India, the world’s fifth-largest economy, has rebounded very strongly as COVID-related restrictions have eased; a fact that Gaurav Narain, India Capital Growth’s (IGC’s) investment adviser, believes has caught many observers by surprise. The key indicators suggest further recovery from here (India’s PMI was 56.3 for November) and Gaurav says that recent results have generally surprised positively. As was discussed in our last note, IGC’s manager, has enhanced its investment process and recent performance shows a marked turnaround in its returns relative to its competitors (IGC’s NAV was up 48.2% during the half year to 30 November 2020, versus an average of 25.3% for its peers – see page 19). Gaurav has been rebalancing the portfolio towards longterm growth stocks that are yet to fully recover. Investors have the opportunity to benefit, both from this recovery and from a narrowing of IGC’s discount, as this outperformance comes through. Should this not materialise, there is a redemption opportunity at the end of 2021.
Companies: India Capital Growth Fund
India, the world’s fifth-largest economy, has rebounded very strongly as COVID-related restrictions have eased; a fact that Gaurav Narain, India Capital Growth’s (IGC’s) investment adviser, believes has caught many observers by surprise. The key indicators suggest further recovery from here. India’s purchasing managers index (PMI) was 56.3 for November – a number above 50 points to an expanding economy. Gaurav says that recent results have generally surprised positively.
It was a remarkable second quarter with global markets staging the sort of comeback few would have thought plausible, at the end of March. With some countries still battling the first wave of infection and others seemingly headed to a second, not to mention what happens when governments start to remove direct stimulus measures, uncertainty still abounds.
Companies: NCYF EGL NAIT THRG GCP IGC HHI JLEN PCT VNH ASLI IBT HRI CSH SIGT
India Capital Growth’s (IGC’s) board is asking investors to back a continuation vote scheduled for 12 June 2020 and it is important that shareholders make their vote count. COVID-19 has depressed valuations to levels not seen since the financial crisis. The managers see substantial upside when market confidence returns and are asking for more time to deliver that. The board believes shareholders should support continuation. This reflects their confidence in the measures taken to turn performance around. Combined with potential mean reversion in small and mid-cap valuations, IGC’s share price could improve meaningfully.
India Capital Growth’s (IGC’s) board is asking investors to back a continuation vote scheduled for 12 June 2020 and it is important that shareholders make their vote count. COVID-19 has depressed valuations to levels not seen since the financial crisis. The managers see substantial upside when market confidence returns and are asking for more time to deliver that. The board believes shareholders should support the continuation of the company. This reflects their confidence in the measures taken to turn performance around, which we discuss in this note. When small and midcap valuations return to trading at long-term average valuations, IGC’s share price could improve meaningfully.
There was palpable shift in sentiment over the third quarter with the cautionary undertone perhaps best reflected by gold’s resurgence. Ongoing trade jockeying between the US and China did not help the mood and neither did the Argentine debt default in August. At the real economy level, manufacturing output has been trending lower across some of the major global economies.
Companies: AEMC BIOG SIGT IBT JEFI MHN CHRY MTE PSHD RSE SIR FJV LTI MVI SEQI SOND SLI EGL SUPP VNH CSH VSL BRLA UTL ADAM SOHO GPM TPOU JRS JLEN SEC IGC MPO LIV CCRGF THRL
India Capital Growth (IGC)’s portfolio was trading at just 12x estimated earnings for the year ended 31 March 2021 at the end of August. The manager says that when it last hit that level, in August 2013, IGC delivered a 197% return in sterling over the following three years. Indian stocks have begun to rebound since the end of August but there could be much more to go for and there is scope for IGC’s discount to narrow further.
India Capital Growth (IGC)’s portfolio was trading at just 12x FY21 earnings at the end of August. The manager says that when it last hit that level, in August 2013, IGC delivered a 197% return in sterling over the following three years. Stocks have begun to rebound but there could be much more to go for and there is scope for IGC’s discount to narrow further.
The Indian stock market slid in September, extending its run of losses in 2018, and has seesawed since. Higher oil prices fed through into inflation concerns; rising interest rates; a fall in the exchange rate between the Indian rupee and other key currencies such as the US dollar; and what appears to have been, a liquidity squeeze (where some companies found it hard to borrow money).
The Indian market slid in September, extending its run of losses in 2018, and has seesawed since. The main culprit was the oil price, which feeds through into inflation concerns, rising interest rates, a falling rupee and what appears to have been, a liquidity squeeze. A sharp fall in the oil price since mid-October may now be heralding a recovery in Indian equities. Against that backdrop, India Capital Growth (IGC)’s manager and adviser (David Cornell and Gaurav Narain, respectively) see real value emerging in the portfolio.
