City Of London Investment Share Discussion Threads

[cockerhoop] 09/6/2020 14:14

If the Hardman Eps f/c's are anywhere near close (so dependent on FUM to be of much worth imo) the dividends f/c are light if as CLIG suggested today 1.2x divi cover is maintained as a guide.

[speedsgh] 09/6/2020 12:17

Encouraging estimates in the Hardman note on the dividend...

2020E - 28.0p
2021E - 30.0p
2022E - 33.0p

[stun12] 09/6/2020 12:05

frazboy, the Hardman research note linked above makes this point. There is a 12-month lock-up so no improvement in liquidity until at least then, regrettably.

[frazboy] 09/6/2020 11:26

I guess the key benefit to both parties is diversification? I'm not convinced it'll benefit liquidity much as, presumably, most of the new shares will end up with Karpus, himself.

[cockerhoop] 09/6/2020 09:44

Gre,

The Karpus founder is retiring, releasing his bonus ($15.4m last year) to profits. Therefore should be earnings enhancing.



Hardman very bullish with EPS upgrades of approx 15% for 2021 47.1p & 2022 51.8p

[gre] 09/6/2020 08:56

I'm a long term holder and was big fan of CLIG under the leadership of Barry Olliff. However I'm not sure about the logic of this deal. CLIG's admin costs are roughly 64% of net fee income and the company makes a healthy profit . In the case of Karpus admin costs (including VERY generous staff bonus payments)exceed net fee income. As a result Karpus has made an operating loss in the last two years. Unless Mr Karpus accounts for most of the bonus payments and he is retiring then what's in it for us?

I'd be interested in other people's thoughts?

[masurenguy] 09/6/2020 08:01

Looks like an interesting diversification presumably triggered by George Karpus seeking to retire. Should enhance their growth potential in the US. Good to see no indication of any leaks on this deal.

Dividend policy remains as stated.

For the financial year to 30 June 2019, the Board declared dividends of 40.5 pence per Share (calculated based on the weighted average number of Shares in issue for the year). This included a special dividend of 13.5 pence per Share. The Board of CLIG attaches great importance to providing Shareholders with a stable flow of dividends, balanced by a policy of prudential capital management. To this end, the Board has for some years adhered to a dividend cover ratio of 1.2 times profit after taxation attributable to Shareholders based on rolling 5-year periods, using accumulated retained earnings to address any short-term profit shortfalls that derive from volatility in the markets in which CLIM invests. The Board of CLIG intends to continue with the same dividend policy on Completion of the Merger.

[robsy2] 09/6/2020 07:57

OTS divis,I saw this;


..............The KMI Stockholders will further agree to waive their entitlement to receive: (i) the final dividend declared on the Shares in respect of the financial period to 30 June 2020 in respect of their entire holding of Shares; and (ii) the interim and final dividend declared on the Shares for the financial period to 30 June 2021 in respect of such percentage of their holding of Shares which represents the number of days in that financial period for which they do not hold Shares, divided by 365.

....so the CLIG year end is 30.06.20,and the final divi expected is circa 18p (if same as 2019 final),logically,if the new shareholders are not getting it( see text of agreement) then that suggests the old shareholders like us, are.
That means final divi will be paid but the amount is not clear. With FUM at 5bUSD as of now , i think 18p is do-able.

[creme de menthe] 09/6/2020 07:32

Glad this deal has been announced. Hopefully they will comment on the dividend also which has clearly been holding the share price back.

[montyhedge] 09/6/2020 07:16

Great deal, it looks like.

[skinny] 09/6/2020 07:03

.

City of London Investment Group PLC, today announces that it has entered into a Merger Agreement to acquire the entire issued share capital of Karpus Management Inc., a US-based investment management business, on a debt free basis, to be satisfied through the issue of up to 24,118,400 new shares in the capital of the Company which, based on the closing price of the Shares on the date of the Merger Agreement of 325 pence per Share, equates to £78.4 million. In addition, each KMI Stockholder will be entitled to a cash payment pro rata to their interest in KMI of the amount by which the net working capital of KMI at Completion exceeds US$550,000 up to a maximum amount in aggregate of US$550,000.

Summary Rationale

The Company has, over the years, looked at a wide range of businesses to identify opportunities to spread risk, create economies of scale, and provide greater security and career opportunities for employees. On each occasion when management looked in depth at a business, they decided for cultural or structural reasons, or as a result of conflicts of interest, not to proceed.

