NCC - NAOS Emerging Opportunities Company

[System]

NAOS Emerging Opportunities Company Limited (NCC) has been established to provide investors with the opportunity to invest in a listed investment company with a primary focus on investing in emerging companies, being listed entities outside the S&P/ASX 100 Accumulation index.

http://www.naosasset.com.au/naos-emerging-opportunities-company/the-company/

 

[McLovin]

Can someone explain how this works...

http://naos.com.au/naos-emerging-opportunities-company-limited/#performance

Issue price $1 February 2013

Dividends since issue 14.5c

Increase in pre-tax NTA 13c post tax 10c.

Total nominal return pre-tax NTA 27.5c/27.5%. Post tax NTA 24.5c/24.5%

Their performance table claims 60% nominal. Surely it's not all being eaten up in fees and taxes?

SP today...$1

 

[Ves]

Can someone explain how this works...

It's pre-tax and fees, and it implies that the investor reinvested the dividends.

There might be a fair bit of tax if they're heavily churning the portfolio and not letting the DTLs build up on open positions.

 

[Ves]

I think they're also including the free options granted to shareholders at the IPO that were exercisable in Feb 2015 at a discount to NTA (think it was around $0.13).

Which would make up a lot of the difference between the $1.42 quoted (pre-tax, pre-fees, reinvested dividends NTA) in the latest NTA update announcement for Feb 2016 and the $1.59 required for a nominal return of 59% since listing.

In other words: it's highly massaged rubbish.

 

[McLovin]

I think they're also including the free options granted to shareholders at the IPO that were exercisable in Feb 2015 at a discount to NTA (think it was around $0.13).

Which would make up a lot of the difference between the $1.42 quoted (pre-tax, pre-fees, reinvested dividends NTA) in the latest NTA update announcement for Feb 2016 and the $1.59 required for a nominal return of 59% since listing.

In other words: it's highly massaged rubbish.

Ahh the "free" option, I missed that. That gets it to within distance. It's not a bad exercise in separating reality from fiction. I'm sure if someone bought $1,000 on the first day of trading and has participated in the DRP they'd be wondering why they only have $1,140 (they'd be underwater on all but one of their DRP purchases), where the rest of it has gone and why they have underperformed XAOAI (although they have beaten the XSO).

Massaged rubbish indeed, Ves.

ETA: What it all comes down to...



Money for jam.

 

[Ves]

ETA: What it all comes down to...

View attachment 66109

Money for jam.

Yeah mate, pretty much. I clicked on one of those broker reports they linked to on their website, and it said fees had been around 2.6%pa so far. That's not exactly cheap.

 

[McLovin]

Yeah mate, pretty much. I clicked on one of those broker reports they linked to on their website, and it said fees had been around 2.6%pa so far. That's not exactly cheap.

That's bend over stuff. Jesus 2.6% they should be delivering way more than they are. I've never actually really looked at LIC's, but they offer a pretty good insight into the distortion of tax and fees in a way that unlisted funds do not.

 

[Miner]

Any one following NCC? Agm this week I believe. Last post was 2016. Ex div. NTA is more than net price.

 

[Dona Ferentes]

Naos Emerging Opportunities Company Ltd has announced a 1-for-4 bonus option. The choices are to

1. Exercise the Options at $1.02 each; or
2.Take No Action i.e. allow the Options to remain until Expiry 29th June 2021.

NAOS also announced a fully franked final dividend ($0.0375 per share) whereby existing Option holders (NCCOB) can exercise their options early and be eligible for this dividend. The options are required to be exercised prior to the dividend Record date 17th March 2020.

- Currently trading at $1.00 so there's little attraction, but the space NCC operates in is high conviction (usually less than 10 companies in portfolio), microcap only buying into companies with MC <$250mill, and holding for a long time, or until the investment thesis changes
- NCC is itself less than $100Mill MC, and trading below NTA by a significant amount (end Jan was $1.24 but probably lower now)
- the directors have 'conviction'

 

[Dona Ferentes]

and now ..... redeemable, unsecured, unsubordinated, convertible notes (NCC Notes). will trade under ticker NCCGA.

• Interest Rate:

• Until the First Step-Up Date (30 September 2026): Fixed at 4.50% per annum;
• From the First Step-Up Date (30 September 2026): Fixed at 5.50% per annum; and
• From the Second Step-Up Date (30 September 2027): Fixed at 6.50% per annum;

• Interest payments: paid semi-annually, in arrears on each of 31 March and 30 September, with the first interest payment payable on 30 September 2021;
• Maturity Date: 30 September 2028 (if not converted or redeemed earlier);
• Convertibility: convertible into Ordinary Shares upon notice at a fixed Conversion Price (subject to adjustment for certain dilutionary and other capital transactions by NCC) at any time until 30 September 2026;
• Conversion Price: the Conversion Price is $1.15;
• Issue size: the issue of the NCC Notes will raise up to $23.0 million (before costs);

 

[Dona Ferentes]

and now ...

NAOS Asset Management is raising $35 million to invest in seven to ten unlisted businesses, as it sees opportunities in the smaller end of ASX listed companies dry up.

The Private Opportunities Fund wants to find companies that are profitable, founder-led and not yet listed.

NAOS is eyeing businesses with a valuation typically between $20 million to $70 million, and annual revenue of $5 million or more. It plans to stay away from miners, metals, casinos and other similar businesses that do not meet its ESG requirements.

The strategy of investing in unlisted companies is a departure from the NAOS current lineup, which invests primarily in listed equities.

NAOS managing director Sebastian Evans said the firm has already identified investment opportunities for the new fund, including a coffee wholesale retailer.

"The opportunity set in this sector is great. There are almost 50,000 private businesses with turnover in the $2 million to $10 million range whilst there are only 375 listed companies in the $5 million to $100 million turnover range", Evans said. "The market is witnessing a trend of quality private companies choosing to stay private for longer and we want to take full advantage of this movement"..

NAOS plans to use five avenues of finding potential unlisted investments: its current network, its advisory board, professional service providers like lawyers and accountants, cold calling business owners identified via industry awards or events, and even just simply looking into the brands or products that people are talking about.

Some of these businesses need capital to grow, but do not want to list and are too small for VC [venture capital]...sometimes, cold-calling resonates the most if you make $5 million a year, he said.

The fund is closed ended with a five year term. It can go up to 20 unlisted investments, but Evans expects the number to sit between seven and 10.

NAOS has not appointed brokers for the raise. Its three LICs invest about $400 million for 8000 investors, whom it plans to tap in raising for the new fund.

 

[peter2]

Wow, that's a radical change in investment style. It's not a drift but a shift.