There is some evidence that, in recent years, the rise of passive funds has caused investment managers to become increasingly concentrated, endeavouring to be considered active managers as opposed to ‘closet trackers’. The most active trusts tend to generate the highest levels of alpha, as we have often noted, and on average managers have been decreasing their number of holdings in the hope of achieving this. Academic support for taking this approach has been provided by Martin Cremers and Antti Petajisto, who have shown evidence that portfolios with higher ‘active share’ tend to beat their benchmark net of fees whereas the least active tend to match their benchmark index performance before fees, and under-perform after fees. In this article we assess how the trusts that have been increasing their concentration have performed in the most recent market corrections. We then assess the performance of the most concentrated trusts, including investors in both small and largecaps, through the COVID-19 crash, and compare how they have done relative to the broader investment trust universe and their peers. Our research shows that more concentrated funds are not necessarily more susceptible to underperformance in a falling market.
Companies: MNP MNL BAF FGT TIGT
Companies: MNP MNL BAF
Martin Currie Global Portfolio Trust (MNP) aims to offer investors a portfolio of some of the most exciting, high-growth companies across the globe. Zehrid Osmani has managed the portfolio since 2018, searching for undervalued, high-quality companies that can offer investors consistent returns. He is unconstrained in his approach and favours a highly concentrated portfolio. Currently MNP is made up of just 30 holdings, with the top ten making up more than 40% of the total NAV. The team at MNP go into great detail throughout the investment process, which is built around a proprietary toolkit, narrowing the universe of around 3000 companies down to 500. The portfolio has the second highest exposure to growth companies of any in the sector (73.4%), most of which are large cap companies (75.7%). Since taking over the portfolio, Zehrid has been able to generate returns in excess of the peer group and benchmark, as we discuss in the Performance section. Under his management the trust has achieved NAV total returns of 26.1%; which is considerably more than the previous benchmark FTSE World (13.2%) and almost quadruple the AIC peer group’s returns of 7.1%. Performance in 2020 has been strong, and the trust protected capital well through the February and March downturn, before rebounding in April and May. Typically the trust trades at around par, with the board enforcing a zerodiscount policy. Currently the discount is around 1.8%, in comparison to a sector average discount of 4.4%. [N.B. As of February 2020 performance has been measured relative to the MSCI ACWI, which includes emerging markets, unlike the FTSE World Index.]
Companies: Martin Currie Global Portfolio Trust
Martin Currie Global Portfolio Trust’s (MNP’s) performance has improved considerably following the appointment of manager Zehrid Osmani on 1 October 2018, since when he has refined the trust’s investment process. MNP has now outperformed its benchmark over the last one, three, five and 10 years. The manager focuses on high-conviction positions and his long-term horizon helps navigate short-term market volatility. MNP has performed well despite a lack of exposure to the high-profile, large-cap US technology stocks that have led the market. Osmani has generated alpha by investing in some mid-cap stocks that are not particularly well followed, such as US company Masimo (non-invasive patient monitoring technologies), which is now the largest position in the portfolio.
Last year we published a number of studies showing that investment trust managers were counteracting the rise of passive vehicles by further concentrating their portfolios and using the advantages of the closed-end structure such as gearing and the ability to pay income from capital more aggressively. New analysis from the team at Kepler shows that that over the past five years, trusts which have seen the greatest reduction in number of stocks in portfolios have generated the highest levels of alpha. Similarly those trusts which reduced their turnover the most have generated a higher alpha compared with those which haven’t. This corroborates the academic literature on the subject. In our view this finding is a strong indicator of the future direction for investment trusts in combating the threat from passives. In this article we dive into the data, which shows that having more active portfolios has delivered strong benefits for shareholders. We also consider the reasons why the investment trust universe remains a place that active managers can outperform. Finally we highlight three trusts that have most recently taken decisive steps to become significantly more active.
Companies: MNP MNKS HNE MRC FSV JAM
Martin Currie Global Portfolio Trust (MNP) has been managed by Zehrid Osmani since 1 October 2018. He has refined the investment process, taking fundamental analysis deeper, aiming to enhance stock selection and the trust’s returns, and says that advanced risk analytics enable the portfolio to be managed in a more accurate way. The manager aims to build a high-conviction, but diversified fund of quality stocks in terms of superior top-line, profit and free cash flow growth, with high returns on capital, and room for further improvement. Whatever the market environment, Osmani is confident on MNP’s prospects versus the benchmark on a five-year view.