In deciding to proceed with the Merger with KMI, the Directors believe that it will deliver the following key benefits:

· the Directors believe that the Merger with KMI is highly complementary and represents an opportunity for significant diversification, which is in line with the Group's strategic plan;

· the Directors believe that that the addition of KMI will reinforce the Group's presence in the US where it is already very well established;

· the Merger has the potential to be earnings enhancing for the first full financial year following Completion;

· the Merger is expected to establish CLIG in a new but related segment with immediate scale. KMI invests predominately in closed-end funds ("CEFs"), which relates to CLIG's core market, and has delivered strong investment performance for its clients;

· the Directors believe that the Merger will also diversify CLIG from the potentially more volatile Emerging Market segment of asset management, therefore reducing earnings volatility for the Enlarged Group;

· the clients of KMI are largely drawn from the wealth management sector and the Directors believe that earnings of the wealth management sector can be less volatile than other parts of the asset management sector and can offer long-term stable client relationships;

· the founder and management team of KMI will become significant stakeholders in the Enlarged Group as the Merger is a share-based transaction;

· the Directors believe that in the medium term onwards, the Merger has the potential to improve liquidity in the Shares, to provide employees with additional career opportunities and to develop the Company's strategy and ambitions to compete more extensively and in new markets.

Impact of Covid-19

The Board has considered carefully the impact of the COVID-19 pandemic and has concluded that the strategic rationale for the Merger remains sound and indeed may have been enhanced given the strong strategic fit of the two businesses, the diversification of the revenue base and risk mitigation which the Directors strongly believe will result from the Merger. Furthermore, the Board is confident that both businesses are well set to take advantage of opportunities when the situation has stabilised.

About Karpus Management Inc.

KMI is a US SEC-registered investment management business, with its principal place of business located in Pittsford, New York, that uses CEFs amongst other securities as a means to gain exposure for its client base comprising US high net worth clients and corporate accounts. KMI was founded by George Karpus in 1986, growing the business to an estimated US$3.4 billion in funds under management as at 31 May 2020. George Karpus is currently chairman of the board and chief investment strategist of KMI. Prior to founding KMI, George Karpus held key positions at two brokerage firms, a regional bank and another investment advisory firm. George Karpus is resident in, and a citizen of, the United States. George Karpus is the largest shareholder with approximately 66.1 per cent. of KMI's equity, with 13.3 per cent. owned by George Karpus' family members, 10.0 per cent. by a charitable foundation and a university, and the remainder by management and one former executive.

As at 31 March 2020, KMI managed US$3.2 billion in funds under management for 2,273 client accounts. Most client assets are managed in balanced portfolios, with over 50 per cent. invested in CEF and CEF-preferred securities.

[rcturner2] 04/6/2020 09:19

Thanks skinny.

[frazboy] 04/6/2020 09:18

320p on the bid, still. share price has totally ignored the recent rally. And you can buy as much as you like. Definitely still an overhang. I'm trying to determine the risks (another crash - but you can index short to protect yourself), fund outflows (?), poor sentiment towards EM (and China) due to the pandemic?

Final dividend should probably be safe given the rally.

[skinny] 04/6/2020 07:35

That's a direct lift from their website.

Edit :- monthly chart added for the period.

[rcturner2] 04/6/2020 07:34

Skinny, nice chart, are you able to put the share price on top of it?

[masurenguy] 03/6/2020 13:21

FUM in May @$5bn was 3.6% up on April and 13.5% up on March. The last time FUM was at $5bn was 18 months ago, in January 2019, when the shareprice was circa 380p.

[stun12] 03/6/2020 13:11

FUM as at the end of May was just shy of US$5bn. The high (Dec-19) was a shade over US$6bn with the share price at 440p at the end of the month. Though it's clearly not a linear relationship, FUM down 17% and CLIG down 28% doesn't look right to me. Gradually buying, though I'm not sure if I trust the FTSE up here...

[masurenguy] 27/5/2020 13:55

Increased broker forecasts could reflect FUM being up by 9.7% in April, compared to March.

[shanklin] 27/5/2020 12:06

Stockopedia is showing quite significant increases over the last couple of months in consensus broker forecasts for 2020 and 2021. Is that accurate please?

Obviously only in terms of the forecasts not whether they have any relationship to the numbers we will see in due course.

[my retirement fund] 20/5/2020 21:58

Divi will be slashed next year imo

[otemple3] 20/5/2020 21:50

Unless they sell the rest....

[masurenguy] 20/5/2020 18:27

Blackrock have disposed of 1,181,950 shares and reduced their holding from 9.9% to 5.4%. This probably held the price back and now the overhang has cleared the shareprice could revive.