Australia's largest stock trading and investment forum Australia's #1 stock forum

ALF

Click for more information

0.00%

85.0¢ australian leaders fund limited

Ann: Net Tangible Asset Backing, page-15

First 15 Last

Share
Profile

Follow
lordearl

988 Posts.

50

25/02/17

19:37

Post #: 22905752
Share

Originally posted by marketmaker ↑

ALF has cut the dividend as I had suspected in one of my earlier posts. They've moved the dividend to 4c this half and only 50% franked! That means on a gross basis the dividend has declined from 7.1c (5c fully franked) to 4.9c. That is a 31% decline - quite a nasty surprise for those who rely on the sustainability of this dividend.

I thought I would re-run my previous analysis to incorporate January's performance to assess whether ALF will need to cut the dividend again in the next half and the numbers aren't looking too good.

ALF's profits reserve as at 31 Dec 2016 was $9.28m. To begin with, there appears to be some questionable accounting in the period. ALF made a profit for the first half of $4.22m but the profits reserve miraculously increased by $8.17m. In every previous result, the addition to the profits reserve has always been equal to the profit in that period - this is the first time that the numbers vary and that to by a very significant magnitude ($3.95m variance). Interestingly, this is also the first time that the sum of the profits reserve and accumulated loss reserve is actually negative which means ALF has already exhausted all prior period profits by paying dividends. I am very curious what the auditors checked when they signed off on these latest set of accounts but let's assume it is okay for the purposes of this analysis.

Assuming we believe the profits reserve is actually $9.28m, ALF has committed to paying $10.85m of dividends in April 2017 which are yet to be reflected on its balance sheet. Once these dividends are paid in April, ALF's profits reserve falls to -$1.57m! In addition to this, ALF's net performance in January was -0.7% which means that ALF has lost c$2.44m in January. Therefore, ALF's profits reserve is now down to -$4m on a pro-forma basis. In order for ALF to pay a 4c dividend in the second half, it needs to have $10.85m of earnings to distribute. Given it is starting from a base of -$4m, it needs to earn $14.85m in the period from 1 Feb - 30 Jun 2017. This means that ALF needs to generate a return of at least 3.12% in these five months to even maintain the rebased 4c dividend. If we back out the questionable profits reserve top up during the first half of $3.95m ($8.17m increase less the actual profit of $4.22m), ALF needs to earn $18.8m in the next five months or a 5.4% net return. While this is entirely possible, ALF has only managed to make a return of 2.4% in the last 1 year and 4.9% over the last 3 years which to me then suggests that this is a fairly hefty target for ALF.

I will be closely monitoring performance in the coming months in order to assess the sustainability of this 4c dividend but at this stage, it looks like it might be a stretch. ALF is still trading at a 7.7% premium to its $1.30 NTA when performance has been dismal and dividends are in decline! I was also a bit put off by the timing of the result announcement. Did they really think that by releasing the result after 5pm on a Friday night that no one would see it?

Expand

That's some great analysis & thanks for posting for us.

There are a lot of funds which don't trade at a premium to their NTA and ALF has earned its stripes but we are now looking at a fairly muddy zebra.

When was the last time it traded below NTA?

One thing which does interest me is Braitling's focus on global tech developments. I'd be inclined to hold over the longer term to see how these assets perform within the fund.

He is no fool but like many of us has been caught out majorly in the past 6 months.

Last edited by lordearl: 25/02/17

ALF Price at posting: $1.40 Sentiment: Hold Disclosure: Held
1 Upvote

0 Great analysis

Reply

Top Stories

AN1

CuFe sells its Crossroads gold royalty to Northern Star for $4M cash; says better than waiting for mine launch

ME1

Banshee's historic trenches prove rich in antimony and gold for GDM

AUN

Cyclone signs MOU with Vale for development of Iron Bear play

BNL

Blue Star Helium sees approval for five more wells at 'Galactica/Pegasus' project in Colorado

GRL

To make modern missiles, you need 3D Printing. And in that gold rush, Amaero is selling shovels

BTH

Bigtincan's Board backs Investcorp offer: Why a NASDAQ listing could be game-changing

LYN

InhaleRX gains approval for clinical trial to test non-opioid therapy for cancer pain

Week 46 Wrap: Copper hits 2mth low as Trump threatens net zero pace; US rally fades; HotCopper’s picks

EDE

NT Gov't delivers environmental approval for Empire Energy's Beetaloo Carpentaria pilot gas play

HotCopper Highlights: Your most watched stocks for Week 46, 2024

There are more pages in this discussion • 17 more messages in this thread...

First 15 Last

Add ALF (ASX) to my watchlist