A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
Companies: AGY ARBB ARIX DNL GDR NSF PCA PIN PHNX PHP RE/ RECI STX SCE SIXH TRX SHED VTA
There has been much comment on the fact that equity markets in the US and Europe have been shrinking for some years now, certainly in terms of the number of quoted companies, if not in total market capitalisation (MCap). This paper has been written with the assistance of the Quoted Companies Alliance (QCA) and focuses on the evidence for such in the London market and, in particular, that for smaller and midcap companies. It assesses that evidence and considers explanations. Finally, we ask why it matters, and assuming that it does, what practical steps can be taken to reverse the trend. Successful public markets have been a key part of the United Kingdom’s economic success for generations, even centuries, and we should not allow them to wither on the vine.
Companies: AVO AGY ARBB ARIX ASAI DNL GDR HAYD NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE TRX TON SHED VTA
Much of the UK’s privatisation programme took place between the early 1980s and the mid-1990s: subsequent sales have been few. Undoubtedly, privatisation attracted many private investors to the market, many for the first time.
Companies: AVO AGY ARBB ARIX BUR CLIG DNL FLTA GDR NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE SIXH TRX SHED VTA
“The focus for the next few years is on relatively modest investment and on driving return on assets towards our medium-term target of 20% for each division”. So said John van Kuffeler at the 16 January 2020 capital markets day. After an eventful 2019, 2020 (and beyond) is now all about operational delivery, the “boring” grinding out of profit from a franchise that has seen heavy investment over many years. We welcome this focus and think it will help deliver the 84% EPS growth (2021 on 2018) in current consensus estimates. The accompanying trading statement indicated 2019 results would be in line with market expectations. The shares rose 15% on the day.
Companies: Non-Standard Finance
We recently published a paper, Share ownership: For the many, not the few, based on a statistical survey of share ownership, produced jointly with Argus Vickers, the share analysis service. The Office for National Statistics (ONS) has now issued its equivalent survey. This paper compares its results with ours. Although there are, inevitably, differences in the detail, the two surveys reach the same conclusions.
Companies: AVO AGY ARBB CLIG DNL FLTA GDR MCL NSF PCA PIN PXC PHP RECI RMDL STX SCE TON VTA
“The focus for the next few years is on relatively modest investment and on driving return on assets towards our medium-term target of 20% for each division”. So said John van Kuffeler at the 16 January 2020 capital markets day. After an eventful 2019, 2020 (and beyond) is now all about operational delivery, the “boring” grinding out of profit from a franchise that has seen heavy investment over many years. We welcome this focus and think it will help deliver the 84% EPS growth (2021 on 2018) in current consensus estimates. The accompanying trading statement indicated 2019 results would be in line with market expectations. The shares rose 15% on the day
The Office for National Statistics (ONS) is due to publish its most up-to-date survey on share ownership in mid-January, which identifies the beneficial owners and decision- makers of the stock market. Hardman & Co has worked together with the share analysis service, Argus Vickers, to jointly produce its own survey, which anticipates the conclusions of the ONS survey but goes into much greater detail. Our work does not use a sample of 200 quoted companies as the ONS historically has, but rather includes everyUK quoted company. The ONS samples share registers every two years; our study uses six-monthly data points. Our survey also extends to shareholders on NEX; the ONS does not.
Companies: AVO AGY ARBB BUR CMH CLIG DNL FLTA GDR MCL NSF PCA PIN PHP RECI RMDL SCE SIXH SHED VTA
NSF has issued a trading update highlighting a 4%-5% reduction in consensus estimates due to softer trading in 3Q (primarily lower loan volumes in guarantor loans, a market which has been affected by adverse press coverage) and a 6%-8% reduction associated with a step change in provisioning policy. The latter highlights yet again the importance of understanding the assumptions in provisioning. For the same arrears, a higher assumed probability of downside has increased provisions. This reflects the known cyclicality inherent in IFRS9. A downgrade is unwelcome, but it does not reflect current customer deterioration, only the Board’s cautious approach. After today’s reduction’s, we still forecast 2021 adjusted profits at 2x the level of 2018.
The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.
Companies: AVO AJB AGY ARBB BUR CLIG DNL DPP FLTA GTLY GDR MCL MUR NSF PCA PIN SRE PHP RE/ RECI RMDL STX SCE TON SHED VTA W7L
Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.
Companies: AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF PCA PIN PHP RE/ RECI RMDL STX SCE SIXH TON SHED VTA W7L
The challenges associated with value creation drive all investors. Any investment professional is eager to make their mark by picking organisations that are able to deliver superior returns. Increasingly investors look into how organisations are governed and how effective the top decision-making bodies of organisations really are. In this white paper, we shed light on research findings and reveal the seven hallmarks of effective boards. The seven hallmarks are proven to create more effective boards and are set to be the next lever in the value creation process. Better Boards has created advanced board evaluation tools designed to motivate and inspire and above all, contribute to superior value creation.
Companies: AVO AJB AGY CLIG DNL DPP FLTA GTLY GDR KOOV MUR NSF OXB PCA PHP RE/ RMDL STX SCE TRX TON SHED VTA W7L
NSF has reached the turning point in its strategic development. Having invested heavily in infrastructure, controls and people, it has substantially built the franchise. The pace of further investment is expected to now slow, at the same time as payback from historical investment becomes increasingly visible. We see profit growth accelerating sharply, driven by wider jaws between revenue and costs in the branch business and guarantor loans, efficiency improvements in home collect, and improving credit. Assuming NSF is successful in securing additional lower-cost funding, we expect funding costs to relatively reduce, and the funding mix to improve. Our strong growth forecasts are unchanged.
