Impax Environmental Markets (IEM) offers exposure to mid- and small-cap companies the managers expect to profit from the transition to a more sustainable economy. The trust has performed very well relative to wider equity markets over the past five years – especially in share price terms. The managers have a disciplined investment process which they believe has helped them cope with the huge shifts in equity markets seen over the past 12 months. Impax are growth investors but have a strong valuation overlay. At times this leaves them open to the risk that they may lag very strongly performing markets. During 2020 most trading activity was focussed on the second half of the year, with the team trimming companies that had hit price targets. This has set the trust up well on a relative basis since the November news of an effective COVID-19 vaccine. Historical outperformance has been largely achieved by the portfolio delivering stronger underlying earnings growth relative to the wider index. For 2020, earnings declines were broadly in line with those of MSCI ACWI. However, the managers’ report having seen a positive outcome from Q4 earnings and a reversion to the portfolio’s premium growth expected in 2021. Valuations have risen; IEM’s portfolio currently has an average P/E of 26x, representing a premium of 38% to the market, compared to a historic average premium of 20%. These higher valuations are a factor in the managers’ reluctance to employ gearing, and IEM has net gearing of c. 2.5% currently. The managers’ report that they remain mindful of the risks presented by higher valuations and are aiming to position IEM for defensive growth.
Companies: Impax Environmental Markets
Europe, despite its intention to put past crises to rest, may end up being a major economic flashpoint in 2021. With sudden developments in Italian politics, battles over vaccinations and bonds that guarantee a loss, investors may be forgiven for expecting the once benign region to be the next big source of volatility. Yet there is an equal argument for a European renaissance with pan-European stimulus, attractively valued equities and increasing demand for sustainable investing; the argument is not quite as simple as it seems. In this note we aim to highlight key data-points and issues which are likely to determine near- and long-term returns from European equities. We hope to highlight the possibility that European stock markets may be full of opportunities, even if the macro outlook is cloudy.
Companies: JGC EAT JESC MNP BRGS JEO IEM
I once sat through a three-hour performance of Samuel Beckett’s Waiting for Godot at the Theatre Royal which, despite the best efforts of Ian McKellen and Patrick Stewart – both of whom I like very much – to this day remains one of the dreariest experiences of my life. It is on that note that we welcome 2021, with all the promise it holds, and return to our ‘top picks’ for 2020, a year which is probably best summarised (for those of us lucky enough to have been not directly impacted by the virus) by the Lord Chamberlain’s censor in his review of the first performance of Godot in 1955 – in which he described having to ‘endure hours [and hours] of angry boredom’. As always, these ‘picks’ do not represent advice, and should in no way be relied upon as such; they have been chosen on a lighthearted basis with no thought given to their suitability for your personal circumstances.
Companies: TFG IPU IEM HOT OCI BRWM JRS RICA BHMG BRLA JMI GPM MINI SMT
Like childbirth, we think 2020 will be remembered for what it produced rather than the agony of the experience. Events have conspired that, rather than the sickly and unpopular child it once was, sustainability as an investment theme has become a thriving, healthy teenager which seems destined for great things (note the torturous lack of gender specifics in this sentence, another thing we can thank 2020 for). As with many trends that were already in progress at the start of 2020, the speed at which this particular infant has grown has accelerated this year. I for one didn’t begin the year thinking I’d be using a bamboo toothbrush by the end of 2020. The recent news that Keystone Investment Trust is (subject to shareholder approval) switching strategy to Baillie Gifford’s sustainable Positive Change strategy provides further evidence that this is a trend that is gaining momentum.
