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aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio
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Total return with dividends reinvested
Hi Zac.
When you say ... The MSCI Asia Pacific Index (ex Japan) is flat during the 5 year period. HFEL is 9% down over the same period ... is that for share price or total return?
I'm certainly no fan of the performance this fund has delivered over the last 5 years or so. However, some context needs to be provided. The MSCI Asia Pacific Index (ex Japan) is flat during the 5 year period. HFEL is 9% down over the same period. So, certainly an underperformance.
I sold 50% of my holding here at £2.43 to help reduce exposure to dividend paying holdings overall. I plan to keep the balance, take the dividends and review in 12 months time. I'm less worried than others seem to be here with regards to the security of the dividend!
Zac
You are correct. I used the wrong percentage for the increase in shares, but that does not invalidate my calculation of how that increase, when compared to an almost static investment portfolio value, has reduced the NAV per share by 23%.
The 76.8% increase is of the equity value on the balance sheet, from £139.7mn to £247mn, an increase of £107.3mn. This is yet further proof of how badly HFEL has been managed, as it can be seen that each additional share, on average, cost £3.17.
" . . . taking the number to 176.8% of what it was at 31.8.18 (ie getting on for double) . . . HFEL had 121.13mn shares at 31.8.18, but the number was 154.95mn at 31.8.22 . . ."
By my calculations that's a 28% increase in shares in circulation not 177% increase. Am I not reading your statement correctly?
Bott
You write as though the rest of us do not have an understanding of capitalisation, NAV and asset values etc. This I think is not correct there is nothing in any response to your post that disagrees with what asset value or NAV or capitalisation is.
You have a unique view of issuance of new shares which has value but the view of the other respondents also has value.
Do you now think I do not understand your POV?
Ade
My response at 12.38 to an earlier post of yours was written too hastily. A company's market capitalisation has nothing to do with the balance sheet. Is simply the current share price multiplied by the number of shares in issue. It therefore changes every day, reflecting price movements and the issue of new shares or the cancellation of any bought back.
When new shares are issued for whatever price chosen by the directors, the net proceeds will add to the company's net asset value while they are held as cash, but once invested it is the value of those investments that will appear in the balance sheet. If at the next reporting date those investments have risen in value, then (other things being equal) the NAV of the company will rise. If they have fallen, then so will the NAV.
HFEL's NAV has not risen as a result of issuing new shares. It fell from £441mn at 31.8.18 to £435.58mn at 31.8.22. That looks static, but because new shares were issued during that time, taking the number to 176.8% of what it was at 31.8.18 (ie getting on for double), the NAV per share has fallen a lot. HFEL had 121.13mn shares at 31.8.18, but the number was 154.95mn at 31.8.22. Dividing the company's NAV by the number of shares gives us NAV per share of £3.64 at 31.8.18, falling to £2.81 per share at 31.8.22. This is the primary reason why the share price itself has fallen.
The NAV is not influenced by the share price, nor could it be, since it is a company's realisable value, not its prospective value. Share prices are though influenced by what investors think of a company's prospects. If the prevailing view of HFEL's prospective asset value growth were good, the share price would not be tied to its NAV. If dividend growth were expected to be strong, that would be another reason for the share price to rise well above the NAV . As it is evident that the share price is tied to NAV, it is also evident that those who might otherwise buy HFEL shares are in the main, despite its high DY, deterred by its poor prospects. Anyone who does the arithmetic can see that the high dividend yield has not been fully compensating for the deteriorating NAV per share.
Yes, Ade, it is usual (but not absolutely necessary) to pay dividends on newly issued shares. For an IT focused on income, therefore, it is essential to ensure that new shares bought with new money do not weaken the dividend payout. With the last three increases measuring just 1.7%, it is reasonable to be highly sceptical that HFEL has achieved this.
Ade
''in 2018 Capitalisation £438.2m (from annual report 2018), Capitalisation today £361.83m''
The Hang Seng Index was at about 27,000 5 years ago now at about 18,400
CAPITAL VALUES CAN GO DOWN AS WELL AS UP
For those who may wonder roughly 122.84 million shares in issue 2018, 163.7 million shares in issue today about a 33% increase that is in line with LTI's memorised number.
Bott
I do see a problem here as HFEL is obliged to pay dividends on new as well as older shares which may incentivise the company to invest as soon as possible.
Yes, Ade.
Bott
You have a point.
Assets that have been bought have indeed mostly declined we know this because in 2018 Capitalisation £438.2m (from annual report 2018), Capitalisation today £361.83m despite the issuance of new shares.
https://cdn.janushenderson.com/webdocs/HFELAnnualReport2018.pdf
The 2018 final report.
Bott have I understood you correctly?
The coming abuse from LTI et al is worth it for that little nugget.
Ade
What responders to my posts do not seem to realise is that if so much new money had not been raised in recent years, to sit on the balance sheet at its original value, there would not have been the need to add to investments at an evidently declining value, thus leaving net assets (the intrinsic value of the company) unchanged, rather than rising to match the new money invested. That is why the share price has declined so much, artificially elevating the DY. Even so, if the actual dividend had been increased to anything approaching a commensurate level that might have justified raising the new equity, but the dividend level has shown a diminishing return. The more I think about it, the real explanation for what has been happening may well be financial engineering, but for whose benefit. It has definitely not been in the interest of those who have held the shares for some time, which I regret to say includes me.
