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What is the NAV ..... trying to learn the terms
Rich Park
Posted: 10 May 2018 06:38:47(UTC)
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Joined: 09/04/2018(UTC)
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Trying to learn.......... What do these terms actually mean I.E. Nav
at a premium or discount.

Below are two examples with the first being at a premium of 4.11
and the second at a discount of -13.23
How do these premium/discounts worked out?

Henderson Far East Income Ltd Ord
Bid price: 369.00p (09/05/2018)
Offer price: 374.00p (09/05/2018)
Open price: 366.00p (09/05/2018)
Close price: 375.00p (09/05/2018)
Price change: 7.00p  /1.90%
Published NAV: 360.20p (04/05/2018)
Dividend Yield: 5.65
PREMIUM / DISCOUNT
Premium/Discount: 4.11
Net Gearing: 103


Aberdeen New Thai Investment Trust PLC Ord 25p
Bid price: 562.00p (09/05/2018)
Offer price: 568.00p (09/05/2018)
Open price: 568.00p (09/05/2018)
Close price: 565.00p (09/05/2018)
Price change: -7.00p  /-1.22%
Published NAV: 651.12p (08/05/2018)
Dividend Yield: 1.82
PREMIUM / DISCOUNT
Premium/Discount: -13.23
Net Gearing: 103

Thank you
2 users thanked Rich Park for this post.
Aminatidi on 15/05/2018(UTC), mcminvest on 17/05/2018(UTC)
Baron Wuffet
Posted: 15 May 2018 16:32:01(UTC)
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mcminvest on 17/05/2018(UTC)
JohnW
Posted: 15 May 2018 16:39:11(UTC)
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NAV (Net asset value) could be said to be the true monetary value of a company, where the share price is the perceived monetary value of the company. The discount or premium is the difference between the two.
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Aminatidi on 15/05/2018(UTC), mcminvest on 17/05/2018(UTC)
Law Man
Posted: 15 May 2018 17:19:04(UTC)
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This is not a complete answer but, as John indicates, the NAV is the value of the underlying assets of the IT owned as investments.

1. For an IT holding quoted shares, it can take the market value of those shares.

2. For a REIT, which owns real estate, the REIT appoints a valued to value its land owned. This may be a historic value.

3. For a Private Equity IT, holding shares in private unquoted companies, the company estimates a value for the companies. This can be somewhat imprecise; and again may be a historic value.

Take your HFEL as an example. The NAV is said to be 360.2 pence per share, and the Premium to NAV 4.11%. From this you would expect the price of a share in HFEL to be 360.2 x 104.11% = 375 pence. Indeed, this is shown as the 'Close price'.

How you interpret the discount or premium is a different subject.
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Aminatidi on 15/05/2018(UTC), mcminvest on 17/05/2018(UTC)
mcminvest
Posted: 17 May 2018 11:48:33(UTC)
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Good info but I'm still confused too much to invest in an IT. The charges also confuse me, see below for Scottish Mortgage Trust do I pay both of these i.e. 0.77 in total? Is this the same for all trusts? What are the charges to look out for?

Sorry for elbowing in on your post Rich!!

Annual Charge: 0.33%
OCF: 0.44%

Catch The Pigeon
Posted: 17 May 2018 12:28:29(UTC)
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mcminvest;62436 wrote:
Good info but I'm still confused too much to invest in an IT. The charges also confuse me, see below for Scottish Mortgage Trust do I pay both of these i.e. 0.77 in total? Is this the same for all trusts? What are the charges to look out for?

Sorry for elbowing in on your post Rich!!

Annual Charge: 0.33%
OCF: 0.44%



The annual charge is included in the OCF. You only pay 0.44%.
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mcminvest on 17/05/2018(UTC)
Rich Park
Posted: 18 May 2018 08:31:08(UTC)
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Thank you for all the knowledgeable replies, much clearer now.

Catch the Pigeon you are welcome.
I did not know that about the annual charge being within the OCF.
P L
Posted: 18 May 2018 11:31:08(UTC)
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Couple of other things that are worth knowing about IT's.

1. There is a measure known as the Z-score. This is a statistical measure of the current discount/premium against it's historic average value. It's effectively the mathematical equivalent of looking at the Hargreaves discount chart and making an assessment whether or not the current discount/premium is normal or abnormal from the historic data perspective.
A high negative score means that it could be cheap in terms of the cost vs value of assets purchased and a postive value means it's could be expensive. Note this is in relative terms given the IT could in theory still be running at a premium
The key word is "could be cheap/expensive" given there is no rule that says what a discount/premium should be or when and how it should change. Obviously it's always best to buy when it appears cheap then when expensive.

2. IT's can hold up to 15% of their income in reserve, allowing them to top-up dividends out of the reserves during difficult years. Worth looking at the reports to check the size of the reserve as it will give a degree of confidence that the dividend (if that is what is important to you) can be sustained /increased in future.

3. Most IT's have a discount policy that involves them attempting through share buy backs/share sales etc to control the discount. Again worth looking at the report to find out what it is so you get a feel for what the normal might be.
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mcminvest on 18/05/2018(UTC)
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