Companies: JGC MWY BERI MNP ATST MHN IEM PAC JFJ HNE
Having been one of the forerunners of the sustainable investment theme, Impax Environmental Markets (IEM) now finds itself in the epicentre of what we believe is strengthened secular growth post-COVID-19. The trust seeks to invest in companies which will profit from the transition to a more sustainable economy. An investment theme that seems likely to run for many years yet. As we discuss in Portfolio, IEM offers a specialist exposure to mid and small-cap companies around the world within four broad overarching sectors: new energy, water, waste/resource recovery, and sustainable food and agriculture. Interest from generalist investors this year in these areas has resulted in multiples expanding for the portfolio as a whole. On the one hand this might mean enhanced risks for IEM, or on the other hand it might reflect more aggressive ambitions by governments around the world to achieve ‘net-zero’. This increased interest from investors, combined with strong earnings growth means 2020 has been a hallmark year for IEM. As we discuss in Performance, the trust has outperformed the benchmark by c. 11.5% (to 18/11/2020), and the trust has been a strong issuer of shares with the premium to NAV standing at 9.5% currently. IEM’s portfolio has a definite growth bias. However, the managers are valuation-driven in their stock-picking approach, which has enabled them to reposition the portfolio since COVID-19 to improve the portfolio’s quality and growth characteristics. IEM’s net gearing remains at c. 2.5% reflecting the managers’ optimism, balanced by caution on the portfolio’s valuations relative to the wider equity market.
ESG investing, Environmental, Social, and Governance respectively, is much in vogue and has ended up weaving its way into almost every manager’s investment thesis, though with varying degrees of genuine integration. In this article we shine light on where ESG originated from, how Kepler Trust Intelligence goes about analysing ESG, and examples of trusts which demonstrate both good ESG credentials but also the nuances of assessing ESG.
Companies: NESF BERI UKW TRIG IEM HNE MWY JGC
“What a difference a quarter makes”, as Dinah Washington’s accountant used to sing. When last we updated on our investment trust picks for 2020 at the end of March, it is fair to say that collective optimism was thin on the ground. However, we all retained ultimate conviction in our selections (or else had grown so despairing at the market environment that we had settled into a kind of other-worldly fatalism), keeping faith that our initial logic had been ultimately sound. This has proved a good decision, with widespread rallies in financial markets and strong performance subsequently from the majority of our investment trust picks. All it took was a little optimism and long-termism from us, not to mention untold trillions of stimulus from governments and central banks around the world. It is fair to say that whoever wins this competition at the end of the year will be primarily thanking Jay Powell… Indeed, so strong has been the rally that two of us are actually in profit for 2020, without – even indirectly – enriching Elon Musk (thus meeting your author’s definition of an ethical investment). We can see below the contrast between Q1 and Q2 returns. They say understatement is a billion times better than exaggeration, so suffice to say there have been some fairly large divergences between the two quarters! And yet some discount opportunities seem to remain, with an average discount of 23.4% across our picks (albeit skewed somewhat by the massive 61.3% discount on Tetragon).
Companies: BRWM IEM JRS OCI TFG NBPU JMI
2020 has so far proven to be the latest episode in a long period of technology outperformance, as we observed in this article. Over the past decade, technology-related companies have tended to perform like consumer staples or defensives on the downside, and like high-growth discretionary stocks on the upside: an ideal combination from the investor’s point of view. As a result the indices (and fund managers’ portfolios) are increasingly correlated to ‘big tech’. How do investors who want a diversified portfolio deal with this, and how can they introduce more diversification into their portfolios, without reducing the potential for growth? The first step, of course, is to use specialist funds to diversify one’s holdings of individual technology stocks. Allianz Technology Trust (ATT) and Polar Capital Technology Trust (PCT), for instance, are both run by tech specialist managers. But ATT differs from PCT in that the portfolio is significantly more concentrated and, at times, has greater exposure to mid-caps. This combination of features means that ATT can be more volatile and deviate from the benchmark to a greater extent, from time to time. Nonetheless over the last five years, these two aspects of ATT have paid off for its shareholders – having outperformed PCT by a total of 15% in NAV terms. While both trusts have delivered strong returns relative to their Dow Jones World Technology benchmark, both of their fortunes are also inextricably linked to big tech. If the biggest technology companies catch a cold, then the wider technology sector will likely catch it in the short term. At the same time, as we conclude in this article, there are good reasons why the quality characteristics which technology stocks display give them the potential to outperform for years to come. But nothing lasts forever and, while we wouldn’t bet against technology performing strongly in absolute terms over the medium term, it might be that sector leadership could pass elsewhere.
