Agree with RStuff, there is little to no upside in this one left now.
At 30 September, they are forecast to have 57cps cash and 85cps investments, with a few cents of positive net other assets to get the current $1.44 NAV.
They are paying out 39cps cash so ex distribution their NAV will be 18cps cash + 85cps investments, i.e. $1.03. If the share price drops by the exact amount of the distribution (39c) from its current level, the trading price post the distribution will be $1.31 - $0.39 = $0.92.
At an $0.92 ex distribution share price, the trading price will be only 11% below NAV. There is no upside to the NAV (these are debt investments so are likely to be either held to maturity at which point par value is repaid, or the $19m in negative outlook investments will be sold at a slight discount to book value), the weighted average yield on the investments is ok without being great (8.4%), and it's going to take them 3 years to realise the portfolio. So, best case scenario is you wait for 3 years and receive a roughly 8% tax ineffective yield on the way, and get out at $1.03 (equivalent to $1.42 in today's money adjusted for $0.39 distribution). In this best case scenario, the IRR is ~10%, which is pretty mediocre.
I have held this since $1.14 and have enjoyed the distributions and capital appreciation along the way, but in my view there's very little juice left in the tank.
HHY Price at posting:
$1.31 Sentiment: LT Sell Disclosure: Held
