Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings at ICM Group. While the company has suffered a tough period of absolute and relative performance, Jillings is very encouraged by the prospects for the fund, given attractive valuations and businesses that are ‘delivering good results’. He believes he can be patient, waiting for UEM’s value to be realised, and in the meantime the trust offers an attractive dividend yield. The manager suggests that over time there is potential for UEM’s discount to narrow if sentiment towards emerging markets improves, which could be helped by a weaker US dollar. For these reasons, along with the potential for an uptick in performance, Jillings believes that it is an opportune time to consider an investment in an emerging markets fund.
Companies: Utilico Emerging Market
Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings at ICM Group. It is a specialist fund focusing on infrastructure and utility assets in emerging markets. The manager is encouraged by the prospects for UEM’s investee companies, supported by urbanisation and significant growth in the regions’ middle classes. He also suggests that it ‘is a very interesting time in the world’, with issues such as climate change and the shift to renewable energy high up on the global agenda, which should be beneficial for UEM’s investments. While not used as a formal benchmark, as shown in the chart below, the trust’s NAV has markedly outperformed the MSCI Emerging Markets Index over the last decade.
Utilico Emerging Markets (UEM) offers a different set of exposures to the average emerging market fund, focusing on the infrastructure and utilities sectors and on Latin America rather than North Asia. The trust owns a portfolio of companies chosen for their strong positions in their industries, which should allow them to generate high shareholder returns over the long term, with an aim of harnessing the growth potential in the rise of the emerging markets middle classes. The trust has performed strongly over the long term, with five year returns ahead of the index and peer group despite not being exposed to the fashionable, higher-growth sectors of information technology and consumer discretionary. The trust has tended to do better in down markets while making less than the market in rising markets, which is unsurprising given the bias to defensive sectors. The more defensive sectors the trust invests in tend to pay higher dividends, and so the yield is significant, at 3.1%. However, the objective of the trust is to generate total returns, so income is not prioritised over capital returns. The dividend has been grown or held each year over the past decade, however. The trust trades on a discount of 12.5%. This is tighter than the average for 2018, when emerging markets were out of favour, but wider than the five-year average of 10.8%. In 2018, UEM redomiciled to the UK from Bermuda, in an attempt to make the trust more attractive to investors and close the discount. The trust has also carried out regular buybacks when the discount widens into double figures. The trust is managed by specialist fund manager ICM, and a team headed by Charles Jillings and Duncan Saville. The management team and directors have substantial shareholdings in the trust. There is a performance fee, charged at 15% of the NAV total returns in excess of 8% (or the benchmark plus 2% when that is higher). There is a high watermark and the fee was last charged in 2017.
Utilico Emerging Markets Trust (UEM) has been managed by Charles Jillings at ICM Group since the fund was launched in 2005. He continues to find interesting infrastructure and utility investment opportunities in emerging markets. The manager notes that investee companies have strong earnings growth, supporting higher dividend payments; however, he says that company valuations have not kept pace with earnings growth, providing opportunities for revaluation. Jillings is constructive on the outlook for emerging market equities, and comments that a resolution to the US-China trade dispute would be beneficial for most regions. He is optimistic regarding a positive outcome, given the high importance to both parties in reaching an agreement.
Utilico Emerging Markets Trust (UEM) is a specialist fund focusing on infrastructure and utility investment in emerging market equities. In April 2018, UEM completed its re-domicile from a Bermuda-based investment company to a UK-based investment trust, in order to benefit from the UK’s increasingly supportive regulatory and tax environment. There is no change to UEM’s investment approach or dividend policy. Also, following the final exercise of its subscription shares, UEM now has a simpler capital structure. The board believes that these changes have potential to improve investor perception and, over time, lead to a narrower discount.