Companies: ATT PCT SMT BBH UKW IBT MHN IEM BERI MWY
Impax Environmental Markets (IEM) seeks to invest in companies which will profit from the transition to a more sustainable economy; a concept that is now firmly accepted but has not always been. Underpinned by strong earnings growth from the underlying portfolio, NAV performance has been strong historically. Over five years the trust has delivered NAV total returns of 82%, compared to the MSCI ACWI total return of 70.7%. 2020 has been something of a rollercoaster ride, and IEM has not been exempt from the impact. The managers note that the trust’s underperformance during February and March was due largely to small and mid-cap exposure; but also to cyclical exposures in locked down industries, especially automotive, as well as underweight healthcare and the US dollar. Positives have been the exposure to renewables, software and energy efficiency. As we note in the Portfolio section, lessons learned from managing the trust over the past 18 years have enabled the team to hold their nerve in the volatile conditions, and helped the trust to rebound more strongly than the market. IEM’s portfolio has a definite growth bias. However the managers are valuation-driven in their stock picking approach. The market volatility enabled them to initiate positions in several new companies, which previously had valuations that the team considered too rich. A combination of new holdings, as well as sticking to fundamentals, has enabled IEM to bounce back strongly – which we discuss in the Performance section. The managers believe that COVID-19 provides more long-term support for environmental protection, as demands for ‘Building Back Better’ seek to embed low carbon energy systems and cleaner air in cities.
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 KKVX FAIR ICON RSE CRS GWI USF DIGS
An Englishman, an Irishman and a Scotsman walk into a bar. But they can’t get past the front door because it’s been boarded up. And then they get floored by a soldier in a hazmat suit who is now part of a unit patrolling London because there’s a ban on public gatherings. It’s funny because it’s true, right? We aren’t quite at the stage where troops are patrolling London’s streets, but back in January, when we published our ‘top picks for 2020’, nobody could’ve predicted that by now we’d be locked in our homes, banned from meeting our friends and relatives, and facing the indefinite cessation of most economic activity until further notice. When all’s said and done, it’s been one hell of a month. In any sort of broad market move, some share prices move outside of what we might consider a rational boundary. As investment trust experts, it is our job to try and point these out. Clearly the advent of the apocalypse has made this job harder; the minute a share price or discount reaches a particular level, by the time we are in a position to publish anything, time (and prices) have moved on. So, with our feeble excuses made, we now return to the selection of trusts we put forward in January as our ‘top picks for 2020’; when we were all bored of headlines about Brexit, and snug behind the magical wall that protects us from respiratory conditions found only in far-flung parts of the Orient. Readers of a delicate constitution are advised to look away now.
Companies: IEM TFG NBPU BRWM OCI
Last year the five-strong team at Kepler Trust Intelligence – including analysts and mere mortals – chose a trust each as our personal ‘top pick’ for 2019 and we will be reporting back on the performance of those trusts in early January, once the final numbers are in for this tumultuous year. In the meantime I can reveal that an investment of £5,000 spread equally across our selections, made on 1st January 2019, would at the time of writing be worth a cool £6,349 today and that performance puts us comfortably ahead of an equivalent investment in a passive fund; the iShares MSCI World ETF being our example, £5,000 invested there being worth £6,280 today. And so, buoyed by that success and a surfeit of mince pies and Babycham, the team at KTI – our ranks now swelled to seven – are back with more predictions for 2020, like lucky first-timers, staggering drunk on glory to the next roulette table with a pocket full of chips, confident in our mastery of the great game. For the benefit of those who take life too literally, it should be noted that this is a light-hearted article and these selections do not represent advice or any form of prediction. Don’t buy these trusts and then blame us if they don’t perform well – we aren’t telling you that they will and this isn’t ‘proper’ research.
