Australian (ASX) Stock Market Forum

EZL - Euroz Hartleys Group

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robusta said:
There are a few reasons I like the holdings in WIC and OZG. The main reason I am invested in EZL is the high ROE from the brokerage side of the business but I sleep a little better knowing these assets are there to prop up the sp in the event they went the same way as Wilson HTM for example.

The investments in WIC and OZG make up about three fifths of the NTA for EZL. WIC yields about 3.4% while OZG is yielding around 5.6% this helps to support the dividend through tough trading conditions.

Both LIC's are trading at a discount to NTA and are undergoing a buyback.

This sounds like peanuts but I like the fact that they pay a management fee to themselves to run assets they own.

Management get to advertise the LIC's with the invest where we invest line.
Click to expand...

You missing the point.

The LICs may be fantasic and you might like to hold them. In that case, just go and buy them. You can buy them in the same ratio as EZL holds them, and you can construct an exposure that is identical.

There is no added value for EZL to hold the LIC's on your behave. You can't sell them if you want to. You can't hold them if EZL chooses to sell. The only effect is a discount being applied to EZL's share price.
 
skc said:
You missing the point.

The LICs may be fantasic and you might like to hold them. In that case, just go and buy them. You can buy them in the same ratio as EZL holds them, and you can construct an exposure that is identical.

There is no added value for EZL to hold the LIC's on your behave. You can't sell them if you want to. You can't hold them if EZL chooses to sell. The only effect is a discount being applied to EZL's share price.
Click to expand...

I think I get your point, the sum of the parts is worth more than the whole. EZL has a good history managing capital however and maybe in the future that discount will not be applied to the share price.
 
robusta said:
I think I get your point, the sum of the parts is worth more than the whole. EZL has a good history managing capital however and maybe in the future that discount will not be applied to the share price.
Click to expand...

The discount will always apply to the share price. Here's why...

Suppose there are one group of investors who really like EZL's brokerage business... call them group A.

Suppose there are another group of investors who really like the LICs currently owned by EZL... call them group B.

Now how many investors like EZL's brokerage buiness as well as the LIC's? This group (call them group C) is a union of group A and B (union as in set theory). And by definition, the union of group A and B cannot be greater than A + B.

So the combination of brokerage and LIC does not make EZL any more attractive. Any person belonging to group C can simply go and buy separately the brokerage business and the LICs and control the exposure they want. While any investors who are in group A or group B, but not group C, can simply buy the part they like.
 
I don't believe in that theory.
Wesfarmers is a true conglomerate and it gets rated appropriately.
Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.
 
Knobby22 said:
I don't believe in that theory.
Wesfarmers is a true conglomerate and it gets rated appropriately.
Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.
Click to expand...
Except Wesfarmers don't run LICs that traditionally trade on a discount to NTA.
 
Knobby22 said:
I don't believe in that theory.
Wesfarmers is a true conglomerate and it gets rated appropriately.
Its true that broking firms and analysts etc. dislike companies that have more than one arm, but I think that if they are well run they can really add value. That is if management is capable enough.
Click to expand...

You can't go buy the different parts of WES on market and construct the same portfolio.

You can with EZL.

If they hold two unlisted investments trusts then it's a different story.

But when both are simply listed there is no value-add.
 
skc said:
You can't go buy the different parts of WES on market and construct the same portfolio.

You can with EZL.

If they hold two unlisted investments trusts then it's a different story.

But when both are simply listed there is no value-add.
Click to expand...

EZL have been increasing their holdings in the two LIC's since the start of the GFC. Also those LIC's have had a share buyback operating for the same period. That sounds like a smart allocation of capital if you think the LIC's hold decent assets.

It will be interesting to see how they manage these assets in the future, directors and staff hold over 55 million of the 144 million shares on issue.
 
What SKC is trying to highlight is that you can in effect go "short" only the brokerage operations of EZL, that is by selling short say $20,000 worth of EZL, and using the proceeds to buy the same weighting that EZL hold in both WIC and OZG (it should cost less than the $20,000 to construct this long portion).

In theory you are net short only the brokerage/finance operations of Euroz, having cancelled out the investment holdings of the company (which don't add value at all). Euroz should simply distribute all of their WIC and OZG shares out to shareholders pro-rata in order to simplify company operations. This however would probably cause a blow to both the ego of the people in charge as now EZL would be a much smaller company by market capitalization and the tenure of their positions in Euroz would be more at risk should the brokerage arm fall under duress.

The listed investment companies themselves look interesting, discounts from share price to NTA of around 25% and nice projected dividends of ~11% for OZG and ~7.5% for WIC if you include the franking. Both LIC's portfolios are relatively similar except for OZG having a massive position in Cedar Woods Properties, which isn't replicated in WIC. Only OZG has a share buyback going at current and is a less liquid (and therefore a bit cheaper) of a LIC, and if I had to choose between the two I'd go with OZG, but there if I had to choose between them and the rest of the managed funds on offer I'd choose someone else to manage my money.
 
Revenue up 29.84% NPAT up 280.7%, diluted EPS 7.14 cents compared to 1.87 pcp. Much of this result comes from OZG and WOZ holdings. The brokerage side of the business is still doing it tough.
 
Not sure I am impressed with the latest dividend, not the amount, but conditional payment of it. While I might be naive in these matters, it smells of giving a dividend but making it difficult to receive.
Has anyone read it and feel the same?

An options exercise is to be conducted on the 22nd to allow holders to participate in the dividend payment. Exercise forms and payments for options exercise must be received at the registered office by close of business 19th July. Exercise forms received after this date will not be exercised prior to the ex dividend date and will NOT partipate in the dividend payment.

So you effectively pay for option to get a dividend. That is Pay for you dividend.

As a holder, I have not seen any exercise forms to date.
 
Hi JB, the options exercise is to allow holders of options, code EZLO to participate in the dividend.
 
Volume spikes are often followed by a price breakout.
Hasn't happened yet, but my scan suggests I keep an eye on EZL.

EZL vpp 01-09-14.gif
 

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