nvestors are increasingly turning to global funds. We suggest that concerns around Brexit are most likely leading investors to seek diversification overseas. In terms of retail sales the global sector has been comfortably the most popular among investors over the past few quarters. In 2018 global funds had close to twice the level of retail sales of any other sector, as can be seen in the chart below. A similar trend has emerged in the investment trust sphere, where the average discount within the 16-strong AIC Global sector sits at 4.7%. Only North America trades at a narrower average. While Brexit may be the cause of this increased appetite, diversifying overseas is a sensible strategy in all economic environments; although investors typically still overweight their own market, a tendency known as ‘home bias’. The AIC Global sector consists of a diverse collection of trusts, which are suitable for a range of different investment purposes. In this paper, we consider the diversification benefits of investing in overseas equities and the options available in the sector. As well as scrutinising each option, we aim to explore which trusts offer genuine diversification.
Companies: SMT MNP MNKS MWY
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
Martin Currie Global Portfolio Trust (MNP) aims to achieve long-term outperformance of the FTSE World Index from a portfolio of 25-40 high-growth companies from around the world. Zehrid Osmani is at the helm of the portfolio, having joined the team in June 2018 and taking sole management of the portfolio in October 2018, and is constantly striving to identify undervalued, high-quality companies that can offer investors consistent returns. The process is built around a proprietary ‘toolkit’, where financial models, qualitative and thematic research are utilised to narrow the universe of around 3000 companies down to 500. After this, more detailed analysis is conducted, with Zehrid and his team identifying companies that generate high returns on their capital, have attractive growth profiles and have the potential to sustain or further improve it. Since his appointment, Zehrid has been given greater flexibility in his investment decisions, increasing his allocation to high-growth companies and the portfolio’s concentration. It now consists of 33 holdings, in comparison to the average trust in the AIC Global sector has 127 holdings. In performance terms, MNP has long been one of the stand out performers in the Global sector. Tom Walker was at the helm of the portfolio since the launch of the trust in 1999 and during his tenure delivered NAV total returns of 9.52% p.a., outperforming the FTSE World Index, which returned 8.9% p.a. over the same period. Zehrid has been able to do even better during his short time in charge of the portfolio: he has delivered 17.2% returns since July 2018, considerably more than the benchmark FTSE World (11%) and almost triple the AIC peer group which delivered 5.5% on average. Over this period, only Nick Train of Lindsell Train, has generated greater levels of alpha relative to their Morningstar best fit benchmarks, however MNP has done so at lower levels of volatility. In July 2013 a zero-discount policy was introduced by the board - allowing the trust to buy back shares in order to control its own discount - and since then the trust has predominantly traded at or around par. Throughout 2018 the average discount for the trust was 0.9%, however, 2019 has seen the trust move further towards trading at a premium and as of the 26 August 2019, the trust is trading at a premium of 0.4%. The weighted average discount within the AIC Global sector currently sits at 1.2%.
Anyone who takes a strong interest in financial markets sometimes feels the pull of market timing. It is seductive to imagine yourself a canny trader, buying or selling positions just before the market shifts, trading investments daily and beating the herd with superior analysis and instincts. We can add to the existing research suggesting this is a bad idea, and that taking a long-term view of your investments is the way to go. We looked at investment trusts that have outperformed over the past ten years and ran monthly NAV returns. We then calculated how many months were responsible for their outperformance. In other words, how many months did you need to miss to have ended up with market performance or less, negating any benefit of choosing an active fund over a passive fund? The results were surprisingly low, suggesting that switching in and out of investment trusts is fraught with danger and a potential recipe for underperformance, and underlining the case for a long term approach.
Companies: SDV CTY SMT FGT MNP JMG SDP
Martin Currie Global Portfolio Trust’s (MNP) investment performance has improved considerably following the appointment of Zehrid Osmani as lead manager on 1 October 2018. However, he remains vigilant, continuing to seek long-term, attractive investment opportunities. The trust’s more concentrated portfolio contains the manager’s highest-conviction ideas, and is constructed without reference to the FTSE World index benchmark. Part of the in-depth fundamental research process involves focusing on three long-term megatrends: the future of technology, demographic change and resource scarcity. MNP is a member of the large AIC Global sector; while the peers follow different mandates, the trust’s pure equity, fundamental investment approach has proved successful and MNP is ranked second out of 16 funds over the last 12 months.