Companies: JMI IEM TFG BRWM
The central investment thesis behind Impax Environmental Markets is that the global economy is in transition from a depletive economic model (growth which ignores negative social and environmental costs), to a sustainable one, in which growth is achieved with improved social and environmental outcomes. Impax believes that companies which help solve these huge, global problems should outperform those which don’t. IEM’s objective is to achieve strong financial returns from it’s investments. It has not been designed as an ESG fund, but shares many to ESG-thematic funds. Aside from the investment thesis and specialist sector focus, the managers also integrate ESG fully into their investment process. As we discuss in our new ESG section, the managers see ESG analysis as one of the most effective ways of mitigating risks in investments. They observe that the speed of change in markets is accelerating, and so fully understanding the environmental, social and governance risks is one of the key contributors towards finding successful long-term investments. IEM’s portfolio companies must have at least 50% of their revenues exposed to what the Impax team view as “environmental markets”. Currently around half of the portfolio is invested in energy efficiency and water infrastructure sectors. These are two key pillars of Impax’s investment thesis. Several countries and global companies (with Nestlé being the latest) have declared that they will be net zero emitters of carbon dioxide by 2050. Any attempts to achieve this will require significantly enhanced efficiency of our current energy consumption. Cape Town last year, and Chennai this year are both cities which have experienced unprecedented droughts and prolonged water shortages, illustrating the need to improve the conservation and efficiency of water supplies around the globe. Impax believes that many of its investee companies will be the ones that help alleviate many of these problems. Underpinned by strong earnings growth from the underlying portfolio, NAV performance has been strong. Over five years, the trust has delivered NAV total returns of 81.1%, against the MSCI ACWI total return of 76.6%. Shareholders have actually done significantly better than this, on account of the discount having narrowed, which means that the share price total return has been 109.2% over the same period. The trust currently trades on a premium of 1.7% (11 September 2019). IEM has seen a significant improvement in demand for shares, such that the board has felt able to bring in its discount target from 10% to an expectation that it will seek to maintain the share price at or close to NAV (in normal market conditions).
Whilst not everyone is yet declaring a “climate emergency”, most people now recognise that the global economy is not on a particularly sustainable trajectory. Recent news from Nestle – that they aim to be “net-zero” greenhouse gas emissions by 2050 - shows that what might have seemed a “fringe” idea a few years ago, is now mainstream. According to a 2018 YouGov survey, 62% of people believe Government are doing too little to prepare for and adapt to the impacts of climate change. 71% believe fossil fuel companies should help pay for damage caused by extreme weather events, and (perhaps of most immediate relevance to our readership) 62% of people are interested in a pension fund or financial institution that considers the environmental impact of the companies it invests in (Source: YouGov 2018). At the same time, consumers are increasingly aware of their buying power, and the influence it can have on companies’ corporate behaviour and supply chains. Allied to this, investors also recognise the effect their investing behaviour can have on companies they invest in. Increasingly, they look to the managers of the funds they invest in to engage with company management and see this as a mechanism by which positive change in investee companies can be brought to bear. Many established funds and ETFs offer “ethical”, “green” or another shade of socially responsible investment. However, these labels don’t in our view really reflect the full range of what is potentially on offer. We understand the broad concept as “ESG Investing” – environmental, social, governance. As a theme or concept it is clearly rising in popularity - Google searches for ‘ESG investing’ have risen rapidly over the past decade, with a compound annual growth rate of 73%, almost double that of ‘passive investing’ (42%). Many fund managers (or their marketing departments) have been jumping on the bandwagon, and ESG now features in many presentations where perhaps as recent ago as last year, there had never been any mention! Despite its apparent popularity, many investors do not have a fixed idea of what they really mean when they say they want funds with better ESG credentials. For example, some investors may mean that they want a very narrow focus in the types of companies they invest in – for example supporting renewable energy, and thereby generate strong returns but also help finance the shift to a less carbon intensive economy. Others may want to invest in companies which are leading the way in reducing (or actively addressing) the harmful effects of their business operations’ externalities, meaning that they are comfortable investing in companies and industries that pollute – but only if they are “getting their act together”, trying to reduce negative externalities, or are “best in class” in trying to minimise their negative effects. Others may want their fund managers to actively engage with company managements, and try to influence the strategic direction the company is taken on. Lastly, investors may only want to own companies with what they see as a correct gender-balance, or have policies which prevent child labour within their supply chains. There are many different ways of interpreting what ESG really means. The job of investors looking at ESG must be to find a fund or investment trust which is aligned with their own specific values, irrespective of the marketing document or industry sector it belongs to. We believe an increasing number of “mainstream” funds will be suitable for ESG investors, depending on what their requirements are. How, then, do investors find them?
