Aberforth Split Level Income

ASIT’s managers: Today’s investment opportunity is amongst the best in Aberforth’s 33 years…

Aberforth Split Level Income

ASIT has the potential to deliver strong returns in its short remaining life…

Aberforth Split Level Income

ASIT offers potentially exciting returns as its planned 1 July 2024 wind-up date approaches…

Aberforth Split Level Income

Aberforth Split Level Income (ASIT) uses the advantages of the investment trust structure to create an unusual proposition which marries a high yield and a portfolio with the potential for strong capital growth. The fixed life provision means that there are potentially attractive returns on offer from the narrowing of the discount as the trust approaches its July 2024 wind-up and from dividends, even if there is no gain to the NAV.

Catch a tiger by the tail

It’s the topic on everyone lips. Yes, Inflation. It is thirty years since the UK has seen inflation at a higher level. Will it subside, or will it persist? Not possessing a crystal ball, this isn’t something we are going to determine here. However, what we will discuss are the various trusts that investors might like to consider as a reaction to this very novel environment. We consider how one might most directly benefit from rising inflation, and potentially protect capital or income in real te

Aberforth Split Level Income - Overview

Aberforth Split Level Income (ASIT) offers a high yield from UK small caps with a highly-geared approach which has generated exceptional returns in the reflationary recovery from the pandemic. ASIT is geared through zero dividend preference shares which do not receive a dividend, meaning ordinary shareholders receive a higher yield (see the Gearing section). The historic yield is 3.3%, which is in line with the AIC UK Equity Income sector average and above the yield available on conventional sm

Aberforth Split Level Income - Overview

Aberforth Split Level Income (ASIT) invests in UK small-caps. Managed on a collegiate basis by the investment team at UK Small cap specialists Aberforth Partners, ASIT comprises a portfolio of UK smaller companies which the managers believe to be trading at substantial discounts to their fair-value. A fixed-life trust due to be wound-up in July 2024, ASIT employs structural gearing through zero-dividend preference shares (ZDPs), as discussed under gearing. These afford the managers flexibility

Cool Britannia?

There is no question the UK economy is in dire straits. A fall of 12% in GDP in Q2, followed by a 16% rise, led to an economy 7% smaller in September. The recent imposition of a second lockdown will lead to a further decline. The Bank of England forecasts the UK economy will end the year 11% smaller than when it started. The OBR estimates it will be smaller than it was entering the current crisis until late 2022. One lagging indicator which is lagging even more than normal is the unemployment ra

Aberforth Split Level Income - Overview

Aberforth Split Level Income (ASIT) aims to generate a high yield from the UK small-cap market. The ordinary shares are geared through zero dividend preference shares (ZDPs) which allow a much higher yield to be paid out. Although the historic yield is c. 7.4%, given the collapse in UK dividends due to the pandemic, the board indicates the dividend will be cut next year. As we discuss under Dividend, the shares may still yield substantially more than the typical small-cap portfolio. High levels

Aberforth Split Level Income - Overview

Aberforth Split Level Income Trust (ASIT) aims to generate a high yield from a value investment strategy in UK small caps and from gearing taken through zero-dividend preference shares (ZDPs). The trust has a fixed life and is to be wound up in 2024. All income is distributed to ordinary shareholders. On a historical basis, following the coronavirus crash the yield is extremely high, at 8.5%. However, as we discuss in the Dividend section, investee companies are having to cut their payouts becau

The fight in the dog

Smaller companies are usually a problematic area to invest in during significant downturns or recessions; and the sharp fall in 2020 hasn’t been an exception. In this article we assess the performance of smaller companies trusts throughout the pandemic, while identifying the factors that have differentiated the winners from the losers. This includes the impact that cash, market cap exposure, sector allocation, revenue exposure and growth or value biases have had, with some surprising results. We

First Quarter of 2020

We have knitted together the impact on the investment companies from what is now widely considered to be the most severe pandemic in a century. The collapse in asset prices over the latter part of March, brought the curtain down on an up-market that lasted more than ten years. In amongst this, there were pockets, such as the technology sector, that held up well. For many industries, the worst is still to come, as we brace ourselves for the sharpest contraction to global growth since the US great