Utilico Emerging Markets Limited (UEM) has a portfolio of predominantly developing world equities that has a clear focus on stocks and sectors that display the characteristics of essential services or monopolies. The portfolio is managed by Charles Jillings and the sizeable team at ICM. Charles and the team are bottom-up investors who run the fund with few peers in the investment trust universe, with a portfolio that is almost entirely focused on the emerging market utilities and infrastructure sectors with a bias towards asset backed, cash generative and often monopolistic companies. In essence, Charles aims to own companies that meet the growing needs of the ever-increasing middle classes in emerging markets countries, which we discuss in this article. UEM has built up a long term track record of outperformance – particularly in flat or falling markets. Though it lagged the MSCI Emerging Markets index in 2016 when sentiment towards the developing world improved dramatically, its NAV total returns of 48.9% over five years to the end of February 2018 puts the trust considerably ahead of the index (40.7%) and its average peer in the Morningstar IT Global Emerging Markets sector (35%). There have been certain notable changes to the portfolio over the past year. Charles and the team have reduced overall concentration, shifted the portfolio away from Asia and more towards Latin America while recently reducing the overall level of gearing. The decision to increase the trust’s weighting to Latin America has had a positive impact on the dividend, which yields 3.11% at the time of writing. UEM has tended to be one of the highest yielders in the sector and the board has not cut the dividend since its launch in 2005, but due to various factors, had to fund a proportion of the 2012, 2013, 2014 and 2015 dividends from capital. However, the higher yielding nature of the Latin American stock market, has meant the trust’s revenue return per share has increased dramatically over the past two years – resulting in covered dividend payments in 2016 and 2017. This leaves the trust (as at the 2017 financial year end) with revenue reserves of 0.69x. Discounts across the AIC Global Emerging Markets sector have remained wide for some time now, and UEM is no exception, averaging a -10.69% discount over the past three years (to the end of February 2018). The board aims to mitigate the discount getting too wide and buys back shares when the discount pushes too far past double-digits. They have been very active in this regard, having cancelled 9.8m shares so far in 2018 already. The trust currently trades on a 14% discount (as of the end of February 2018), which is wider than its longer-term average.
Long-term secular trends provide a strong tailwind to investment returns. One of the most talked about themes in recent years, a clear beneficiary of which has been Tesla’s share price, is the potential for a shift toward electrification. However, far from being a ‘one stock’ story, we believe that there are widespread implications across many sectors, and in this research we identify a range of trusts which have exposure to them.
Companies: IEM UEM UKW IEM BRWM
The Board of Utilico Emerging Markets (UEM) has announced details of its proposal to re-domicile from Bermuda to the UK. Ordinary shareholders will exchange all their ordinary shares, on a one for one basis, for ordinary shares in Utilico Emerging Markets Trust plc (“UEM Trust”), a newly incorporated Investment Trust established in the United Kingdom, subject to shareholder and other approvals. The shareholder meeting is scheduled for 20 March 2018. The Board believe that this enhances the attractiveness of UEM. We continue to recommend that investors buy UEM for exposure to infrastructure assets in emerging markets.
Utilico Emerging Markets (UEM) aims to generate long-term growth in capital and income from a portfolio of 60-90 emerging market equities. Exposure is diversified by geography, with a large concentration in infrastructure, utility and related sectors. Manager Charles Jillings is bullish on the outlook for emerging market equities in 2018 due to a widespread economic improvement, which should result in another year of robust corporate profits. UEM has announced that it is proposing to change its domicile from Bermuda to the UK, which has the potential to improve investor perception and may lead to a narrower discount.
Utilico Emerging Markets (UEM), managed by a team led by Charles Jillings, has a focus on real revenue producing assets in the infrastructure space. It has generated returns which have been better than the MSCI Emerging Markets Index over the long-term, with significantly lower volatility and strong diversification benefits. We believe that this combination, coupled with UEM’s progressive dividend policy makes UEM attractive to investors looking for exposure to emerging markets and/or infrastructure assets. Since inception, it has had an annualised return of 12.1%, as at 26 June 2017. It currently has a historic dividend yield of 3%. We reiterate our Buy recommendation..
Utilico Emerging Markets (UEM) aims to generate long-term total returns from a portfolio invested primarily in operational and cash generative companies in emerging markets infrastructure and utility sectors. UEM typically holds about 60 to 90 high-conviction positions and is broadly diversified by both sector and geography; the manager has a long-term investment approach and aims to generate a 15% pa total return from each holding. More than 95% of the portfolio is invested in well-established businesses with 75% comprising companies paying a dividend. UEM has increased or maintained its dividend every year since launch in 2005.
Utilico Emerging Markets (UEM) aims to generate long-term total return from investing in emerging market equities, primarily in infrastructure and utility companies considered to have above-average growth prospects with a relatively low risk profile. More than 95% of the portfolio is invested in quoted companies, with the majority paying a dividend, which is reflected in the current fund yield of 3.3%. UEM’s NAV total return has consistently outperformed the MSCI Emerging Markets index and is ahead of the global emerging market peer group average over one, three, five and 10 years; since inception in 2005, the annualised NAV total return is 11.4%.
