Following a muted 2022 (NAV TR +5.0%), we expect the fund’s total return to rebound (10-12%) driven by an increase in net income and the release of provisions. We expect the ordinary dividend to be fully covered and maintained at 6.5p pa (paid quarterly). Our confidence reflects clear progress on the workout portfolio and its rotation into core social impact sectors. Management’s guidance is for c7.0-7.45pps of net income (7.5-8.0% NAV Yield) in 2023. Since inception the fund has delivered an NAV TR of c6.2%pa. Assuming RMII meets our FY23 expectations, we estimate that it will have delivered its IPO target (6.5%pa); an investing period that encapsulates both a pandemic and a war. RMII (c8% yield) currently trades at a c15% discount to NAV. We expected fund to start consulting on a triennial liquidity opportunity following the end of Q1’23. Ignoring the consultation, our expectation is for RMII to re-rate as new lending (occurring at c10.25%) gets reflected in the return.
