NCC - NCC valuation

Forum Topics NCC NCC NCC valuation

Pinned valuation:

Added a month ago

Justification

Oct 22:

I honestly like NAOS, whenever they speak on podcasts I find them level headed and very well informed, but come on guys....

More than 4% of NTA going out the door every year and it's excluded from the performance fees that they report.

What's worse, is that if things do come good and they shoot the lights out, existing shareholders will get diluted by the convertible notes which are convertible at $1.15.

Notes (NCCGA) YTM is about 9% at the moment, if you have a time horizon of 3 years + it makes no sense to hold the equity...

May 23:

SP is starting to come down to my valuation from last year. Holding NCC over the past year would have been a diabolical decision.

NCCGA are still good value on a risk adjusted basis, provided you're willing to hold to maturity. I hold IRL.

NAOS need to stop reporting gross performance (from memory they even exclude interest on the convertible notes) and focus on shareholder outcomes. That means putting all capital management initiatives on the table.

The MER (management expense ratio) is through the roof on NAOS' small LICs.

Nov 22:

NCC has battled recently but nccga (the illiquid but listed convertible notes) look like really good value to me, with a YTM of over 8%. The recovery rate would only drop below 100% if NTA went to $0.1-$0.2 per share. The embedded option is worthless at this stage for valuation purposes.

There is further upside if NAOS decide to buy the notes back, whether that be on or off market.

2020:

Has outperformed it's benchmark since inception (even after fees) and I like the strategy they employ. It's problem is that it's small, has high fees and there are about 5,000,000 options still yet to be exercised at a price of $1.02. On top of that there are a bunch of convertible notes out on the stock with a conversion price of $1.15 which would put a dampener on things if performance continues to be strong. Interested

Valueinvestor0909

a month ago

Thanks for posting this.

I will post these two screen shots comparing one of the blue-chip bank Westpac and one of Naos's LIC performances.

FYI : I don't own any of these two. This is just one of my dummy Sharesight account.

RhinoInvestor

a month ago

I used to own the NAOS 4.95% 3Dec24 bond IRL. Got rid of it about a year ago when interest rates kept going up as there were a number of better options with about the same risk level and much better returns (I pivoted toward BBSW+ floating rate bonds for a large proportion of the portfolio).

It will be interesting to see what happens with that when it matures into what will likely be a higher interest rate environment.

PeregrineCapital

a month ago

I believe NSC is the best performing of the 3 NAOS LICs and the only one without a convertible.

NCCGA now has less than 3 years to the first step up date and the YTM p.a is somewhere between 8.5 and 10%. So duration risk is not much of an issue IMO.

There's minimal credit risk - the recovery rate on the bonds should only start to dip below 100% as NTA approaches nil.

The liquidity is shocking, but if you're planning on holding to maturity and you have sensible exposure then it's not so much of an issue.

There's a risk that NAOS let the bonds "step up" to 5.5% and 6.5% instead of letting them mature early. This would lower the YTM, but the returns would still be acceptable.

I think there's asymmetric risk adjusted returns on offer, which are probably explained by a classic illiquidity premium.

There's also outside possibilities of upside from:

a) The imbedded option becomes in the money.

b) A higher IRR than the YTM p.a if interest rates go back down.

NAOS Emerging Opportunities Company Limited