Chagsy
Hi
Apologies to the person that created this thread, stay, forum post. I can't find it.
I believe another straw person replied with the excellent rationale that the market is discounting the privately held firms as there is no mark to market valuation.
More broadly, private equity increased the valuation of their unlisted holdings by 3.2%, whilst the broader market reduced in valuation be 22%.
It often take some time for these valuations to correlate.
Part of the reason is that the fees charged by managers are usually as a percentage of the NTA, so it is clearly in their interests to keep these high.
Now, this doesn't really apply to BTI: the vast majority of their assets are listed.
So presumably, people or institutions that are interested in investing in BTI do not believe that the underlying holdings are worth what the market are currently valuing them at. They might be right, I don't know.
The alternative reason is that the market is inefficient. For example, Soul Patts valuation of underlying assets is valued at a premium to Brickworks underlying assets by 30%, historically. Even though the vast majority of these assets are the same (due to cross holdings). They are attempting rectify this anomaly with greater shareholder information.
It should have been a great arbitrage play, but it never worked out. However, it may well play out now.
I am a holder of BTI and see it as underpriced, particularly given is large cash holding. I do not own BKW or SOL. I am considering BKW closely!
Nnyck777
Hi @Chagsy great explanation. I too hold BTI. I think one insightful Strawperson suggested that as the NTA valuation is done by BTI itself there is reason to be skeptical. Perhaps valuations are generously optimistic. I note that the charts are pretty abysmal lately for some of their holdings- for example site minder see below. Perhaps the market is being cynical because of >50% falls this past financial year.
I still like it as an arbitrage opportunity and have a small holding <1% in my SMSF.
I am curious to hear your position on Brickworks vs Sol. I am personally avoiding index funds in my SMSF currently and I was interested in researching SOL further. I would appreciate your insight.