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 depression.
Companies: ASL SDV ASIT BGEU BRLA CCPE DPA IEM JMF JZCP JUKG EPIC PSHD CSH RIII CCPG BLP TMPL BPCR SEQI AIF SMT CIFU KKVX FAIR ICON RSE CRS GWI USF DIGS
BioPharma Credit (BPCR) has entered into a definitive agreement to provide US$165m in a single-tranche senior secured loan to Collegium Pharmaceutical, a Nasdaq-listed biopharmaceutical company, which currently markets an abuse-deterrent formulation of oxycodone (opioid) under the Xtampza brand, as well as Nucynta, a centrally acting synthetic analgesic. Collegium reported US$223m in total sales for these two drugs in 9M19. The investment is made alongside BioPharma-V, which provides an additional US$35m, implying BPCR’s share of the deal is 83%.
Companies: Biopharma Credit
BioPharma Credit (BPCR) offers investors access to a diverse portfolio of secured debt instruments for life science companies. During 2019, BPCR was able to deploy more than US$500m and was thus able to reduce the large cash position accumulated as a result of the share issue in late 2018 and prepayment of the Tesaro note in January 2019. New investments include the largest deal so far with Sarepta Therapeutics, where BPCR provided funding of up to US$350m (of which half was initially drawn). We estimate that BPCR’s current loan portfolio has an attractive average coupon rate of c 9% (of which c 50% is at a fixed rate). On drawdown of outstanding commitments, arrangement fees and additional coupons will provide full cover of the annual dividend.
BioPharma Credit (BPCR) has announced it has entered (alongside the BioPharma V fund) two five-year senior secured loan agreements with a total commitment of US$85m over the next 12 months (of which US$52.5m will be drawn initially). The terms of both loans are broadly in line with previous deals with a high single-digit floating interest rate, a 2% upfront fee and certain make-whole/prepayment fees. We estimate that BPCR still has at least US$344m in uncommitted cash (after excluding the recently declared dividend of US$0.0175 per share), which it aims to deploy before the end of the year.
BioPharma Credit (BPCR) has recently entered into an agreement to provide up to US$82.5m in the form of a five-year senior secured loan to OptiNose, a Nasdaq-listed, commercial-stage pharma company with its flagship product XHANCE, an FDA-approved nasal spray for the treatment of chronic rhinosinusitis with nasal polyps. The therapy uses the inhaled corticosteroid fluticasone propionate coupled with OptiNose’s proprietary Exhalation Delivery System (EDS) designed to reach deep into the nasal passages. We estimate that BPCR still has c US$400m in uncommitted cash available for further deals. We also acknowledge the recent settlement of the dispute between Lexicon (one of BPCR’s borrowers) and Sanofi, which will result in a US$260m cash inflow for Lexicon.
BioPharma Credit (BPCR) recently announced that it has entered into an agreement to provide a US$80m senior secured loan to BioDelivery Sciences International (BDSI), a Nasdaq-listed commercial-stage pharma company. BDSI’s main assets include Belbuca, an FDA-approved partial opioid agonist classified as a Schedule III drug, as well as Symproic, an FDA-approved drug for the treatment of opioid-induced constipation (OIC). This agreement represents BPCR’s first investment this year. Moreover, it invested US$25m in BDSI’s recent share issue, which constitutes BPCR’s first equity investment since inception. We estimate that BPCR still has around US$500m in uncommitted cash available for further deals.
Biopharma Credit – New investment
BioPharma Credit - TESARO statement | Merian Chrysalis - Portfolio update | HgCapital Trust - Partial realisation of Visma
Companies: BPCR MERI HGT
Augmentum Fintech – Zopa banking licence | NB Global Floating Rate Income – EGM on share buyback author | BioPharma Credit – Statement on TESARO
Companies: AUGM NBLS BPCR
BioPharma Credit (BPCR) provides access to a diverse portfolio of debt instruments for life science companies, consisting mainly of senior secured loans at present. Structural changes in the industry and high M&A activity constitute positive drivers of BPCR’s new debt investments. Despite increased life sciences equity and convertible bonds issues, the trust has invested c US$640m so far this year (and has outstanding commitments of US$140.5–160.5m). The trust has recently completed a private placement, with US$305m of final gross proceeds (after being upsized to US$200m from US$150m). Post the Amicus Therapeutics deal and advancing the second tranche of the Tesaro loan, BPCR visibly increased its exposure to floating-rate loans to c 62%.