Ade, this is hilarious. It's like a social experiment. Did you notice how LTI acts like a baboon when you presented actual evidence (instead of dogma) that the underlying holdings of this trust do not support its outsized yield? Instead of a measured, logical response, he starts beating his chest. He also purported to being smart, which was so funny it made my day yesterday. Please keep provoking him with the truth, because it is wonderful entertainment.
LTI
HFEL ??
BS and more BS
ADE
HFEL 1.4%
???? 98.6%
Total BS
Holding. weighting Yield
1 Bank of Communications 4.80 9.17%
2 Taiwan Semiconductor Manufacturing 3.90 2.05%
3 Hon Hai Precision Industry 3.80 4.93%
4 Samsung Electronics 3.70 2.03%
5 Macquarie Korea Infrastructure Fund 3.40 6.38%
6 Vinacapital Vietnam Opportunity Fund Ltd 3.00 2.77%
7 Midea Group 2.90 4.31%
8 Ping An Insurance Group Co of China 2.90 5.83%
9 Rio Tinto Ltd 2.80 6.28%
10 BHP Group 2.70 4.93%
33.9% of portfolio
Simple average 4.87%
.44 + .08 + .187 + .075 + .217 + .0831 + .125 + .17 + .176 + .133.
Weighted average 4.97%.
Everybody who is posting in response to Bott are quoting what they know, think, believe is correct.
To be completely clear I am asking Bott why he thinks dividends should be higher like most who have commented I do not see why.
If it is of any value I agree with the analysis of most of the response to Bott.
How much does Bott think dividends should be increased by and why? Question not statement.
Mr Guitarsolo
Not saying anything. Asking.
OK guys, when you show yourselves up with basic knowledge you have to understand why people will doubt other claims you make (even if they happen to be justified).
When HFEL issues new equity (at a marginal premium) those new investors are providing capital to Mike Kerley that he might invest. He will likely do so into the same companies he already invests in. That means more dividends that are more or less in proportion to current dividends (a marginal benefit to existing shareholders). The dividend doesn't grow by 75% because there is 75% more shares in issue over a 5 year period. The dividend per share remains about the same. If you don't understand that, I don't know what to say.
If you honestly think the dividend should be 75% higher because there are 75% more shares in issue over a 5 year period then you really shouldn't be investing. I don't often talk in such language but I think it is justified in this instance.
And as an addendum, when you make comments like that it really does detract from the worthwhileness (is that a word?) of comments about dividend washing.
Do you see the problem here peeps?
Guitarsolo
Was from memory -
a bit more accurate - a 33% increase in the number of shares from 2018 to a couple of months ago.
The relevance is?
''New shares issued''
Number of shares increased by about 25% between 2018-22.
and the relevance is?
Bot
Are you saying the dividend should be 75% higher than 2018?
Company assets were £438.2m in final report 2018.
Were new shares issued 75% of this number?
New shares issued in 2018 was £17,914,000 say £18 million/£432 = approximately 13%.
13 X 4 = 54.5% new capital. In the ball park of the numbers you are talking about if I understand you correctly.
https://cdn.janushenderson.com/webdocs/HFELAnnualReport2018.pdf
2018 final report.
Please post the links of where your info is derived.
"HFEL started 2023 with three quarters more shareholders' money 'invested' than four years previously."
HFEL share price now back at NAV
ADE
As I have written before, all my numbers are taken from the last five years' IFRS audited accounts, three years of which are here on this website (see 'Fundamentals') and the missing two were be found under 'Financials' on the free-to-use HL website but have currently been taken down. As I printed them from HL some time ago this is the source I have been using, but I know they are in accord with the 'Fundamentals' here, so you can at least see the last 3 years for yourself - as can everyone else on this chat board. The percentages I have shown come from normal arithmetic, comparing one number with another. Nothing I've written has been made up.
The figures do of course come originally from the annual accounts, which can be found on the Henderson website as PDFs.
Damienmoore is misleading when he says, "The money raised from new equity is quickly deployed by the manager and on a per share basis the company does not lose assets." Although a loss is not a loss until it's crystallised, a falling share price naturally reduces the NAV of that holding, which is what appears in HFEL's balance sheet. When new money is consistently invested in shares which lose value, which the accounts show has been happening at HFEL, that strongly suggests that either the manager is incompetent or he is pursuing the wrong strategy. As HFEL's balance sheet shows, the practice of issuing more shares to follow the same path was substantially reined back in 2022, so perhaps the manager (or the board) did eventually realise its stupidity, at least in the present environment, but a study of announcements in the past year would show whether that is true (I don't have the time to do it).
The idea that the manager has been dividend stripping is an interesting one and may well be true. If so, I would expect that to be formally reported as HFEL's policy in every six month period it happens. However, as I have pointed out, the tiny dividend improvement this may have achieved has been done at the expense of investment value - and vastly so.