Companies: IEM UKW MNP
“Active ownership” is one part of this strategy that crops up across all three of the broad ESG strategies and is an increasingly “hot topic”. Traditionally, many institutional investors have neglected to engage with corporates, but with a growing awareness that owners of businesses have responsibilities not only to the ultimate underlying investors, but also to other stakeholders. As described above, it involves the use of shareholder rights to support good practices, normally through proxy voting and corporate engagement. Ultimately, “engagement” is taken to its fullest extent where the investment manager owns a majority of a company, such as with private equity, of which there are plenty of listed vehicles. An example of a trust that utilises ESG engagement is ICG Enterprise. ICG, the manager of ICG Enterprise, believes that companies which are successful in managing ESG risks while capturing ESG opportunities will outperform over the longer term and the ICG Enterprise investment team include ESG screening in their due diligence on new managers and co-investments before they invest. One of the higher profile trusts which fit many of the “impact” strategies is Impax Environmental Markets. The trust has been managed by the same individuals since launch, co-managed by Bruce Jenkyn-Jones and Jon Forster. The trust seeks to invest in companies which will benefit from the ever- increasing need for resource efficiency, focusing on companies which operate in the water, energy, waste management and food / agriculture sectors. Impax aim to “anticipate the second bounce of the ball” and enable investors to benefit from superior earnings growth generated by companies exposed to resource efficiency, but also benefit from a re-rating from being early into specialist small and mid-cap companies located all around the world. A byproduct of their investment is the impact that is felt, illustrated by the graphic below.
Companies: ICGT IEM PAC
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Since the FY2020 results announcement in December 2020, the UK has gone into a prolonged lockdown that has significantly reduced high street footfall, not to mention the international travel restrictions impacting Ramsdens FX business. Against this backdrop the group has delivered a resilient performance in 1H21. Despite most stores remaining open, the group expects to report only a small loss in the half helped by prudent cost control. Moreover, the group’s balance sheet remains strong with c.£15m of cash and an undrawn £10m credit facility. Given today’s update and continued uncertainty regarding international travel, we now expect FY2021E PBT of £1.0m (from £3.9m). We continue to believe in a strong recovery once restrictions are lifted and maintain our TP of 162p. However, given the recent share price performance we move to a HOLD rating.
