Monthly Listed Investment Trust Report – April 2021

This story features QUALITAS REAL ESTATE INCOME FUND, and other companies. For more info SHARE ANALYSIS: QRI

Download related file: Monthly-LMI-Update_April-2021

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market.

Note: For comprehensive comparative data tables for LICs and ETFs please see attached.

By Radek Zeleny, analyst Independent Investment Research

Qualitas Real Estate Income Fund ((QRI)) Raises $54m

On 1 April, QRI announced the successful completion of a $54m placement to a select group of existing shareholders and new wholesale investors. As part of the placement, QRI issued 33.75m new fully paid ordinary shares at $1.60 per share, representing a 0.94% discount to the 10 day VWAP leading into the announcement.

The new shares are within the 15% placement capacity and therefore did not require shareholder approval. With the Trust’s existing capital fully deployed, the funds raised will be used to undertake further Commercial Real Estate (CRE) loans that are in line with the Trust’s investment strategy. The capital is expected to take 2-3 months to deploy.

The Manager will seek to take opportunities to continue to grow the size of the Trust to: (i) improve portfolio diversification; (ii) increase CRE debt market share; (iii) achieve operating cost efficiencies (iv) increase diversity of unit holders; and (v) increase liquidity.

Bailador Technology Investments ((BTI)) Raises $20m

BTI announced a capital raising of $20m from a share placement to institutional investors. The capital was raised through the issue of new shares at $1.37 per share, which represented a discount of 4.9% to the share price leading into the announcement.

The company also intends to undertake a Share Purchase Plan (SPP) to give existing shareholders the opportunity to acquire additional shares at the same price at as the institutional placement.

The SPP offer is expected to close on 18 May 2021. The capital raised will be used to capitalise on a pipeline of investments that the Manager believes represents very good value for investors.

KKR Credit Income Fund ((KKC)) Implements Structural Changes

On 19 April, KKC announced a $20m buy-back program over the next 12-months in an attempt to address the discount to NAV that the Trust continues to trade at. Further to this, KKC are increasing the frequency of the distribution from quarterly to monthly, with the first monthly distribution expected to be paid in August 2021.

Earlier in the year, KKC announced that the Trust’s holding of the Global Credit Opportunities Fund (GCOF) was being moved into a separately managed account (SMA) to reduce costs and enhance flexibility and liquidity in the structure.

The transfer of assets was done in two phases – 80% of GCOF assets were transferred across to the SMA in January with the remaining 20%of assets transferred in mid-April. The transfer of assets means that the Trust will no longer be invested in the GCOF fund but the SMA will be managed by the same investment team and invest using the same strategy alongside the GCOF fund.

NCC Completes $23m Convertible Notes Offer

Naos Emerging Opportunities Company Limited ((NCC)) raised $23m through the issue of listed, redeemable, unsecured, unsubordinated, convertible notes (the Notes). The Notes were issued on 15 April 2021 and commenced trading on the ASX on 20 April 2021 under the code NCCGA.

The Notes have a face value of $100 and will pay a fixed coupon of 4.50% p.a. from the issue date until the first step up date (30 September 2026). From the first step up date, the coupon will increase to 5.50% p.a. until the second step up date (30 September 2027). The coupon will increase to 6.50% p.a. from this date until the Maturity Date.

Coupons will be paid semi-annually on 31 March and 30 September. Unless converted or redeemed earlier, or purchased by NCC and cancelled, the Notes will be redeemed on the Maturity Date of 30 September 2028.

Noteholders may elect to convert their holding by issuing a conversion notice at any time during the conversion period (from the issue date of the Notes until the first step up date). If a conversion notice is received and accepted, the Notes will convert into NCC ordinary shares based on the conversion price ($1.15 per share subject to adjustment for certain dilutionary and other capital transactions by NCC).

WAM Announces New Strategic Value Strategy

Wilson Asset Management ((WAM)) is seeking to raise capital and list the WAM Strategic Value strategy. The strategy will focus on identifying on capitalising on share price discounts to underlying asset values of listed companies, primarily LICs, LITs and other closed-ended investment vehicles.

This is an area that WAM has historically been very active in. A Prospectus is expected to be released in early May with an IPO expected in the coming months.

FPC Raises $5.26m in SPP Fat Prophets Global Contrarian Fund Limited ((FPC)) raised $5.26m in April through the completion of a Share Purchase Plan (SPP).4.14m shares were issued at $1.27 per share (five-day VWAP prior to the issue).

MA1 Releases Details of Restructure to an Active ETF

On 1 April, Monash Absolute Investment Company Limited ((MA1)) provided a Notice of General Meeting and the Explanatory Memorandum for the restructure of the company to an Active ETF. The independent expert appointed by the Board for the proposed transaction, concluded that the proposed transaction is fair and reasonable.

