Aberdeen New Thai aims to spice up returns – Aberdeen New Thai has reported results for the year ended 28 February 2018. The Thai market, as represented by the Stock Exchange of Thailand index (“SET Index”), provided a total return of 21.6% in sterling terms. The chairman’s statement says that foreign investors were net sellers of Thai stocks but local investors drove the market higher.
However, Aberdeen New Thai failed to keep up with the market as a whole. The net asset value rose by 17.7% on a total return basis (in Sterling), some 3.9% behind the benchmark SET Index. The share price fared slightly better, rising by 18.4% on a total return basis to 592.0p, reflecting a small tightening of the discount to the net asset value from 15.0% to 14.8%.
Over five years too, while there have been substantial absolute gains for investors, the net asset value performance has lagged the benchmark. The share price has continued to trade at a discount to net asset value, notwithstanding significant buybacks over the last two years.
Proposed Changes
Against this backdrop, the board has consulted the manager and together have identified a number of changes designed to improve returns to shareholders over time.
Pre IPO investments: The manager receives, from time to time, requests to invest in unquoted companies in the period leading up to a flotation on the SET Index but this is not allowed under the existing investment remit. The board believes it would be beneficial to shareholders if the investment policy was adjusted. Such investments to be limited to 10%, in aggregate, of the net assets at the time an investment is made.
Increasing Small Cap exposure: (those with a market capitalisation under THB 50 billion) are approximately 35% of the overall portfolio. The manager will seek to increase this exposure to interesting companies but always with an eye to management of overall portfolio liquidity.
Gearing: The company has a £10 million loan facility provided at a competitive margin rate over Libor (the London Interbank Offered Rate) which will in future be used more proactively by the manager. They increased the drawn down loan from £2.65m to £5.65m during February 2018. Even if fully drawn gearing should, at current market levels, remain materially below the board-imposed limit of 15%.
Charging certain revenue costs to capital and introduction of interim dividend: 100% of total expenses have been charged against revenue. In line with the expected returns of the investment portfolio, the board has decided to charge 75% of such expenses to capital with effect from 1 March 2018. This, whilst impacting to an extent the capital return, will enhance net revenue and increase the net earnings available to pay out to shareholders. In order to smooth the distribution of income to shareholders, the board will also declarare an initial interim dividend covering the six months to 31 August 2018.
Reduction in management fee: An amendment to the management fee became effective, retrospectively, on 1 March 2018. From that date the manager is entitled to a fee payable monthly in arrears based on an annual amount of 0.9% (previously 1.0%) of the company’s assets less liabilities.
ANW : Aberdeen New Thai aims to spice up returns