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Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Today's news & views, plus announcements from KGF, JMAT, LAND, GFTU, VTY, PTEC, BME, YEW, APP, BLV
Companies: LAND APP YEW
AuM grew by +43% (+16% organic) to £29.4bn in Q3. Investment performance was strong (+£2.5bn) as COVID vaccine news propelled markets. Net inflows were maintained qoq (£792m). Sustainable was the stand out performer (+24%). AuM has broken through £30bn post-period end. Better than expected AuM drives +3% FY21e EPS and +5% in outer years. Continued distribution efforts in Sustainable, Global Equity and Multi-Asset funds stands to catalyse earnings. Alongside flow momentum, 12x FY22e PER is not reflecting this upside.
Companies: Liontrust Asset Management PLC
I once sat through a three-hour performance of Samuel Beckett’s Waiting for Godot at the Theatre Royal which, despite the best efforts of Ian McKellen and Patrick Stewart – both of whom I like very much – to this day remains one of the dreariest experiences of my life. It is on that note that we welcome 2021, with all the promise it holds, and return to our ‘top picks’ for 2020, a year which is probably best summarised (for those of us lucky enough to have been not directly impacted by the virus) by the Lord Chamberlain’s censor in his review of the first performance of Godot in 1955 – in which he described having to ‘endure hours [and hours] of angry boredom’. As always, these ‘picks’ do not represent advice, and should in no way be relied upon as such; they have been chosen on a lighthearted basis with no thought given to their suitability for your personal circumstances.
Companies: TFG IPU IEM HOT OCI BRWM JRS RICA BHMG BRLA JMI GPM MINI SMT
Whilst falling power price forecasts (the product of a range of factors, including lower gas prices and reduced demand) have weighed on GCP’s NAV in recent quarters, the good news on vaccines should provide some relief. We explained the rationale for GCP’s rebased 7p annual dividend in our last note. We would note that, even after the cut, GCP trades on the highest yield in its sector (by some distance) and the investment adviser has a pipeline of opportunities lined up that it thinks will allow GCP to maintain and possibly grow the dividend in the future.
Companies: GCP Infrastructure Investments
Urban Logistics REIT (“REIT”) has acquired another high quality “last mile” asset in the Wirral for £16.3m (5.0% NIY). The 169k sqft site is let to a subsidiary of Culina. It is leased through to 2032 and has clear rental progression, with an uplift on commencement of a reversionary lease in 2022 and a rent review in 2027. 99% rents for the Jan-Mar quarter have already been collected – highlighting the resilience in the tenant base/income. We do not change forecasts, already assuming full deployment by year end. We estimate that c.£75m capital capacity remains. We note a 6%+ dividend yield in FY22e – a 12m period of full capital deployment – and note that the discount ignores embedded NAV growth potential.
Companies: Urban Logistics REIT plc
The Thistle Portfolio - Sigma’s first PRS mandate for clients of Gatehouse Bank – has been sold to Goldman Sachs and Pitmore for c.£150m. This was built at a £110m cost only ~5 years ago. This marks one of the few major transactions of a portfolio of single-let family homes in the UK and underscores the value which Sigma’s model is able to create with the 4.15% exit net initial yield (“NIY”) a full 35bps better than current assumption. This has positive implications for returns in The PRS REIT, the EQT mandate and for Sigma’s model overall. The sale crystallises a c.£3m carried interest; higher than expected. We do not change forecasts in light of imminent FY20 results. Sigma continues to trade at a significant discount to our 200p/share intrinsic value, which excludes any upside from further fundraising.
Companies: Sigma Capital Group plc
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1
Hipgnosis Songs Fund, is independently valued by Massarsky, who in December chose to reduce the discount rate on the revenues generated by the portfolio from 9% to 8.5%, due to strong evidence of growth in streaming numbers and the stable nature of the revenue stream. This produced a NAV of 125.35p as at the 30 September interim period end. It is worth noting the recent publication of significant changes in the discount rate as announced by Professor Aswath Damodaran of the Stern Business School in New York for the Entertainment Industry to 4.82% from 7.83% in January 2020. Combined with recent evidence that music streaming revenues in 2020 are now larger than the entire music market in 2016, we believe this is an encouraging backdrop for potential further reductions in the discount rate being applied by Massarsky going forward
Companies: Hipgnosis Songs Fund C Shares
Henderson Opportunities Trust (HOT) has performed strongly since experiencing sharp NAV and share price declines in the Q120 market sell-off, powering to the top of the AIC UK All Companies sector over the past 12 months with an NAV total return of c 40% in the second half of 2020. Managers James Henderson and Laura Foll say performance has benefited from holding a number of ‘next-generation leaders’ in the UK. The portfolio is esoteric in its make-up and seeks to avoid being overly exposed to trends in the global and domestic economy. The managers continue to see good value opportunities across the UK market, particularly on AIM, and say their intention to maintain gearing at a ‘decent’ level (c 10–15%) is indicative of feeling the portfolio and market offer good value.
Companies: Henderson Opportunities Trust
Equals' brief trading update reads positively, disclosing revenue and adj EBITDA for FY20E comfortably ahead of our earlier forecasts. There has also been a notable beat on net cash, as operating cash break-even has been reached via the streamlining of costs over the year. December 2020 trading appears to have been particularly strong, giving good momentum into FY21E. We view the current outlook positively, given recent greater clarity over Brexit and a potential rebound in UK travel (affecting retail cards, travel cash, albeit these activities are now non-core). As earnings come through from increasing operating leverage, an EV/Sales of 1.4x is at historic lows, giving good potential for a re-rating over the year.
Companies: Equals Group Plc
The PRS REIT (“PRSR”) has seen 529 completions in Q2 as momentum is sustained. 3,163 homes have been completed (£29m ERV) progressing towards the 5,200 target by FY22e. We note the Thistle Portfolio sale announced today will likely provide a positive catalyst for valuation in the next 12 months. The shares currently trade on a 24% discount to NAV with a 5%+ yield (growing to 6.5% on stabilisation). We expect progress over the next 9-12m to represent an inflection point in terms of return visibility and the discount to narrow, alongside an attractive yield and NAV progression, driving a total return profile.
Companies: PRS REIT Plc
CVC Credit Partners European Opportunities (CCPEOL) has achieved a total NAV return of 1.9% (target 8% annual return) in the last 12 months. Its index outperformance was helped by sector rotation early in the COVID-19 crisis and by staying positive on the market. The manager sees the greatest opportunity in the upper CCC and lower B segments and in structured finance. CCPEOL remains optimistic in the credit opportunities segment, despite the market recovery. It expects 2021 will bring more leveraged loan issuance from broader industrial segments, thus providing greater investment prospects. Portfolio resilience led CCPEOL to raise its annual dividend from 4p/4c per share to 4.5p/4.5c in September 2020.
Companies: CVC Credit Partners Europn Opprtnity
Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb. Moonpig, the digital greeting card company, is planning an IPO with a potential valuation of £1bln, according to multiple media reports. Further details expected to be announced over the next two weeks.
Companies: ZPHR PANR PRSM SENS CYAN G4M ITX CRCL FEN ZIN
Interim results demonstrate YoY growth and a resilient outcome that has exceeded management's expectations from the start of the Covid-19 pandemic. This is testament to the degree of recurring revenue generated across the business. FY21 trading looks to be more challenging, as notably lower new insurance sales post-lockdown will translate into lower premium income. A number of organic opportunities are being worked on to fill the shortfall. Rising UK redundancies and their impact on policyholder retentions creates great uncertainty, hence our forecasts remain withdrawn and recommendation remains Under Review.
Companies: Personal Group Holdings Plc