ESG stands for Environmental, Social and Governance. It is a broad term, covering the analysis of investments by metrics other than traditional financial ones. It has also been the stand out trend in the investing world over the last five years. ESG analysis represents a different way of at looking at companies and reflects the growing awareness that there are consequences of being a shareholder or owner of a business (other than receiving dividends), as well as a broader understanding that purely financial metrics only catch part of what a financial analyst should be looking at. In this article, we review the rise of ESG, the impact on funds and investment trusts, and the various ways ESG has evolved in the fund world, before taking a look at which investment trust managers incorporate ESG analysis in their management process.
Companies: SDRC HGG STS MHN MNP
The objective of integration involves investing with the intention to enhance long-term risk-adjusted returns through the obvious and methodical inclusion of ESG measures in the investment research process. Integration is one of the most common of the various ESG investing strategies, specifically bottom-up ESG integration. In the investment trust world, Martin Currie stand out as a management house that utilises this approach, in particular within their Global Portfolio Trust (MNP). ESG is fully embedded into the investment process at Martin Currie and has been a standard component across all of their trusts over the past decade. MNP aims to grow capital over the long term, whilst offering a solid income for investors. The portfolio is highly concentrated with just 34 holdings, and the top ten holdings making up over a third of the portfolio. Led by Zehrid Osmani, the team use ESG analysis to build a more detailed picture of a company and find that it helps identify the businesses that are most likely to sustain high returns and resist competitive pressures. The results of their approach have so far paid off, albeit over only five months since Zehrid took over management of the trust, having delivered total returns of 6.6% relative to the [FTSE World] return of 2.2% over the same period.
Martin Currie Global Portfolio Trust (MNP) aims to achieve long-term capital growth, in excess of the FTSE World index, whilst offering solid income for investors. Recently, there has been a change of lead-manager: having been at the helm of the trust for over 18 years, 2018 saw Tom Walker step down, and Zehrid Osmani take over, having joined Martin Currie in June. Although the objective remains the same, Zehrid brings with him a more concentrated approach, and an exceptional track record for generating alpha at BlackRock. This has led to a transition in the portfolio. Having further concentrated the portfolio, it now has only 34 holdings, and with the top ten holdings making up over a third of the portfolio, the new manager is clearly willing to back his bets. MNP has an active share of 93.8% (versus the FTSE World), further showing the active and unconstrained approach. The investment strategy has been aligned with Martin Currie’s distinctive Global Long-Term Unconstrained (GLTU) philosophy where the team looks for companies with high-quality growth characteristics, which they believe are undervalued. In particular, Zehrid is looking for companies who generate high returns on invested capital (ROIC), and the potential to sustain or further improve this. The portfolio has a slight bias toward large-cap equities and exposure is broadly diversified in geographical terms, although there is a significant weighting to the US – where over a third of the fund has revenue exposure. The largest sector weightings include industrials, technology and consumer goods, both on an absolute and relative basis. With the arrival of Zehrid there is evidence to believe that the trust’s fortunes have changed as it has risen up the sector rankings, following a period of lesser performance. Since he joined, the trust has delivered NAV returns of 2.8%, almost double the benchmark (1.5%) and over 5% greater than the global closed-ended (-2.4%) and open-ended (-0.1%) peer groups.
Martin Currie Global Portfolio Trust (MNP) has a new lead manager, Zehrid Osmani, formerly a senior portfolio manager and head of European equities research at BlackRock. He describes the trust as ‘the same vehicle with a new engine’, and is very excited about the prospects in his new role. Having introduced new elements to Martin Currie’s investment process, the manager is confident that the trust’s performance can improve, which he hopes will become apparent over the next 24 months. Osmani recognises that the AIC Global sector is a competitive peer group, so he understands that MNP’s performance needs to stand out from the crowd. The trust has a zero discount mechanism and a progressive dividend policy, and currently offers a yield of 1.8%.
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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
With the sale of the Singaporean operations for £1.6bn, the new CEO, Amanda Blanc, shows her intention to focus rapidly on its preferred markets (the UK, Ireland and Canada). The next candidate for sale is the French unit. This transaction is more complicated than the previous one, with the necessity to obtain the agreement of Afer, its key partner in France. With potential proceeds of £2.9bn, Aviva could reduce its debts significantly and allocate more capital to the UK bulk annuity business.
Companies: Aviva Plc
Oil posted its first back-to-back weekly loss since April's rout with the end of the summer driving season and concern about OPEC's production compliance weighing on prices.
Futures in New York edged up on Friday, but prices fell 6.1% this week coinciding with a retreat in U.S. equities. Traders are also examining data indicating the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July.