BPCR - BioPharma Credit – Results of fundraising | CSH - Civitas Social Housing – Q3 2018 NAV and update
Companies: Biopharma Credit Civitas Social Housing Plc
Blackstone / GSO Loan Financing (BGLF*) – September 2018 NAV | Carador Income (CIFU*) – September 2018 NAV | BPCR - BioPharma Credit – Proposed fundraising | Phaunos Timber – Offer wholly unconditional
Companies: BGLF BPCR PTF CIFU
HMSF* – Highbridge Multi-Strategy – Interims to 30 June 2018 | BSIF - Bluefield Solar Income – Finals to 30 June 2018 | BPCR - BioPharma Credit – Interims to 30 June 2018 | ASLI - Aberdeen Standard Euro Logistics Income – Interims to 30 June
Companies: HTCF BSIF BPCR
BioPharma Credit (BPCR) offers investors access to a diverse portfolio of secured debt instruments for life science companies based on BPCR’s pool of investment opportunities. The ongoing specialisation and fragmentation of the drug discovery process is translating into an increased number of market players seeking additional funding backed by sales from approved products and/or royalty streams from out-licensed products. During its IPO in March 2017 and follow-on placings, the trust has so far raised gross proceeds of US$1,080m (of which US$339m is in seed assets) and already deployed US$690m in four large deals. It also has outstanding potential commitments of up to US$350m.
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Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd.
To achieve YoY revenue growth over H1/20A despite the challenges of Covid-19 and its impact on the travel sector is testament to Equals' resilience and increasing focus on B2B and International payments services. While weaker gross profit and EBITDA margins have impacted profitability in H1/20, we see potential for an earnings recovery in H2/20 given cost reduction measures currently being undertaken. This should lead Equals to cash breakeven in Q4/20 and FCF positive by early FY21.
Companies: Equals Group Plc
FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
Sigma Capital (“Sigma”) has partnered with global alternatives manager EQT to deliver and manage a £1bn GDV private-rented sector (“PRS”) housing fund focused on Greater London. EQT will invest £300m equity, complemented by debt (including a Homes England facility), to build 3,000 homes in 5 years. Sigma will generate fee income as development manager, a recurring fee income stream from managing completed assets, as well as participation in returns via a minority co-investment (£16m) and a profit share. We estimate that the fee income alone is worth £45m to Sigma in the first five years: 50% of the current market cap. Crucially, this is a step up in AuM bringing a high quality long-term recurring earnings stream. We will reforecast following interim results (expected tomorrow) to provide full context.
Companies: Sigma Capital Group Plc
Trident Royalties Plc (AIM: TRR) has, this morning, announced the acquisition of a 1.5% Net Smelter Royalty (NSR) over the resourcestage Lake Rebecca Gold Project located in the highly prospective Eastern Goldfields province in Western Australia. The royalty package is being acquired from a private seller for a total consideration of A$8.0 million (c. US$5.63 million), comprising of A$7.0 million in cash and A$1.0 million in new ordinary shares in Trident. The acquisition is Trident’s fifth overall and its third gold deal. As per strategic guidance the company is moving fast assembling a diversified portfolio with a paying cashflow stream from iron ore and copper production and several strategic gold royalties with the potential for near term revenues. The market is paying attention with TRR shares up 49.8% since its IPO on AIM in June this year. There is clearly more to come with c. US$7.5 million of uncommitted cash as well as the potential for debt funding and the ability to use equity as acquisition consideration. The Lake Rebecca Gold Project operated and wholly owned by Apollo Consolidated (ASX: AOP), is located 150km ENE of Kalgoorlie in the Eastern Goldfields Province of the Yilgarn Craton. The Project, envisaged as a simple open pit operation, is close to existing gold infrastructure namely Saracen Mineral Holdings Limited’s (ASX: SAR) Carosue Dam Operation whose processing plant is in the process of being upgraded to increase throughput to 3.2 Mtpa.
