Do AFIC shares trade at a discount right now?

Is AFIC at a discount or a premium right now?

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Key points

  • AFIC is one of the largest LICs on the ASX 
  • A LIC can trade at a discount or at a premium to its underlying value 
  • So where are AFIC shares at today? 

The Australian Foundation Investment Co. Ltd (ASX: AFI) share price, or AFIC for short, has kicked off this Thursday’s trading session with a loss thus far. AFIC shares are currently down by 0.12% at the time of writing at $8.31 a share. That stands in contrast to the S&P/ASX 200 Index (ASX: XJO), which has recorded a modest gain of 0.2% so far today. 

But as a Listed Investment Company (LIC), AFIC’s share price is only one of the metrics new and existing investors have to weigh up. That’s because a LIC is one of the few ASX investment options that can transparently trade at a different price than what the shares are actually worth. A LIC is essentially a company that only invests in other companies. Thus, like many ASX investors, AFIC has a portfolio of shares of its own. This portfolio is managed by the company for the benefit of all shareholders.

Conveniently, AFIC tells us what the value of its share portfolio is every month, down to the cents. That means ASX investors can easily work out how much AFIC shares are really worth. And this metric is often quite different to its actual share price. Thus, if AFIC shares are being priced above what its portfolio is worth, we can say that AFIC is trading at a premium. The opposite is true if the portfolio is being undervalued by the market, and AFIC shares are trading at a discount.

Are AFIC shares at a discount right now?

So what’s going on right now with AFIC’s valuation? Are the shares trading at a premium or a discount to what they are really worth on paper?

Earlier this month, AFIC released its updated net tangible asset (NTA) backing as of 31 March. This is essentially how valuable the company’s underlying share portfolio is on a per share basis. AFIC told us that, as of 31 March, its share portfolio was worth a value of $7.43 per share. That was up substantially from the $7.04 per share that the company recorded on 28 February.

It is also, however, substantially below AFIC’s current share price of $8.28. That means that AFIC shares are decisively trading at a premium to their underlying NTA value right now. Specifically, that premium is worth around 11.84%. So no discount today.

In fact, the last time AFIC shares were trading below their NTA value was back in 2019. So it’s been a while since investors could buy AFIC shares for a discount to their NTA.

At the current AFIC share price, this ASX LIC has a market capitalisation of $10.23 billion, with a dividend yield of 2.9%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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