Earnings figures for the companies in India Capital Growth (IGC)’s portfolio are on an upward trajectory as India puts the disruptive effects of demonetisation and the introduction of the Goods and Services Tax (GST) behind it. Rising oil prices may be a headwind but India’s domestically focused economy should be relatively sheltered from a global trade war. Gaurav Narain, investment adviser to IGC, thinks we could see companies in his portfolio reporting average earnings growth of at least 20% per annum for the 2019 and 2020 fiscal years.
Earnings figures for the companies in India Capital Growth (IGC)’s portfolio are increasing as India puts the disruptive effects of demonetisation and the introduction of the Goods and Services Tax (GST) – both of which were covered in QuotedData’s March 2017 note – behind it. Rising oil prices may be a headwind but India’s domestically focused economy should be relatively sheltered from a global trade war. Gaurav Narain, investment adviser to IGC, thinks we could see the companies in IGC’s portfolio reporting average earnings growth of at least 20% a year for the periods ending March 2019 and March 2020.
Stock selection will play an increasingly important role in driving equity returns as ratesincrease in developed economies. The team managing the India Capital Growth Fund (IGC) believes that most companies in the fund’s portfolio are of higher quality than the benchmark index, while trading at similar valuations. The Indian economy is adjusting to two key policy events which slowed earnings growth in several companies over the last year. Earnings are now recovering from these shocks and the team expects companies in the IGC portfolio to realise total growth in EPS of c.58% over the next two financial years. We strongly believe that the long-term growth opportunities offered by India will be best captured by a fund like IGC. Given its historic performance relative to both the benchmark index and its peer group, we recommend that investors buy IGC for its exposure to Indian equity markets.
India Capital Growth (IGC) moved to the premium listing segment of the London Stock Exchange’s main market on 24 January 2018. The board considers that this market is more appropriate for IGC’s size and maturity, and provides a more fitting platform for its growth ambitions. It also believes that the move allows IGC to access an expanded investor audience, putting it on a par with its immediate peers, and that it will benefit from enhanced liquidity, and potentially an improved rating, building on last year’s narrowing discount.
India Capital Growth (IGC) moved to the premium listing segment of the London Stock Exchange’s main market on 24 January 2018. The board considers that this market is more appropriate for a fund of IGC’s size and maturity, and provides a more suitable platform for its growth ambitions. It also believes that the move allows IGC to access an expanded investor audience, putting it on a par with its immediate peers, and that it will benefit from better liquidity in its shares, and potentially an improved rating, building on last year’s narrowing discount (see pages 2 and 3).
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Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
What’s new: Ahead of the publication of the Group’s interims results for the six months to 31 December 2020, CLIG has released a detailed trading update which reveals: Group consolidated FuM of US$11.0 billion (£8.0 billion), which is twice the FuM of US$5.5 billion (£4.4 billion) at the Group’s year end on 30 June 2020; The merger with Karpus Management Inc ("KMI") added c US$3.6 billion from 1 October 2020; Investment performance across CLIG’s investment strategies was “strong”, following “significant discount narrowing” and “good NAV performance”; Rebalancing of client portfolios resulted in US$ 290 million of net outflows.
Companies: City of London Investment Group PLC
Secure Trust Bank’s (STB) pre-close update confirms the upbeat trends evident in its Q3 update in November. The strong lending rebound continued into Q4, loan repayment holidays are at low levels, and the balance sheet has remained robust and liquid. STB reiterated that its FY20 PBT would be well ahead of £9.7m (we forecast £13.0m). However, the new COVID-19 restrictions introduced in December 2020 have affected consumer loan demand into 2021, as well as the Motor Finance business. Management expects to be better placed to disclose its outlook for FY21 when STB’s FY20 results are released on 25 March. Our forecasts (FY21 PBT £31.6m, ROE 9.1%) and fair value (1,756p per share) remain unchanged.
Companies: Secure Trust Bank Plc
Finals (9mths to Sep-20) are in line with expectations. Recurring fee income from 3rd party AuM (incl. PRSR) ensured solid profitability. The balance sheet is well resourced with £26m to develop seed assets. With a positive outlook following the launch of the £1bn JV with EQT, we see accelerating returns over the medium term. PRSR is also on track to materially complete the initial 5,200 portfolio this year. Sigma trades below our 200p+/share intrinsic valuation – which attributes no value to AuM growth, which is a strategic priority.
Companies: Sigma Capital Group plc
Allied Minds has announced that Joe Pignato has decided to step down as CEO and from the board with immediate effect. However, he will continue to support the company as CFO for an interim period as the board continues its search for a permanent CFO. As part of a streamlining process, Allied Minds will now become a board-led company with no immediate intention to appoint a new CEO. The chairman and NEDs (experienced VCs and private company investors) will represent Allied Minds on portfolio company boards (including Federated Wireless, BridgeComm and Spin Memory) with an intention to accelerate realisations where possible.