Utilico Emerging Markets (UEM) is a closed-end investment company with a focus on infrastructure, utilities and related companies in emerging
markets. This specialisation differentiates it from its emerging market peers, while the dividend yield of 3.9% reflects investment in cashgenerative businesses. UEM’s NAV total return is above the peer group over, one, three, five and 10 years. Investors may wish to consider using UEM to gain exposure to companies that are integral to the long-term growth of emerging markets.
We continue to remain cautious on emerging markets. Within emerging markets we recommend that investors buy Utilico Emerging Markets* (UEM), trading at a 9.8% discount (cum, fair, undiluted). UEM has just announced that it has increased its quarterly dividend payments to 1.625p, for the quarter ending September 2015, which leads us to forecast an annual distribution of 6.4p. With an expected dividend yield of 3.8%, UEM is one of the highest yielding emerging market funds. Its investment in companies which have tangible income producing assets makes it an ideal vehicle for investors looking to maintain or increase their exposure to emerging markets.
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Cenkos’s first half results demonstrated the benefits of its flexible operating model and strength of its client relationships. While challenges related to COVID-19 are set to continue, Cenkos’s focus is on growth companies and its fund-raising year-to-date has had a greater emphasis on corporates financing M&A and growth opportunities rather than for defensive purposes. This should prove more sustainable although, as always, the timing of transactions in the encouraging pipeline reported remains uncertain.
Companies: Cenkos Securities plc
Record’s Q221 trading update confirmed that its new $8bn dynamic hedging mandate has started and that, prior to this, assets under management equivalent (AUME) expanded by 4% in the quarter. The group continues to work on developing new products and is deploying technology to enhance its ability to deliver these and existing products cost effectively.
Companies: Record plc
Avation is a lessor of 46 commercial aircraft to a diversified airline client base. This morning, the group has released results for the 12-months to 30 June 2020, which illustrate the challenges faced by its customer base as a result of Covid-19, as well as the corrective actions taken by the Board that have resulted in profitability being maintained in the year as a whole. Loan repayment deferrals of c.$24.4m were obtained in the period, in comparison to $13.1m short-term rent deferrals being granted to airline customers and thus emphasising management's focus on liquidity during an unprecedented period for global airlines. Avation again reports that it is currently reviewing alternatives in relation to the 6.5% senior notes due in May 2021. Whilst at this point our forecasts remain under review, and near term challenges remain across the industry, we believe that demand for aircraft from lessors such as Avation will increase in time as a result of airlines being even more reliant upon aircraft leasing firms due to the retirement of older aircraft during 2020 in combination with much weaker balance sheets that are unable to support direct aircraft purchases.
Companies: Avation PLC
Primary Health Properties (LON:PHP) is a real estate investment trust (REIT) that holds a portfolio of 510 primary health facilities in the UK (92% of the portfolio by value) and Ireland (8%). The business model is to manage the properties for rental income and to grow the portfolio over time. The
Companies: PHP PP51 PHPRF
What’s new: Today’s trading update reveals 17% rise in assets under management (AuM), double digit revenue growth, and an increasing operating margin as the business scales. The outlook is positive. Highlights are:
12.6% rise in 1H Group Revenues to £11.0m (1H last year: £9.7m);
21.9% rise in 1H adj operating profit to £5.0m (1H last year: £4.1m);
17.4% rise over 6 months in AUM to £7.8bn on 30 September 2020,
n.b. From 31 March 2020 the WMA balanced index rose 11.6% to 4510;
- Market movements added 12.5% to AUM (i.e. Tatton outperformed WMA);
- 1H net inflows of £328.1bn were 4.9% of opening AUM (i.e. c 10% annualised net inflows);
3.0% rise in Paradigm Mortgage Services member firms to 1,591
2.5% rise in Paradigm Consulting member firms
Interims will be announced on Wednesday, 18 November 2020
Companies: Tatton Asset Management Plc
In another upbeat update, GHT has confirmed that the business is tracking in line, in turn being driven by strong traction with key customer, ANZ. Here, new sales have driven a 20% increase in contracted customer revenue to >£11m in FY21. As a strategic partner (deeply involved with GHT in bringing new Clareti banking services to market) this extra investment is very encouraging, as it’s indicative of these services‘ strong future potential. Also announced today – GHT state that its transition to a recurring subscription model (commenced just two years ago) is now complete and that ARR now stands at £11.9m, ~+16% annualised organic growth since FY20 y/e. In a tough new business environment, we view this as a highly credible performance. It’s also worth noting that management reference remaining pipeline opportunities, these would further benefit strong forwards visibility – already £22.4m for FY21. Given this – and also as sign of confidence – today we reinstate FY21 forecasts. We look for a reacceleration in top-line growth: +16% y/y to £28.7m at a Group level, in turn driven by c.+24% organic growth in Clareti, to £20m. For valuation – with Clareti still in its relative infancy – we continue to view a sales multiple as most appropriate. Here, we note that peers typically trade in a 5-7x range vs. GHT at 4x our FY21 estimate. This suggests 25-75% upside to fair value for this disruptive company, with a multi-year growth opportunity still ahead.
