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Aberdeen Asia-Pacific Income Fu Message Board

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  • GodtheCreator GodtheCreator Apr 20, 1999 5:14 PM Flag

    FAX is worth...

    "......whatever anyone will pay for
    it."

    In this case, where ownership produces a revenue
    stream, the value of the stock is independent of its sale
    price. Surely you would not argue that, even if NO
    buyers existed, recieving a guaranteed .06/share/month
    had no economic value.

    No, the point here is
    NOT what people will pay for FAX, but what WE should
    require before selling it. Let those who don't own any go
    get their own guaranteed income if they won't meet
    our price.

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    • You are right on the mark in comparsion
      "shopping". It fun to try and guess a FMV(Fair Market Value).
      And as you say it has to start somewhere and a 3
      month T-bill is always the start for any U.S.
      work.

      A few thoughts to add:

      Appx. 15% of the
      funds dividend is "return of capital" or captial gains
      paid out. Thus that does not reflect a "real" source
      of reoccurring income so I'd cut that part out in a
      T-bill comparison. Or $.10

      The credit quality of
      the income is good, but since it's a fund with no
      maturity a risk premium has to be included for volitility.
      Ususally some kind of variance from the mean kind number
      or standard deviation. At this point the stock is
      right in the middle of it's high and low for 52 weeks,
      about 18% either way variance. Last year I think was an
      unusual year with lots of price movement so it's probably
      some where in the 10% up or down area for varience. I
      want at least half of 10% up or down varience for
      principle protection each year. Or 5%($.50/year)

      So
      if you add the riskless rate(4.5%) and the principle
      risk premium (5%)your looking at 9-10% for this fund.
      Take away the return of capital($.10)and you have a
      FMV of $6.50($.62/.095).

      But I do feel the
      fundamentals can get stronger to move the fund higher in the
      long term. We've certainly discussed this at lenght in
      the past. And of course risk is a perceived thing and
      will vary depending on the last bad occurrance I
      guess. Lastly the fund is at a discount so the payout of
      NAV doesn't become a real problem till the fund is at
      a preium I'd think. So in reality there is probably
      not any reason to cut out he capital gains
      distributions till the fund is at a preium. I personally like
      to see a little discount. Any thoughts
      there?

      I don't know if this makes sense or not, the more
      Wall Street comes up with tools to figure things out
      the worse the outcome it seems.

      • 2 Replies to flipper_58
      • You gentlemen have done a pretty good analysis.
        Another way is risk free return + beta x market premium,
        which would give a little higher price since I believe
        beta is shy of 1.0 for FAX.
        Who knows what the
        market premium is in this crazy market though?
        Five
        percent is a good textbook number, but the market seems
        to demand nothing from earnings or dividend yield
        and expect 20% from capital gains. In truth, I think
        FAX is about right...maybe good for 7. What do you
        think of KBA? Look at the discount from NAV. Thanks for
        your thoughtful analysis. It is good to have company
        like you guys. -wrayce.

      • your thoughtful post.

        1)Risk. Nothing is
        more important. As Will Rogers said, "I am more
        concerned with return of my investment than return on my
        investment." Yet nothing is more difficult to evaluate,
        because it includes too many factors and too many
        unknowns. The answer is to diversify one's portfolio, and
        not to risk funds one absolutely cannot afford to
        lose.

        2)Capital Return. I disagree with your calculation of these
        effects. If part of the dividend is non-taxable, that
        INCREASES the value of the return (in my case, by 38% of
        the portion not taxed). I simplified my analysis by
        leaving out tax effects, because they differ for each
        individual AND because it really complicates comparisons of
        returns between alternative investments when you have
        different (and perhaps unknown at present) percentages of
        taxable returns.

 
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