can the managers possibly achieve a return of 10.5%, when yields of only 7.5% are available.
I appreciate that the use of gearing can add some value, but do not expect this to contribute more than 0.5% to the overall asset value.
As I mentioned previously, I have a decent sized holding in the Units, and would love to be proven wrong, but just can't see how the Growth shares can reach more than 5p.
Perhaps you would give me your thoughts on how you think the managers can perform that well.
the links in the header do not work any more. Need to point to premierfunds.co.uk
ZPG NAV is being supported partly by the rise in EXSZ. 4% in the last month, and it is at least 10% of the portfolio. If ESSZ holds its NAV between now and the end of November, there should be another boost to ZPG NAV as the EXSZ discount to its NAV, about 5%, narrows and is eliminated on its repayment. Only about 0.25p per ZPG share I calculate, but it all helps. Predicting terminal NAV of ZPG, and hence ZPGU, will be easier after November.
I hold ZPGZ and ZPGU.
|glynnef: THE ZERO PREFERENCE GROWTH TRUST PLC
The Company announces that the bid price Net Asset Values, including current
period revenue, at 19 September 2006 were:
per Ordinary unit 67.45p
per Growth share 7.46p
per Zero Dividend Preference share 59.99p
Gross assets less current liabilities £16.02m
As I see it, the company now has sufficient assets to repay the ZDP holders in full, with about £100K to spare. They need to add about £1.2M to the £16M portfolio over the next 22 months to cover the current share price of ZPG. Should be easily achieved. Will be clearer after repayment of the Exeter Securities zero (30Nov06) and Investors Capital zero (28Feb07) are repaid, as they are about 19% of the portfolio.
I was looking at the chart and also considering the divergence between ZPGs NAV and share price.
What is your conclusion based on the ZPG portfolio?
have a good evening|
Not an insider, just somebody that didn't do his homework on the first split capital investment trust he bought because he relied on official information(FT, splitsonline etc), and learnt a valuable lesson.
In analysing that modest loss, I devised a way of truly valuing each component of the split capital structure., understanding the effects of prior charges, and therein the effects of movements in the portfolio had on each share price.
The JDT thread is where all of the information sharing took place, and I am slightly embarrassed to say, as I am a modest man, that valuation methodology became known as the "tiltonboy method"
Of course I get things wrong from time to time, but it tended to be through missing opportunities, rather than making losses. I called this one wrong, when the fund "rolled over", as I did not envisage the market rising so markedly, and given the onerous terms of the ZDP entitlements, and the steep management charges that would be borne by the Growth shareholders.
Hope that helps.
If you have any further questions on this or anything else, please feel free to ask.
As promised a little more detail:
Of the 25 top holdings representing 95.4% of the portfolio:
11.5% winds-up in the next 3 months.
50.7% of the underlying holdings trade at a premium to NAV
30.8% of the underlying holdings trade at a discount to NAV (all uncovered)
The balance of 7% is made up of the holding in Defined Capital Return, plus 17 residual holdings.
In some cases share prices are at a substantial premium to NAV, i.e JZ Equity 173 v 160.
For Growth Share holders to receive anything, Net assets need to rise from 9.8m to 10.66m, which, barring a big fall in the market, should be achievable. However, this is where life becomes difficult. The growth needed to repay various asset classes is known as the "hurdle rate". In trying to calculate possible future values for the Growth Shares, have a look at the hurdles ahead of them:
1)Management Fee - 0.4% per annum(if growth in assets is above 5.5% per annum)
2)Secretarial and Administration Fees - £44k per annum (0.3%)
3)Management Performance Fee - 20% of the growth in assets over 8.25% per annum
4)Management Terminal Fee - 12% of the final NAV distributable to Growth Share holders.
To achieve the current share price at wind-up in three years time the assets of the company would have to grow by 21%, before deducting charges. When you consider 1 & 2 above add a considerable amount to the required GRY, 3 & 4 will take a huge chunk out of any further growth.
Hope that all makes sense.
Zero Preference Growth Trust share price data is direct from the London Stock Exchange