Companies: Gresham House
As expected following the US banks’ releases, Barclays’ third quarter results saw a sharp reduction in provisions build-up while the emergence of delinquencies has been delayed by the State’s supporting measures. Management continues to expect a reduction in the cost of risk next year. It remains to be seen if this guidance is capable of withstanding new lockdowns or a no-deal Brexit.
Companies: Barclays PLC
Following on quickly from its impressive full year results, these interim results confirm that our confidence for growth in the Program Management business was not misplaced.Contracted Premium increased 95% YoY (and 12% ahead of December 2019) to $925m –a stone's throw away from the $1bn 2020 guidance set in 2018. At the same time, Gross Written Premium (GWP) grew 42.6% to £247.2m, resulting in Economic EBITDA turning positive, at £0.8m compared to a loss of £0.3m in 1H19
Companies: Randall & Quilter Investment Holdings Ltd.
ANGLE plc (AGL.L): Acceptance of FDA submission | Feedback plc (FDBK.L*): Partnership agreement | Open Orphan (ORPH.L): Human Challenge Study Model contract with UK Government
Companies: AGL FDBK ORPH
Agronomics has announced it has conditionally raised £10.0m gross from an equity issue at a price of 6.0p, which represents a 6.8% premium to the most recently reported NAV per share of 5.62p. Assuming the company's post-raise cash balance is £8.15m, after repaying a £1.9m bridging facility, we estimate the new NAV per share to be c5.7p. We see significant potential in the cultivated meat sector and believe Agronomics is well positioned to support this developing sector and generate strong returns from these investments. We see upside in Agronomics' portfolio and have today initiated coverage with a Buy recommendation.
Companies: Agronomics Limited
The most pleasing aspect of Tatton’s trading update for the six months ending 30 Sep 2020 (H1 2021) was how robust its fundamental offering to clients (financial advisers) has proven to be in highly uncertain market conditions. It continued to attract strong net inflows into its asset management business while also growing its base of IFA consulting and mortgage services clients. The prospect of beating our previous FY21 forecasts looks promising. Longerterm growth prospects also look strong. We do, however, remain wary of the potential impact of further large market dips. For now, we maintain our fundamental valuation of 300p per share but see room for significant upside on that mark if Tatton continues to deliver.
Tatton has reported an in-line H1 financial performance: revenue totalled £11.0m (vs N+1Se £10.9m) and £5.0m adj. EBIT (50% N+1S FY21e). AuM grew by 3.4% to £7.8bn as net inflows continued throughout H1 (+£328m) – a positive performance given the backdrop. Paradigm, particularly in Mortgages, has been resilient post-lockdown. Having delivered 50% of our earnings forecast for FY21e, there is potential for upside. However, we leave our forecasts unchanged and a margin for safety as we remain alive to potential external risks/volatility.
Cenkos Securities plc has terminated coverage of Record Plc. Our previous recommendation (BUY) and forecasts can no longer be relied upon.
Please contact Cenkos for further information.
The interims confirmed that Covid-19 was minimally disruptive operationally in H1 20 and, ironically, may have improved both of R&Q’s divisions’ mediumterm trading outlooks. As the pandemic and other industry events have generated significant losses for insurers, they have created the current ‘hardening’ market driving demand for Legacy and Program Management.
Agronomics is an investment company building a portfolio of investments in the developing alternative protein sector. The company is focused on early stage investments, offering attractive valuations and significant upside potential. Importantly, we believe Agronomics represents an opportunity for public investors to gain access to early stage private companies, which might not otherwise be available. We expect the cultivated meat sector to be driven by a number of global mega trends that will increase public awareness of the issues the sector is aiming to overcome. We see strong upside in Agronomics' existing portfolio and initiate coverage with a Buy recommendation.