Raised my holding in Fondul Proprietea 50%. It is now a 9% portfolio weight.
Q4 hedge fund letters, conference, scoops etc
This is a Romanian investment trust trading at a discount to NAV – so very much my usual type of investment. It is managed by Franklin Templeton and is at a c45% discount to NAV (on the GDR) – very much too high given quality of management / assets and that action is being taken to narrow the discount.
It is listed on the LSE under ticker FP. I covered it back in 2014 and have happily held it since 2012/3.
https://deepvalueinvestments.wordpress.com/2014/03/15/fondul-proprietatea-romanias-finest/
It has fallen recently as the Romanian Govt brought forward some tax changes – most relevant being a 2% turnover tax on energy companies.
https://www.pwc.ro/en/tax-legal/alerts/important-legislative-changes-geo-no-114-20181.html
The market and FP are down c15%. I am a bit skeptical of the FP NAV as it might not yet fully incorporate the changes. Full effect of these is not yet determined (to put it mildly) – there are issues ANRE (the regulator) has said prices won’t go up but the legislation (apparently) indicates cost increases can be passed on. How this affecs FP.’s energy holdings remains to be seen.
I am more positive that introducing price caps could be struck down by the EU / the level of opposition to the changes could get them reversed. If not I am not too concerned. Hidroelectrica (their biggest holding) has a very asset rich balance sheet and may IPO at some point. FP. appear to hold it at its underlying book value but I think it could well IPO for much more – this suggests €1bn for 15% (FP holds 20% at €917m) – this would give a €333m uplift or 14% of the fund – in effect, adding to the discount (say 10-15%) No IPO plans are announced but FP. have explored selling the stake.
- have been buying back lots of shares and paying dividends for years, trying to get the discount down – until recently they were effective in doing this, but not any more (though they are still buying back shares0. It pays approximately an 8% income yield at current prices.
Their buy back is up to 8% of shares – not sure they will achieve this though.
In other news, I have been doing quite a lot recently.
I bought Warsaw stock exchange, book half market cap, negligible debt, some economic moat, 5.5% yield.
Also PHN.PW – a Polish reit- book is 25% of the market cap, quitebadly run, low yielding but low debt.
I will try to write these up when I get chance but am very busy right now.
ASTO might also be of interest – very illiquid but they have just won a legal case against Grant Thornton – they have NAV of c 37m, small operating business and £21m legal win – which is being appealed, and fees are to come. Market cap is £37.9m – I bought in at average of 293. It’s currently bid at 330. I probably won’t write this up as the opportunity is getting quite a bit narrower – still, might be worth ago.
I have been more productive than usual as I am ‘between jobs’ for a little bit – so am able to give my investments the time they deserve for once – already made 2/3 months salary in one month off – tempting me not to go back!
As ever, comments are appreciated.
Article by Rob Mahan, Deep Value Investments Blog
