Simon Shields

Monash Absolute Investment Company Limited (ASX Code: MA1) has announced that it will offer shareholders the opportunity to participate in an equal access share buy-back of up to 10% of its ordinary shares. The buy-back will be offered to shareholders on an equal access basis in the first quarter of the 2019 financial year, with the price set at a 5% discount to pre-tax net-tangible-asset backing (NTA).

Simultaneously, the Company is also offering existing shareholders (on the register at 7pm on 19 June 2018), an opportunity to participate in a share purchase plan (SPP) of up to the same quantity of shares as the number bought back, with the issue price set at the same 5% discount to pre-tax NTA. Shares not taken up in the share buy-back will be offered for placement to new and existing institutional investors at the same discount.

Discussing the reasons for the buy-back, Monash Investors Simon Shields, Co Portfolio Manager, said that the decision has been made in order to improve outcomes for shareholders by addressing two interrelated issues.

“It has become clear to the Board over recent months that reducing the discount to NTA of the Company’s share price, while at the same time increasing liquidity in the stock, are among our most important priorities.”

“We reviewed a number of options, and decided that creating a liquidity event via a buy-back and share purchase plan will help reduce the discount to NTA.  Prior to the announcement, the shares were trading at 82 cents, a 17% discount to the 98.5 cent pre-tax NTA, which is not ideal for shareholders.  There is no reason why the shares should now more closely track the NTA performance, given the liquidity we are now providing via our innovative solution.”

“And the fact that we are offering the equivalent number of shares available in the off-market buy-back to new and existing shareholders at the same time means there will sufficient liquidity for these shareholders to make additional purchases.”

“At the same time, fixed expenses will be kept low, which means that net performance will not be significantly impacted” he explained.

Mr Shields concluded by saying that, in his view, the discount to NTA at which MA1 shares have been trading is out of line with the strong performance of the portfolio, and with management’s expectations of future performance.

“We take a long-term view, and have a very positive outlook for the future. We expect performance to continue on the back of our quality portfolio.

At the same time, the lack of liquidity in the stock and the trading discount to NTA has been frustrating for management, which is why we are undertaking this buy-back now,” Mr Shields said.

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