Companies: Ramsdens Holdings PLC
Wickes to demerge from Travis Perkins and list on the Main Market. Expected 28 April. Advance Energy to complete an RTO on AIM indirectly acquiring up to 50% of Carnarvon Petroleum Timor which holds a 100 per cent. working interest and is the contractor under the Buffalo PSC, offshore Timor-Leste. Carnarvon Petroleum Timor is a subsidiary of ASX listed company, Carnarvon Petroleum Limited. The net proceeds of the Placing of approximately £20.01m (approximately US$27.51mm) will be used to fund the Acquisition. Due 19 April. NFT Investments plc is an investment company that specialises in non-fungible tokens (NFT). Has applied for admission to the Access segment of the AQSE Growth Market. No funds being raised. Due 16 April. Thor Explorations (TSXV:THX) seeking a secondary listing on AIM. The Company is targeting Admission during Q2 2021. Segun Lawson, President & CEO, stated: “Thor Explorations has advanced significantly, in both project development and capitalisation since the acquisition of Segilola in 2016. This year, the Company is well positioned to achieve two major milestones with the commencement of gold production at Segilola in Nigeria and a maiden resource at Douta in Senegal, as well as continuing to progress our highly prospective Nigerian exploration portfolio on the Ilesha Schist belt.” MAST Energy Developments (MED) is to IPO on the Standard List on 14th April 2021 under the ticker MAST. The company has raised £5m giving a market capitalisation on listing of c. £23m. MED is currently a 100% subsidiary company of AIM quoted, Kibo Energy*. MED was established to acquire and develop a portfolio of flexible power plants in the UK and become a multi-asset operator in the rapidly growing Reserve Power market. PensionBee has confirmed its intention to float on the High Growth Segment of the Main Market of LSE. The online pension provider had approximately 130,000 Active Customers and £1.5bn of assets under administration, in each case as at 28 February 2021. The Offer will comprise new Shares raising gross proceeds of approximately £55m and existing Shares to be sold by certain existing small minority shareholders of up to £5m. None of the founders, directors or members of senior management of PensionBee are selling any existing Shares. Expected in April. Imperial X (AQSE:IMPP) to join the Main Market (standard). It is also proposed that on Admission to the Official List, the Company will change its name to Cloudbreak Discovery Plc. With effect from Admission, Imperial X will hold equity positions and royalties in a variety of projects in the natural resources sector across multiple jurisdictions, primarily in the Americas and Africa. The Company is proposing to raise up to £1.5m by way of placing of new Ordinary Shares to support further prospect acquisitions. Current Mkt cap £4.7m Expected April 2021. Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance.
Companies: GOOD FIH SRT NFC RFX ARCM ACRL EQLS ORPH VRS
Following a positive EGM statement on 16 March, today’s 1Q21 trading update highlights a record quarter for the number of active customers with a further 89k new customers at attractive ARPU and AUAC. This has resulted in revenues more than doubling QoQ to $203m, helped by lower customer trading losses, with EBITDA up six-fold to $121.7m. The performance is a testament to the strength of Plus500’s technology and has been achieved as the group continues to manage high platform volumes and further drives towards its goal to be a multi-asset fintech group from solely being focused on CFDs. We increase our FY21 and FY22 EPS by 7% to reflect the strong performance resulting in the shares trading on just 9.8x CY21 PE. We believe that the benefits of the group’s scalable proprietary technology and marketing algorithms are not reflected in the share price. Hence, we reiterate our BUY rating and increase our TP to 2090p from 1945p.
Companies: Plus500 Ltd.
Belvoir has reported a very strong set of results, ahead of pre-Covid expectations, driven by a resilient performance in the Property division and strong growth in Financial Services. The relatively low risk and capital light nature of the group’s franchise model and its ability to attract and motivate entrepreneurs in the sector continues to deliver strong returns. Cash flow remained strong, with net debt reducing to £3.7m from £6.9m, post a £2.1m acquisition and £1.9m dividend cost. With Government policies set to keep the housing sector moving until at least September 2021 and Belvoir’s long-term growth potential undiminished in a large, fragmented market, we have upgraded our FY 2021 EPS forecast by 11% and target price from 233p to 285p.
Companies: Belvoir Group PLC
The UK market showed a continued recovery in the first quarter albeit the indices are still well short of their all-time peaks, unlike many of their international peers. The FTSE 100 has risen by 1,186 points (21.4%) since the end of October and the FTSE 250 by 4,304 points (25.0%). The comparable performance since the start of the year is less spectacular- the FTSE 100 has risen by 253 points (3.9%) and the FTSE 250 has risen by 1,070 points (5.0%). The factors behind the sustained rally are familiar. The belief that the roll-out of the vaccine and some relaxation of lockdown limitations will lead to a significant economic recovery, compared to the collapse seen in the first half of 2020, due to lockdowns. Indeed, the recent economic picture is becoming more optimistic than previous expectations. According to the ONS, the economy grew a little more than initially estimated in Q4 last year. This means GDP for 2020 as a whole contracted by 9.8%, revised up marginally but still the worst contraction on record. Markets, in general, have focused upon the potential scope and extent of the recovery. The sectors and stocks that have outperformed have been seen as ‘recovery’ plays with a rotation from stocks seen as ‘lockdown’ winners into those set to benefit from the ‘unlocking of society’ and/or exposed to the consumer. We expect 2021 will continue to be a “stock-picker’s” market. The sharp increase in the household savings ratio in Q4 highlights the scope for a recovery driven by expenditure. As further lockdown limitations are lifted, evidence of this growth will help to underpin the more optimistic outlook for Q2 and beyond.