Aberforth Split Level Income Trust - Overview

Aberforth Split Level Income Trust (ASIT) invests in UK smaller companies in order to provide a high income to investors, by aiming to identify undervalued companies with attractive dividend yields and use structural gearing to enhance the income they provide. The ordinary shares currently yield 5%. ASIT is managed by a team of seven at Aberforth Partners, who have been employing a disciplined value strategy in the small-cap space since 1990. The track record of the team illustrates the outperfo

Rethinking UK equity income

There is a problem with the UK’s core crop of income funds. UK equity income trusts are highly concentrated in a few big names, which we think is a potential cause for concern for income-seeking investors. It is also a good reason to diversify one’s sources of income. This concentration is particularly worrying when you consider that many of the largest yielders in the index have an uncertain future, and there are question marks over the sustainability of their dividends. Just eight companies m

Rebel Rebel

There are more than 26,000 investment funds available to UK investors today, yet the average UK investor has just six funds of any kind in their investment portfolio. Clearly, then, investors must be filtering out a lot of potential investments before they make a decision, and an obvious way to do this is by choosing an appropriate sector - but here too, there is a somewhat daunting range to choose from. The AIC announced yesterday an “overhaul” of its sectors, in order that they are as “clear a

Morning Note – 22 April 2024

Benefits of scale set to materialise

Frenkel Topping - Resilient with strong growth potential

FY 2023 was a challenging year for Frenkel with higher interest rates encouraging clients to place money into lower margin money market funds. Despite this, sales grew +32% (supported by recurring revenue +9% and +51% in non-recurring), EBIT margins remained strong at 22% and adj. EPS grew +17% (taking into account the higher number of shares). FY 2024 has seen a solid start to transactional business and there is a strong pipeline of new FUM opportunities both of which support further growth. Wi

S&U - PBT ahead, encouraging volume trends

S&U reported FY24 PBT of £33.6m, down from £41.4m in FY23 on higher funding and regulatory costs and higher impairments in Advantage in H2. PBT was 2% ahead of our forecast as stronger revenues – up 12% to £115.4m – and better costs offset higher-than-expected impairments. Net receivables grew to a record at both Advantage and Aspen and management noted particular strength in Q4 and a good trading environment in the current year. Having absorbed a significant rise in funding cost as well as addi

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Foresight Solar Fund - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

LIBERUM: PayPoint: On track for £100m of EBITDA in FY 26

Regional REIT - Performing as expected ahead of refinancing

In a challenging market, Regional REIT’s (RGL’s) FY23 operational and financial performance was robust, in line with expectations and previous guidance. Investor focus remains on the company’s loan to value (LTV) reduction and bond refinancing plans, explored in detail in our previous note and RGL will provide an update on this in due course.

LIBERUM: Speedy Hire: Weakness in FY 24 but recovery in FY 25

Hybridan Small Cap Feast - 22 April 2024

22nd April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Foxtons Group (FOXT LN) - 1Q24 IMS shows real momentum

Foxtons Group plc first quarter revenue rose 9% to £35.7m (1Q23: £32.9m) with growth delivered across all business segments. Trading is in line with management's expectations.

H&T Group (HAT): Core franchise build, short-term retail noise

In our 15 March 2023 initiation, 'Pawnbroking royalty, with strong, profitable growth', and subsequent notes, we have highlighted the strong market for pawnbroking and why H&T, as the market leader, is uniquely placed to take advantage of these opportunities. These results reconfirmed both, with the pledge book up 28% and net pawnbroking revenue up 36%. Like many in the retail space, H&T faced the challenge of customers focusing on lower-value, lower-margin items in the key run-up to Christmas 2

Hybridan Research: Sector Review: Artificial intelligence in UK cybersecurity: the human uplift 17/04/2024

Artificial intelligence (AI) is a double-edged sword in cybersecurity. Whilst new AI models, architectures, and innovations are emerging to protect the security posture of organisations, attackers are also benefiting from deepfakes, sophisticated phishing, and automation of malicious codes. To ensure the impact of AI on cybersecurity to be a net-positive, we need to pit good AI against bad AI. Point solutions enhanced with machine learning: Global cybersecurity has been built with point soluti

Morning Note – 29 February 2024