Model portfolios: How we're tackling the FKP and Platinum Capital rights issues
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Key Points
- FKP has announced a rights issue at a large discount
- PMC’s is more or less on par with current price
- We’ll take up FKP’s and keep an eye on PMC
Our three model portfolios have been performing well and we’ve been happy to let them get on with it. After all, long-term investing shouldn’t require too much tinkering. But opportunities do come along from time to time and that’s what this update is about.
Two stock-specific opportunities have arrived on our proverbial plate and it’s time to move on them. They come in the form of offers from Platinum Capital, held in both our Moderate and Aggressive portfolios and FKP (to be renamed Aveo Group from 10 December), held in the Aggressive portfolio.
FKP (ASX code: FKP)
The retirement group is offering five new securities for every nine currently owned (5-for-9) at a price of $1.30 (NTA before tax), but the price has dropped back recently and, as of yesterday, we could buy PMC shares at the same price on-market.
At the moment this means – unlike with FKP – there’s not much financial benefit to taking up the offer, although we’ll keep an eye on the share price until the deadline (11 December) before making a final decision. Effectively we’ve got a call option over PMC shares, but it will only be worth exercising (that is, taking up the rights) if we can buy the shares at a discount to their market value (ideally we’d like to see the share price closer to $1.60 to bother).
If the share price moves higher, and we take up the rights, we’ll adopt the same approach as with FKP and hold on to the additional shares. The amounts involved aren’t large enough to incur the costs of selling.
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