Question 1: I am interested in buying a uranium stock. Paladin (PDN) and Boss Energy (BOE) are the leaders. Which stock do the major brokers prefer?
Answer: The major broker analysts like both stocks but note that their valuations are ultimately a play on the underlying commodity price. On valuation, they marginally prefer Boss Energy. With Boss Energy (BOE), the consensus target price is $3.83, about 63% higher than the last ASX price of $2.35. The range is a low of $2.75 through to a high of $4.50. There are 5 “buy” recommendations and 1 “neutral” recommendation.
For Paladin (PDN), the consensus target price is $11.48, about 49% higher than the last ASX price of $7.71. The range is a low of $9.50 through to a high of $15.80. There are 5 “buy” recommendations and 1 “no rating”.
Question 2: Pengana Private Equity Trust (PE1) has been trading at a large discount to its NAV (net asset value). They have recently announced a share buy-back and “are currently reviewing a number of other strategies and mechanisms that seek to address this discount on a permanent and ongoing basis”. What are the other strategies they could be considering? Do you think this could be a prelude to moving the portfolio off the share market?
Answer: Pengana Private Equity Trust (PE1) has announced an on-market buyback where it will buy up to 10% of the ordinary units over the next 12 months. PE1 is trading at a big discount to its NAV (net asset value) – about 27% on 30 November (the last time PE1 updated the market on its NAV).
Apart from marketing activities designed to broaden the investor base, and better investment performance, a buyback is practically the only measure an investment manager can adopt to help close a massive discount on a listed investment company or listed trust. The ultimate measure is to delist the trust from the ASX and turn it into an unlisted private trust. In this scenario, liquidity for unitholders is extremely limited.
Question 3: Thank you for the article on banking and investing for kids (see https://switzerreport.com.au/investing-for-your-kids-or-grandchildren-4/ ). There is a feature with investment bonds that intrigues me. You mention that a withdrawal before ten years requires personal tax to be paid, with a tax credit for the 30% tax paid on the way through. That suggests that once a teenager is eligible for adult tax rates, there might be merits in withdrawing early, paying tax (likely at 0% if under the minimum income threshold) and receiving effectively a “franking credit” for tax already paid within bond. Have I got that right?
Answer: Potentially, if they can access the tax-free threshold of $18,200, they may be able to withdraw early without any penalty. To access the tax-free threshold, they will need to be over 18, or if a minor, be in a full-time employment. Tax rates for minors are punitive (the first $416 is tax free, then a rate of 66% up to $1,307, then 47% on every dollar thereafter).
To show how an investment bond is taxed, here is a simple example. Let’s assume you put $5,000 into an investment bond. 7 years’ later, it is worth $15,000 and you decide to redeem it. The increase in value ($10,000) will be fully taxable and counted as assessable income. Against this will be a tax offset of 30% or $3,333, leaving taxable income of $6,667. If this was taxed at a minor’s tax rate, it would be pretty horrific.
Question 4: Both NAB and ANZ are holding their AGMs this week. Why are they held so late in the year?
Answer: Westpac held its AGM last Friday, NAB was yesterday (Wednesday) and ANZ is today (Thursday).
Given that each of these banks has a financial year ending 30 September, I think they are doing remarkably well to complete audited financial accounts, prepare an Annual Report, prepare a Remuneration Report, prepare a Sustainability Report, give notice for an AGM and then hold an AGM within 80 days or so of the financial year end.
I guess their strategy is to try to do it before Christmas, rather than come back in February, and that’s why they are held “so late” in the year.