The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.
Companies: AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF OXB PCA PHP RE/ REDX RMDL STX SCE TRX TON SHED VAL VTA W7L
When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.
Companies: AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY KOOV LWRF MCL MUR NSF OXB PCA PHP RE/ REDX RMDL STX SIXH TRX TON SHED VAL VTA W7L
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Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.
Companies: Equals Group
Accelerating activity in to FY21
Companies: Manolete Partners
Blackbird plc* (BIRD.L, 19.25p/£64.7m) | Mirada plc* (MIRA.L, 92.5p/£8.2m) | Tern plc* (TERN.L, 10.75p/£29.0m) | Checkit plc (CKT.L, 39.5p/£24.5m)
Companies: BIRD MIRA MIRA TERN CKT
Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.
S4 Capital has announced the merger of Lens10, a leading Australian digital strategy & analytics consultancy, with MightyHive, its data & programmatic media practice. Founded in 2010, Lens10 provides a range of data services including digital strategy, digital analytics, optimisation and tag management. It is a certified Google Partner in Google Analytics, Google Cloud & Google Marketing Platform and is an Adobe Analytics partner. It has 25 data specialists in Melbourne and Sydney, and has a blue-chip client list including CottonOn, National Rugby League, Australian Ballet and ME Bank. Data analytics continues to grow in importance as marketers accelerate their digital transformation and S4 Capital indicates it has seen explosive demand for these services. No financial information has been disclosed, though we note the group reiterates its commitment not to compromise its balance sheet, which remains net cash. Separately, the group has announced that Miles Young, previously Chairman & CEO of Ogilvy, is joining the board. He has particular expertise in creative work and talent, new technologies and Asia Pacific developed over 35yrs at Ogilvy
Companies: S4 Capital
REACT Group plc (REACT) is exploiting a gap in the market for specialist deep cleaning services for customers in the public and private sectors, with revenues split 50/50 between reactive work and regular maintenance. The Covid-19 pandemic has led to a significant upturn in activity in certain sectors (such as healthcare and transport) but temporarily weaker demand from others (such as hospitality). While its Covid-related work is by no means its biggest revenue generator, the legacy of the pandemic is likely to have a profound impact on future levels of activity as all businesses and organisations become more aware of the importance of maintaining high standards of cleanliness and hygiene. With a new management team and strengthened balance sheet, we believe the outlook is positive, a view that has been supported by the Group’s interim results which have generated maiden profits.
Companies: React Group
Wirecard UK’s suspension by the FCA has been lifted, allowing U Account business through Shelby Holdings and Morses Club to resume as normal, permitting customers full access to cash, which was previously frozen, albeit ring-fenced in a safe Barclays UK account. Morses Club has offered its U Account customers free use of the previously affected U Account accounts in July as compensation for the issue, helping to mitigate any negative impact and ensuring the relationship with customers remains strong.
Companies: Morses Club
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Hipgnosis Songs Fund (SONG LN) has today announced a trading update for the full year ending 31 March 2020. The unaudited NAV has risen 13% YoY to 116.7p, up 14.3% since the last published NAV of 102.2p as at 10 January 2020. This represents a like for like valuation uplift of 11.4%. All equity has been fully deployed and shareholder approval has been sought to increase net debt from 20% to 30%. Revenue is strong with £64.7m generating an EPS of 10.7p (more than 2x the annual 5p dividend target). NAV growth has been driven by revenue statements which were up 2%, and an increase in streaming growth rate assumptions by the independent valuers. The portfolio comprises 54 catalogues, with 13,291 individual songs, now valued at £757m which was acquired at purchase price of £697m on an acquisition multiple of 13.9x – now valued on 15.0x historical earnings.
Companies: Hipgnosis Songs Fund Ld
FY20 Interim results
Companies: Litigation Capital Management
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
FY20 results – increased firepower to acquire
Companies: First Property Group
Gore Street has moved a meaningful proportion of its 900MW pipeline into exclusivity with agreements covering a 81MW operating site and a 50MW project in development, both in the GB market. These add to the recent announcements of projects in Scotland and near London. Power storage continues to offer the opportunity to acquire projects that will deliver the fund’s target 10% IRR and we think there is plenty more to go for.
Companies: Gore Street Energy Storage Fund
Martin Currie Global Portfolio Trust’s (MNP’s) performance has improved considerably following the appointment of manager Zehrid Osmani on 1 October 2018, since when he has refined the trust’s investment process. MNP has now outperformed its benchmark over the last one, three, five and 10 years. The manager focuses on high-conviction positions and his long-term horizon helps navigate short-term market volatility. MNP has performed well despite a lack of exposure to the high-profile, large-cap US technology stocks that have led the market. Osmani has generated alpha by investing in some mid-cap stocks that are not particularly well followed, such as US company Masimo (non-invasive patient monitoring technologies), which is now the largest position in the portfolio.
Companies: Martin Currie Global Portfolio Trust
The group’s final results were broadly in line with our forecasts, with an 11% increase in revenue, marginally lower than expected profitability, and an 11% increase in the proposed dividend.