Companies: AMYT ARBB BPC BAG BVC BEG BONH BLVN BRSD CML CWK CRPR EYE ECHO FDM FAR FA/ GPH GSF HUW INSE JDG KAPE KP2 MACF MPAC MNZS NESF NBI OTMP OBD PREM QFI RUA SCS SEN SOS SUR TON TOU TXP TGL TCN UEM VLS WYN
NFT Investments plc is an investment company that specialises in non-fungible tokens (NFT). Has applied for admission to the Access segment of the AQSE Growth Market. No funds being raised. Due 16 April. Thor Explorations (TSXV:THX) seeking a secondary listing on AIM. The Company is targeting Admission during Q2 2021. Segun Lawson, President & CEO, stated: “Thor Explorations has advanced significantly, in both project development and capitalisation since the acquisition of Segilola in 2016. This year, the Company is well positioned to achieve two major milestones with the commencement of gold production at Segilola in Nigeria and a maiden resource at Douta in Senegal, as well as continuing to progress our highly prospective Nigerian exploration portfolio on the Ilesha Schist belt.” MAST Energy Developments (MED) is to IPO on the Standard List on 14th April 2021 under the ticker MAST. The company has raised £5m giving a market capitalisation on listing of c. £23m. MED is currently a 100% subsidiary company of AIM quoted, Kibo Energy*. MED was established to acquire and develop a portfolio of flexible power plants in the UK and become a multi-asset operator in the rapidly growing Reserve Power market. PensionBee has confirmed its intention to float on the High Growth Segment of the Main Market of LSE. The online pension provider had approximately 130,000 Active Customers and £1.5bn of assets under administration, in each case as at 28 February 2021. The Offer will comprise new Shares raising gross proceeds of approximately £55m and existing Shares to be sold by certain existing small minority shareholders of up to £5m. None of the founders, directors or members of senior management of PensionBee are selling any existing Shares. Expected in April. Imperial X (AQSE:IMPP) to join the Main Market (standard). It is also proposed that on Admission to the Official List, the Company will change its name to Cloudbreak Discovery Plc. With effect from Admission, Imperial X will hold equity positions and royalties in a variety of projects in the natural resources sector across multiple jurisdictions, primarily in the Americas and Africa. The Company is proposing to raise up to £1.5m by way of placing of new Ordinary Shares to support further prospect acquisitions. Current Mkt cap £4.7m Expected April 2021. Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance.
Companies: RCN NCCL PRIM ORR AVCT TLY RENX CMCL ARO
Premier Miton’s 2Q21 trading update highlights the continued progress in both improving performance and AUM mix. Following a strong first quarter, 2Q21 AUM increased by a further 5% QoQ to £12.6bn (LibE: £12.1bn) driven by a second successive quarter of net fund flows and good market performance. Demand for UK equity-focused strategies is finally increasing and we expect the group to outperform given its strong track record and overweight position. Recent changes, including lower costs for investors, should also help turnaround the recent fund outflows in multi-asset funds. The strong 1H21 performance and good start by new funds gives us confidence that the group is well positioned for long-term growth. We raise our FY2021E EPS by 5% which results in our TP increasing to 188p (from 179p) offering 31% TSR.