Companies: Trident Royalties Plc
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
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
In line interim results to 30 June 2020 show the strength of this business amid a difficult environment. This is the first step in what should be an exciting growth trajectory toward a larger, scaled up business with high recurring revenues and ownership of the full supply chain in the personal injury and clinical negligence market for clients requiring long-term, risk-adjusted returns. We reiterate our TP of 50p, noting further upside potential as acquisitions are completed.
Companies: Frenkel Topping Group Plc
In June, faced with the task of replacing its longstanding portfolio manager, Alistair Mundy, Temple Bar Investment Trust’s (TMPL’s) board reiterated its commitment to a value style of investing. The board has now opted to hand the management contract to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. Value investing, where managers buy stocks that are valued more cheaply than market averages – based on measures such as price/earnings, price/book and yield – is deeply out of favour. The RWC team says that value stocks have never looked more unloved in the 30- odd years that they have been managing money. In their view, this makes it imperative that TMPL investors keep faith with the strategy and it also means this is an attractive entry point for new investors. One important change, however, is a cut to TMPL’s dividend to a level that the RWC team believes will be more sustainable.
Companies: Temple Bar Investment Trust
HSBC’s future should be clarified as soon as the US and China come back to the negotiation table. This will not happen before the US elections are over. In the meantime, HSBC will continue to be instrumentalised and its share price will remain under pressure.
Companies: HSBC Holdings Plc
The impressive full year 2019 results included some eye-catching numbers, including a record PBT of £40.1m (nearly 3x FY18 @ £14.3m), £620m of reserves acquired over 16 legacy deals, and $842m of (estimated) Contracted Premium in the Program business – on track to breach $1bn in FY20 as previously guided and $1.5bn-$2bn in 2022-2023.
Companies: Randall & Quilter Investment Holdings Ltd.
As anticipated, Record has confirmed a material uplift in AUME following the rebound in financial markets from April. We upgrade FY21E forecast EPS by +18%, with higher staff costs offsetting some of the benefit. We expect AUME growth to be more modest from herein. While no performance fees have been recognised over Q1/21 and will be harder to achieve due to Covid-19, any future recognition would have a materially positive impact on earnings. Covid has temporarily paused new client wins, but we expect further additions to come as conditions improve.
Companies: Record Plc
City of London has announced its full-year results for FY’20. As previously indicated, over a volatile year, FUM grew to $5.51bn. This led to a 4% increase in fee income to £33.3m. With cost control excellent, as usual, this led to a 9% increase in operating profits to £11.6m. Earnings were impacted by exceptional costs for the Karpus transaction and losses on the seed investments in the new REIT strategies, and fell 19% to £7.37m. The final dividend was increased from 18p to 20p, giving 30p for the full year. This leaves cover ahead of the target cover over a rolling five-year period of 1.2x.
Companies: City of London Investment Group Plc
Randall & Quilter has undergone a transformation over the last two years; simplifying its operating model, releasing cash, and developing an exciting Live (Program Management) business which promises to provide a key balance for its core Legacy business in terms of earnings visibility, capital use, and cash generation. The company's interim results reported several key milestones in both areas, notably the largest ever Legacy acquisition and significant future Gross Written Premiums for Program Management. An announcement which exuded optimism highlighted the potential for current year profitability to be strong and, possibly, ahead of expectations. Longer term growth is likely to come from a more balanced combination of Legacy and Program Management earnings with the potential for greater cash generation. Accordingly, consensus forecasts for adjusted 2018 EPS have increased by over 30.0% while both distribution and Net Tangible Assets per share moved higher.
FY20 Interim results