Question 1: With interest rates smalling, many commentators have been talking about small caps. Is there an easy way to get access to small caps in the US, perhaps through an ETF that tracks the Russell 2000 index?
Answer: Yes, there is a locally listed ETF that tracks the Russell 2000 index. Launched a couple of weeks ago by Global X, it trades on the ASX under the ticker RSSL. It is still quite small but should develop over time. The management fee at just 0.18% pa is pretty reasonable.
Question 2: I am an investor in the Qualitas Real Estate Income Fund (QRI). It has a non-renounceable entitlement issue at $1.60 per unit. Should I take up these entitlements?
Answer: QRI is a listed investment trust that has a portfolio of investments offering exposure to commercial real estate loans secured by first and second mortgages, predominantly located in Australia. It is paying an attractive distribution yield of around 8.5% pa.
It is raising about $150m through a non-renounceable entitlement issue on a 1 for 5 basis, with new units being issued at $1.60. The funds will be used to invest in additional commercial real estate loans, taking the size of the trust to around $900m. The offer closes on Monday (3 March).
The latest NTA (net tangible asset value) per unit for QRI is $1.6098. On the ASX, QRI is trading at $1.62. The entitlement price is $1.60.
QRI has been very stable (both in a NTA sense and ASX price sense) around $1.60. The price is not going to run away (higher), or fall precipitously, following completion of the entitlement issue. So, invest if you want more exposure to this asset class (and it suits your portfolio). Otherwise, pass.
Question 3: Flight Centre (FLT) came out with a poor result and the stock fell. Where do the brokers see value?
Answer: Flight Centre’s first half profit of $117m missed consensus by around $10m, and although guidance for the full year was reaffirmed at $365m to $405m, Flight Centre said it would be in “the low to mid tier section” (i.e. between $365m and $385m). The stock fell 10% to $15.92, after making a new 52 week low.
Before the result, the brokers were bullish on FLT. All brokers had “buys”, and the consensus target price was $22.44, about 41% higher than the last ASX price. I suspect we will get a bit of a downward revision in target prices over the coming days, but nothing too material. Flight Centre looks cheap to me.
Question 4: When does BHP go ‘ex-dividend’. Is there a DRP I can join?
Answer: BHP will trade ‘ex’ its US50c dividend (about A$0.79) next Thursday (6 March). The last day to buy BHP shares and receive the fully franked dividend is Wednesday 5 March.
BHP operates a DRP (dividend re-investment plan). There is no discount on the price of the shares. If you want to participate in the DRP, or vary a current election, contact the share registry. You need to do this by COB on 11 March.