Companies: XOM HES KOS JSE 88E ADV CAD CHAR ECHO ENOG EME I3E PMG RBD SQZ SOU TLW VGAS WTE PHAR
What’s new: CLIG results have beaten Zeus expectations at revenue, EPS and DPS. On 14 July CLIG provided an update which revealed $338m of net inflows (6% of opening FUM), outperformance of the Emerging Market and Developed strategies (98% of FuM) and 25% rise in FuM in 4Q to $5.5bn and an indication that the final dividend would be not less than last year. In our opinion, key features of CLIG’s full year results include:
4.4% rise in revenue to £33.3m (Zeus forecast: £32.0m);
6.1% fall in adj PBT to £10.7m (Zeus forecast: £10.3m), excluding gains/losses on seed investment 9.4% rise to £11.6m (FY19: £10.6m);
3.2% rise in adj EPS to 35.3p (Zeus forecast 32.5p);
11.1% rise in final DPS to 20.0p (Zeus forecast: 18p) with the total DPS of 30p (Zeus forecast: 28p) is 11.1% above the prior year excluding special DPS.
Net cash of £14.6m (Zeus forecast: £10.0m)
The acquisition of KMI is expected to complete on 1 October 2020.
Companies: City of London Investment Group 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
S4 Capital had an extraordinary week with strong interims and an impressive CMD accompanied by a further merger and topped off with winning its third Whopper. Interims were ahead of our expectations and we were particularly encouraged by LFL Gross Profit growth of +18% in July. The group announced the merger with Dare.Win, an award-winning digital creative agency which extends the geographical presence of MediaMonks to France. BMW and MINI consolidated its Pan-European account into a team led by MediaMonks, which is the third whopper account for S4 Capital, and notable in our view for being won in a pitch, rather than by land & expand, and being an automotive rather than technology client. The group held a three day CMD and our summary would be i) Day One demonstrated the compelling strategic logic and strict financial discipline underpinning the group ii) Day Two illustrated the already formidable partner/client list of S4 Capital, including Adobe, Amazon, Google and CAA and iii) Day Three highlighted the chemistry between the individual agencies brought together to form S4 Capital and the outstanding work that they produce. To reflect BMW and Dare.Win we raise our FY21 EPS forecast by +8% to 10.8p (was 10.0p) and continue to view 15p as a realistic target with further whoppers in prospect and the balance of the recent equity raise to deploy. On a 30x multiple, we raise our target price to 450p (was 375p) and retain our Buy recommendation.
Companies: S4 Capital Plc
Frontier IP has announced it has invested £320k in a £720k convertible loan financing of Nandi Proteins. Nandi Proteins is developing functional proteins for food ingredients aimed at reducing levels of fat, additives and gluten in processed foods addressing important social, health and environmental concerns about processed food. Frontier IP holds a 20.1% equity stake in Nandi Proteins; the last disclosed value of the holding was back in July 2017 at approx. £2.9m. Connected in part to the announcement today, we have used the opportunity to refresh our cash flow forecasts to reflect the net £2.1m proceeds of the July 2020 fundraise, the planned deployment of proceeds into bridge financing and refreshed our Sum-of-the-Parts valuation analysis to reflect the excellent portfolio progress made in FY’20. We anticipate a 50% increase in the unrealised profit on the revaluation of investments in FY’20e to £5.82m (vs. £3.0m prior estimate; £3.85m in FY’19). Applying the peer group multiple of 1.6x on Yr1 Book value of late-stage assets and incorporating the £2.1m proceeds and dilution associated with the July placing, implies an intrinsic value of 82p/share, 27% above the current share.
Companies: Frontier IP Group Plc
Following a solid H120, HgCapital Trust (HGT) announced several portfolio transactions representing a considerable uplift to the carrying value at end March 2020 and translating into a c 12.0% ytd NAV total return (TR) to end August. On completion of these deals, HGT’s cash resources will improve significantly to £314m from £123m in early July, while its unfunded commitments will decline to £814m. Consequently, HGT’s commitment coverage ratio will improve markedly to c 39% vs 13% in early July.
Companies: Hgcapital Trust
Artemis Alpha Trust (ATS LN) has undergone a radical transformation over the past two years following a comprehensive strategic review. In April 2018, the trust held around 90 stocks with approximately 25% of NAV held in unquoted positions. Following the implementation of the review, Kartik Kumar (who has been with Artemis since 2012) was appointed lead manager alongside John Dodd remaining in place with an overseeing role. Kartik has since significantly reduced the number of stocks to a much more concentrated high conviction portfolio of just 36 stocks, and has significantly reduced the unquoted exposure to only 7%. This shift in focus has at the same time improved portfolio liquidity by moving up the market capitalisation scale.