Companies: Premier Miton Group Plc
A strategic update from NewRiver shows intent to reshape the business, leaving it well capitalised and fit for the future of physical retail. Management is exploring the divestment of Hawthorn via an IPO, currently c.25% of the group asset base. Successful execution will help reduce LTV to within management’s target range, helping relieve any covenant concerns. Together with further non-core disposals, this will leave NewRiver with capital to transform ‘regen’ assets to create long-term value. Covid has proven NewRiver’s Retail resilience, which comes through again in its operating metrics. The shares now trade on an unadjusted +2yr fwd NAV of 33%, a wider discount than Hammerson, which to us looks wrong given the very different growth outlooks.
Companies: NewRiver REIT plc
The latest UK Power Market Outlook from Bloomberg New Energy Finance shows low UK wholesale electricity prices over the next ten years, falling below £20/MWh by 2030. However, we expect actual price outturns to be higher due the circular impact of lower prices on new capacity investment. While prices may weaken, we think they are unlikely to match the BNEF forecasts. NextEnergy Solar Fund benefits from its non-amortising debt which gives the company a cash cushion with which to maintain dividends even in the face of weaker prices.
Companies: Nextenergy Solar Fund
Duke is raising up to £35m (gross) in new equity to deploy into new royalty partners and a follow-on investment. Crucially, the equity enhancement allows the group to make full use of the recently enlarged £55m Honeycomb debt facility for deployment. The resulting c£73m of available liquidity should see the group scale up to c£165m of invested capital and significantly diversify and secure the portfolio's royalties and lead to a notable step up in DPS toward pre-COVID-19 levels.
Companies: Duke Royalty
In the past few weeks, all the listed multi-national pharmaceutical companies have reported results for 2020, which has given us the opportunity to update our industry statistics and drug database. This report provides the first, snapshot publication of global and US rankings of the top 20 drug companies for 2020. Comparisons are made with historical data to show how different company strategies have evolved. In addition, summary analysis has been provided for the sales evolution of therapeutic biopharmaceutical drugs, which saw sales rise 5.6% to $245bn, representing 26% of the market, driven by antibody-derived drugs.
Companies: AVO ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PXC RECI STX SCE TRX VTA YEW
Companies: ARG ADT UKOG PHAR UNG CYAN FA/ SNX VRE SHED
Augmentum Fintech has sold its stake in Dext (fka Receiptbank) to private equity firm Hg for £10.5m, delivering a £3m gain on sale equating to a 30% IRR. This is Augmentum’s first exit. An additional €2m investment has been made into existing portfolio company Grover to support the continued roll out. The current Series B round implies a £3.2m uplift for Augmentum’s stake. Together, these gains represent c.4p/share in NAV terms. We see further value creation opportunity in Augmentum’s curated portfolio, capturing the digitalisation and structural evolution trends in the Financial Services space.
Companies: Augmentum Fintech
When finnCap issued a very positive trading update in early March, it noted that it retained a good pipeline with deals still to close in the remaining weeks of its financial year to the end of March 2021. The post-close update confirms that the Group did, indeed, secure further revenue following stronger performances than expected across all its businesses. It states that Total Income will be around £47.3m – well ahead of the previous view of ‘in excess of £43m’ and an 83% increase on the prior year. The M&A team maintained its strong financial Q4 performance while equity and debt activity continued to flourish. Reflecting the higher anticipated outturn, we upgrade our revenue and EBITDA estimates for FY 2021E by 9% and 11% respectively. CEO Sam Smith confirms that the Group’s Q1 2022E pipeline is ‘healthy’ and we see finnCap enter its new financial year with a set of businesses that are performing strongly, backed by a robust balance sheet.
Companies: finnCap Group plc
Urban Logistics REIT (“ULR”) has secured two assets at aggregate £21.7m cost equating to a 6.14% NIY. Both assets have long unexpired lease terms and opportunities for rental growth, as well as scope for value creation through asset management. 99% of rents for the Jun-21 quarter have already been collected. ULR offers a 6% dividend yield on the annualised returns from capital deployed in FY22e. With the price at NAV, we think that this represents an attractive entry point into an active value creation play with strong structural tailwinds.
Companies: Urban Logistics REIT plc