Companies: Allied Minds PLC
Sirius Real Estate has been a stand-out performer within the UK listed commercial real estate sector over the last three years, delivering a total shareholder return of 107%. The shares also offer a valuable portfolio diversifier for investors, with a geographic focus on Germany, and a focus on pro
Companies: Sirius Real Estate Limited
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotech stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group of 25.3%. PHI is the top-performing trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, EV continues to be a significant theme and the manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
Companies: Pacific Horizon Investment Trust
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1
Vietnam Enterprise Investments (VEIL) is the largest and longest-established Vietnamese equities closed-end fund. The last quarter of 2019 and most of 2020 marked a period of portfolio repositioning for the fund. The team sold 14 holdings, and bought two, making the portfolio more focused (28 stocks at end 2020 versus 41 at end Q319) but better balanced by market cap as well as domestic and international business exposure. Over H220 the performance has picked up, with NAV total return of 28% versus 24% for the VN Index, after marginally lagging the benchmark over the past three years. The trust is well positioned for longer-term investors looking for an exposure to the fast-growing Vietnamese economy via a relatively large and liquid listed equities vehicle.
Companies: Vietnam Enterprise Investments
Volta Finance (VTA) posted a 5.7% decrease in NAV in 2020, recovering from the initial 32.4% drop in March. This was mainly supported by CLO equity tranches posting solid monthly returns in November and December 2020 at +11.0% and 9.7%, respectively. Volta had anticipated a downturn for some time and repositioned its portfolio into CLO equity over the last two years. During the early-2020 market turmoil, Volta’s manager focused on securing liquidity by fully deleveraging the portfolio and implementing cost-cutting initiatives. In December, Volta introduced a dividend policy to pay 8% of its NAV (in line with historical yields), which currently implies a prospective 9.2% yield on the share price.
Companies: Volta Finance
Acorn Income Fund was launched in February 1999, and has a split capital structure with both Ordinary shares which receive a high level of income, during last year dividends of 23p were paid representing an increase of 10.6% on 2019 and offer a flat yield of 7.3%. It also has Zero Dividend Preference shares (ZDPs) which mature next February and offer a GRY of 5.9%. To mirror the two classes in the capital structure, the portfolio also has two distinct pools of assets; with 70%-80% being invested in UK Small Companies being managed by Unicorn Asset Management and the balance of 20%-30% invested in an income portfolio, predominately Corporate Bonds which is managed by Premier Miton Investors. This two pronged approach has enabled the trust to generate a strong total return for Ordinary shareholders of 213% over the past decade with annualised total return of 12.1%. The recent strong annualised dividend growth of 10.8% over the past five years and the current discount of 14.9% on the Ordinary shares offers an attractive entry point.
Companies: Acorn Income Fund
Martin Currie Global Portfolio Trust’s (MNP’s) manager Zehrid Osmani reports that his ongoing focus on long-term structural, sustainable business models was beneficial for the fund’s performance during the coronavirus-led market sell-off in Q120, with portfolio companies undertaking measures to protect their brand equity. He is encouraged by a general increase in investor awareness of environmental, social and governance (ESG) issues, an area of research that Martin Currie has focused on for several years, as he believes that ESG improvements can lead to higher total returns for shareholders. MNP’s performance has improved since the appointment of Osmani in October 2018, and its NAV is now ahead of its benchmark over the last one, three, five and 10 years.
Companies: Martin Currie Global Portfolio Trust
Redde Northgate has come through the COVID crisis in very good shape so far. We expect minimal impact on the former Northgate business from “lockdown 2.0”, a strong recovery in profits and a re-rating as normality returns and Redde reverts to mean. We could see further useful earnings upside from acquisitions such as Nationwide and revenue synergies not yet included. The Group is transforming itself into a mobility business which is higher returning, more diversified and has sustainable compounding growth prospects.
Companies: Redde Northgate PLC
AuM grew by +43% (+16% organic) to £29.4bn in Q3. Investment performance was strong (+£2.5bn) as COVID vaccine news propelled markets. Net inflows were maintained qoq (£792m). Sustainable was the stand out performer (+24%). AuM has broken through £30bn post-period end. Better than expected AuM drives +3% FY21e EPS and +5% in outer years. Continued distribution efforts in Sustainable, Global Equity and Multi-Asset funds stands to catalyse earnings. Alongside flow momentum, 12x FY22e PER is not reflecting this upside.
Companies: Liontrust Asset Management PLC
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotechnology stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan index of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group (see page 23) of 25.3%. PHI is the topperforming trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, companies exposed to the growth in electric vehicles (EV) continue to be a significant theme. The manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
