Economic and Political Monthly Roundup January 2023

A collation of recent insights on markets and economies taken from the comments made by chairs and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.

Economic and Political Monthly Roundup January 2023

A collation of recent insights on markets and economies taken from the comments made by chairs and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.

Stable NAV, stable dividend & deep discount

Hipgnosis Songs Fund (SONG LN) released its Interim results for period ending 30 Sep 2022 this morning. The NAV is stable at $1.8312, which equated to a sterling NAV of 164.06p, based upon the £/$ exchange rate of 1.1162 as at 30 Sep. Based upon live £/$ exchange rate on 6 December of 1.2223 this equates to 149.87p today. With the shares trading at c80p this represents a deep discount of 47%. The Board have restated its intention to maintain the target dividend of 5.25p per Ordinary share for th

Hipgnosis Songs Fund

The SONG portfolio’s significance is not reflected by its wide discount to NAV…

Full Year results - NAV up 9.9%

Hipgnosis Songs Fund has today released its full year results for year ending 31 March 2022, the Operative NAV is up 9.9% YOY to $1.8491 (140.79p). NAV growth was mainly driven as a result of strong LFL streaming growth of 19.4% in H2 2021, in excess of the Valuer’s expectations, which resulted in an increase in expected future streaming revenue. NAV TR for the 12 month period was +14.2%, and since inception over the past 4 years +59.1%. Furthermore, adjusting for the FX movement since the end o

Ready player one

The last six months may seem like a lifetime to investors, with the jubilation of the post-COVID economy giving way to inflationary blues, and equity markets entering the worst bear market in years. The roller coaster is not over, however, with the Ukrainian crisis yet to be resolved, inflation rampant, and supply chains restricted. Oases have been hard to find. Many real assets, alternatives and infrastructure trusts have managed to generate positive NAV returns. However, as the risk-off ride a

A game of two halves

In the first article of our series examining the AIC Flexible Investment sector, we divided this widely disparate group of trusts into what we think are more comparable sub-groups, identifying four roughly similar types of strategy.

Copyright Royalty Board III Decision

The final decision on CRB III (see below) on streaming revenues is positive for Songwriters, Music publishing and Hipgnosis (SONG). The decision will result in addition revenues being paid to SONG over the coming periods. We view the ruling as positive and evidence of a continuing shift in the understanding of the value of a Songwriter’s contribution to a hit record and the willingness of industry stakeholders to recognise it. YTD SONG has de-rated significantly and currently trades on a 23.8% d

Music streaming subscriptions vs TV & Film

Over the past week, we have seen both Spotify and Netflix release updated paid subscription numbers for Q1 2022. Spotify announced that its paid subscribers have risen from 180m (Q4 ‘2021) to 182m (Q1 2022), despite the suspension of its 1.5m Russian subscribers. Whereas Netflix has reported a slight reduction in paid subscribers from 221.84m (Q4 2021) to 221.64m (Q1 2022). With several pay to view TV & film entertainment packages available to subscribers we believe that consumers will begin to

Hipgnosis Songs

SONG has continued to deliver, yet now trades at an attractive discount

KKR Kobalt securitisation read across

The data released as part of KKR’s Kolbalt Fund II securitisation provides strong evidence that Hipgnosis Songs Fund’s (SONG) portfolio valuation is undemanding. FTI Consulting (a different 3rd party valuer to SONG’s) has valued the Kolbalt portfolio on 23.9x historic revenues and a 6.25% discount rate. SONG’s portfolio is valued at 19x revenues and uses an 8.5% discount rate. In light of this information, SONG’s recent de-rating from a modest premium to a 7-8% discount feels unjustified. As the

Bargain hunt

We survey the discount opportunities in the market and update on the performance of our Discounted Opportunities Portfolio

Great expectations

Once upon a time I was lucky enough to spend a few days on a junket to Morocco, where I stayed at a hotel in Marrakech called La Mamounia, occupying the grounds of a former royal palace built by Sultan Mohammed ben Abdallah in the 18th century and described by Winston Churchill as ‘the most lovely spot in the whole world’. On my last night at the hotel I won approximately 52 million dirhams1 in the hotel casino and, feeling somewhat groggy the following morning after celebrating my victory unti

Nobody does it better

Hipgnosis Songs Fund has released its Interim Results for the period ending 30 September 2021 this morning, the Operative NAV is up 2.5% to $1.7242 (vs $1.6829 as at 31 March), based upon the $/£ exchange rate of 1.3268 (as at 15 Dec) this equates to a sterling NAV of 130p. This NAV has been calculated by the Independent Portfolio Valuer, using a discount rate of 8.5% (unchanged from the prior six months). Following the full deployment of the additional £156m of equity raised in July this year,

Morning Note – 22 April 2024

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

Benefits of scale set to materialise

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

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

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

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

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.

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.

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

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

Jupiter Green

Morning Note – 29 February 2024

Hardman & Co Insight - Asset managers had a poor 2022

Asset managers had a poor 2022: the S&P Composite 1500 Asset Management Index was down 22% and, according to the Investment Company Institute (ICI), worldwide mutual funds fell by 20%, from $76tr to $60tr. When bond and equity markets fall, the results are unlikely to be pretty: with revenues trending down and multiples contracting, there is a double whammy to contend with. So how do valuations shape up now, after a bullish start to the new year? The first chart is my favourite chart of asset m

PCI Pal - +25% FY23 revenue growth, FY24 growth of +28% reiterated

PCI Pal’s FY23 results show revenue growth of +25% to £14.9m, gross profit growth of +31% to £13.1m at a margin of 88%, and an outlook confirming robust momentum in H1 24. The FY23 results are as expected following the August trading update, and FY23 Total Annual Contract Value (TACV) is +23% yoy to £16.4m, with ARR +14% yoy to £12.6m due to £3.1m of contracts in deployment. We expect ARR will increase +35% and +31% to £17.0m and £22.2m in FY24 and FY25, as management lands and expands following