Companies: Artemis Alpha Trust
We believe now is an interesting time to invest in Northgate, with a new executive board and a capable management team in place who have already delivered progress on an ongoing turnaround as we await a full strategic review. The group now has a clear and well communicated capital allocation strategy in place and improved earnings quality, in our view. We believe that the growth opportunity in the UK, the value of the Spanish business and the progress made to date with the turnaround are not being reflected in the share price, which is currently 15.9% below book value (414p per share in FY19A rising to 468p in FY22E). We use a variety of valuation methods including P/B, SOTP, DDM and DCF modelling and arrive at an average implied share price of 450p, 29.0% above the current share price.
Companies: Redde Northgate Plc
L&G reported an operating profit from continuing divisions (excluding Mature Savings and General Insurance businesses) of £1,128m, -2.2% yoy. The COVID-19-related cost was £129m. LGR posted a growing operating profit to £721m. Net profit amounted to £290m vs. £874m a year before, being affected by the reduced discount rate used to calculate LGI reserves. The Solvency II ratio stood at 173%. The Board recommended an interim dividend of 4.93p/share, stable relative to H1 19.
Companies: Legal & General Group Plc
Deltic Energy is entering an exciting phase in its development based on its fully funded joint-venture projects with Shell. Preparations are now underway for an exploration well to test the Pensacola Zechstein prospect in the SNS (Southern North Sea). Deltic has indicated that it expects the current contingent well commitment to become firm on schedule by December 1, 2020. Drilling, according to Deltic, should follow in H2 2021. We see scope for positive news flow over the next few months, not least from the evaluation of Shell’s recently obtained processed 3-D seismic over Pensacola. Following Pensacola, the Selene prospect is scheduled to be drilled in mid-2022. The recent 32nd Round UKCS licence awards greatly expands Deltic’s exploration potential in the CNS and particularly the SNS Carboniferous fairway. Here some highly prospective acreage has been obtained.
Companies: Deltic Energy Plc
Belvoir’s H1 results evidence both strategic progress and profits growth. Given the challenges presented by COVID-19, this bodes very well for the group’s long-term growth potential. H1 adj. EPS grew +16%, the acquisition of Lovelle contributed well and in July the group entered into a strategic alliance with The Nottingham Building Society. Cash flow remained strong and the progressive dividend policy has been reinstated, with a 3.4p interim declared plus an additional 2p, as partial compensation for the missed 2019 final. With the resilience of lettings and the current record activity levels in sales and new mortgages the Board is optimistic that full-year results will hit its pre-COVID expectations and we make no changes to our PBT/EPS forecasts. Our target price of 233p (48% upside) assumes a 10% discount to the small/mid cap market. Given the above average performance in H1 and continued evidence that the long-term growth strategy is yielding value we see good upside to this target over time.
Companies: Belvoir Group Plc
S4 Capital has reported interim results that are ahead of our expectations and indicates an acceleration in the pace of recovery in Q3. LFL Gross Profit rose +12.2% in H1, with Q1 +18.8% and Q2 +6.5%. Encouragingly, after the trough of +3% in April, recovery accelerated to +5% in May, +11% in June and July was an impressive +18% ahead. PBT and EPS were both slightly better than our forecasts, while the group delivered a particularly impressive cash performance leaving it with net cash in June even before the £113m July placing. While we maintain our FY20 LFL Gross Profit growth forecast of +14% (Q3 +12%, Q4 +18%), the strong July result makes this look conservative. Further, the group awaits the outcome of two 'whopper' pitches each worth $20m+ with one due 'very shortly' and it can now see the pathway to 20 whoppers. S4 Capital is in a growth sweetspot and has already started to deploy the funds from the July placing to build capability in eCommerce (Orca Pacific) and econometrics/media optimisation (Brightblue). There are a number of moving parts in our forecasts and overall we retain our EPS estimates of 7p for this year, rising to 10p in 2021. We believe landing the whoppers combined with further M&A as the group deploys its recent equity raise & increased debt facility could see EPS of 15p next year.
RECI released its quarterly investor update on 17 August and factsheet on 8 September. This note updates investors with the key developments in both these documents. The key messages are i) robust performance of existing portfolio through COVID-19, ii) full interest and capital repayments expected on bond portfolio, iii) strong volume in investment pipeline, iv) lower-risk business is being added, v) pricing on new business 2%-5% above pre-COVID-19 levels like-for-like, vi) low gearing, and vii) stable dividends. All this appears anomalous with the 17% discount to NAV.
Companies: Real Estate Credit Investments