Adelaide Managed Funds Assets Backed Yield Trust (AYT)
April 16, 2010Disclaimer:
This valuation is NOT advice and provided as educational only (usually mine), it does not take into account your specific investment objectives, financial situation or financial needs. Before acting on the information you should consider if the analysis is accurate (it probably isn’t) and if the investment is appropriate for your investment needs. You need to also consider your financial situation and <strong>you should seek advice from a financial adviser and/or stockbroker.
I can give no guarantee of the accuracy of the information used, omitted, provided or considered in this analysis.
Or to put the information simply:
You should expect my analysis to contain mistakes and omissions, I’m not a professional stock picker nor do I hold an Australian Financial Services License. My work is merely for self education and should not be acted on by any persons (sane or insane) in any location so please don’t sue me.
From: Lepp, Travis
Sent: Thu 15/04/2010 9:08 AM
Subject: Adelaide Managed Funds Assets Backed Yield Trust
Hi All,
As some of you may be aware I have had some spare time on my hands recently and have managed to look at a few stocks. Yesterday I had a look at AYT and liked it so much I purchased 4000 units. Basically AYT has taken money from investors to invest in high yield investments secured by pools of loans and leases (provided by Adelaide Bank – now Bendigo and Adelaide Bank). Normally this would be a high risk vs high reward situation, however with the units trading significantly below the NTA (1.47 vs 1.77 ), no material debt and continuing to pay a yield of around 8% (BBSW + 4% to BBSW + 4.5%); I believe there is enough ‘margin of safety’ to limit the downside. In an effort to close this NTA difference management embarked on a unit buyback with excess cash (without significant impact on the unit price).
AYT has recently found it harder to purchase high yield loans (Bendigo Bank is more risk adverse than Adelaide) and management have proposed to wind up the fund and return capital to unit holders as the various loans mature (majority within 6 to 18 months). As a result of the windup AYT is ceased to buyback units and will not reinvest any additional funds.
The biggest risk to investing in AYT is the nature of the loans made and their repayment. The Trust has exposure to Bendigo’s MIS problems to the tune of $21.1 Million (provisions have been raised to $16 Million, however I’d suggest they should be written them off completely – this should cover the low defaults on the other loans).
AYT isn’t for the ‘widows and orphans’ fund but might be an interesting investment (similar to RHG without as much upside though). I’ve attached my analysis and the latest analyst briefing.
Cheers,
Trav
