One last post before Christmas. I have discussed APW/MPS extensively in previous posts and I expect to provide a more detailed update regarding the NTA in the new year - the NTA ought to be slowly creeping up thanks to the buy-back, St Kilda Road recapitalisation and the APN Regional Property Fund to name a few factors.
For today, let's focus on the distribution announcement:
1. A total distribution of 0.15c will be paid, record date 31 December.
The distribution is made up of 0.099c plus a special distribution of 0.051c. So a ~0.1c quarterly distribution equates to an annualised rate of 0.4c. Some people were expecting 1c. I thought this was un-realistic: a chunk of the underlying investments aren't paying distributions, so expecting a total distribution of ~$5m p.a. just isn't feasible at this point. If management get on with re-working the portfolio then much higher levels of distribution are possible in the future.
The payment date is an un-necessarily distant ~21 March.
2. A Dividend Reinvestment Plan (DRP) has been activated.
This is bonkers. A DRP means new units will be issued at a 3% discount to the unit price. The unit price is already a massive discount to NTA. So the DRP is simply another capital raising at a massive discount to NTA. To make things worse, APW has no debt and has excess cash: it simply does not need the cash.
Why management feels the need to conduct a DRP is beyond me. Why do they need to issue more scrip when at the same time they are buying-back stock? One reason might be that George Wang/AIMS want to increase their % of shareholding on the sly. The other reason might be that these guys are simply incompetent. If I'm missing something, please let me know and I will retract my words.
I will be seeking a reason from management.
In the meantime, please have a merry Christmas and safe new year.
Kristian
Disclosure: own APW
Please get in touch! I am always on the lookout for interesting stock ideas, with a particular emphasis on deep-value, growth companies run by outstanding management and arbitrage opportunities.
Hi Kristian,
ReplyDeleteI agree with your comments on capital management. Recall also that we just raised capital at a greater discount just to buy some back on market?
In terms of returns it is worth noting that APW still hold $5m in P-REIT - maybe better to cut the legal action and get those funds invested elsewhere?
Regards
Alf
I read that the distribution is only for Australian shareholders???
ReplyDeleteHi Kristian,
ReplyDeleteNice post! I am also a holder and agree with your view re capital management, it has always seemed to be a little strange over at MPS/APW!
I have just started a facebook community to discuss deep value ideas, check it out, my first post is on Boom Logistics.
https://www.facebook.com/pages/The-8th-Wonder/482947441814144
Cheers