A General Meeting will be held on 10 April to approve the restructure. The Active ETF will utilise the Single Unit Structure, which will allow for unitholders to buy and sell units either on-market or off-market.

The key reason the company is seeking to undergo the restructure is to remove the discount to NTA that the company has traded at, which has been a cause of frustration for both the Manager and shareholders.

Through the new structure, the Manager seeks to provide a minimum distribution of 6% p.a, payable quarterly, lower the management fee to 1.25% and increase the hurdle on the performance fee to RBA Cash Rate + 5%.

Independent Investment Research, “IIR”, is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPOs. IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

INDEPENDENCE OF RESEARCH ANALYSTS

Research analysts are not directly supervised by personnel from other areas of the Firm whose interests or functions may conflict with those of the research analysts. The evaluation and appraisal of research analysts for purposes of career advancement, remuneration and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Research analysts do not report to, and are not supervised by, any sales personnel nor do they have dealings with Sales personnel

Evaluation and remuneration: The remuneration of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients.

INDEPENDENCE – ACTIVITIES OF ANALYSTS

IIR restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for corporate mandates on behalf of a Broker and are not permitted to prepare or review materials for those pitches. Pitch materials by investor clients may not contain the promise of research coverage by IIR.

No promotion of issuers’ transactions: Research analysts may not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer. For this reason, analysts are not permitted to attend “road show” presentations by issuers that are corporate clients of the Firm relating to offerings of securities or any other investment banking transaction from that our clients may undertake from time to time. Analysts may, however, observe road shows remotely, without asking questions, by video link or telephone in order to help ensure that they have access to the same information as their investor clients.

Widely-attended conferences: Analysts are permitted to attend and speak at widely-attended conferences at which our firm has been invited to present our views. These widely-attended conferences may include investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by Firm sales personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations. Analysts may also carry out preliminary due diligence and vetting of issuers that may be prospective research clients of ours.

INDUCEMENTS AND INAPPROPRIATE INFLUENCES

IIR prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within the Firm including management, which might be perceived to result in inappropriate influence on analysts’ views.

Remuneration and other benefits: IIR procedures prohibit analysts from accepting any remuneration or other benefit from an issuer or any other party in respect of the publication of research and from offering or accepting any inducement (including the selective disclosure by an issuer of material information not generally available) for the publication of favourable research. These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm’s general policies on entertainment, gifts and corporate hospitality.

DISCLAIMER

This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (“IIR”) (ABN 11 152 172 079), an corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report (the “Report”) and will receive fees for its preparation. Each company specified in the Report (the “Participants”) has provided IIR with information about its current activities. While the information contained in this publication has been prepared with all reasonable care from sources that IIR believes are reliable, no responsibility or liability is accepted by IIR for any errors, omissions or misstatements however caused. In the event that updated or additional information is issued by the “Participants”, subsequent to this publication, IIR is under no obligation to provide further research unless commissioned to do so. Any opinions, forecasts or recommendations reflects the judgment and assumptions of IIR as at the date of publication and may change without notice. IIR and each Participant in the Report, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any opinion contained in the Report is unsolicited general information only. Neither IIR nor the Participants are aware that any recipient intends to rely on this Report or of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether opinions or recommendations (if any) contained in this publication are appropriate to their investment objectives, financial situation or particular needs before acting on such opinions or recommendations. This report is intended for the residents of Australia. It is not intended for any person(s) who is resident of any other country. This document does not constitute an offer of services in jurisdictions where IIR or its affiliates do not have the necessary licenses. IIR and/or the Participant, their officers, employees or its related bodies corporate may, from time to time hold positions in any securities included in this Report and may buy or sell such securities or engage in other transactions involving such securities. IIR and the Participant, their directors and associates declare that from time to time they may hold interests in and/or earn brokerage, fees or other benefits from the securities mentioned in this publication.

IIR, its officers, employees and its related bodies corporate have not and will not receive, whether directly or indirectly, any commission, fee, benefit or advantage, whether pecuniary or otherwise in connection with making any statements and/or recommendation (if any), contained in this Report. IIR discloses that from time to time it or its officers, employees and related bodies corporate may have an interest in the securities, directly or indirectly, which are the subject of these statements and/or recommendations (if any) and may buy or sell securities in the companies mentioned in this publication; may affect transactions which may not be consistent with the statements and/or recommendations (if any) in this publication; may have directorships in the companies mentioned in this publication; and/or may perform paid services for the companies that are the subject of such statements and/or recommendations (if any). However, under no circumstances has IIR been influenced, either directly or indirectly, in making any statements and/or recommendations (if any) contained in this Report. The information contained in this publication must be read in conjunction with the Legal Notice that can be located at http://www.independentresearch.com.au/Public/Disclaimer.aspx.

Content included in this article is not by association the view of FNArena (see our disclaimer).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms