Register Log-in Investor Type

Damille II remains focused on discount opportunities

Damille Investments II has announced its annual, results for the year ended 30 November 2015. During the period, the company’s NAV per share fell by 1.2% to 102.15p per share (30 November 2014: 103.35p). The portfolio remains focused on discount opportunities. The company’s shares have consistently traded at a discount during the last twelve months (usually in excess of 10%). And, reflecting this, the company repurchased 1.06m shares (they say shares are repurchased opportunistically where they trade at significant discounts to NAV). The company also undertook a tender offer at the beginning of the year where 9,554,308 shares (14.58% of issued share capital) were redeemed. A new redemption offer was announced on 211 January 2016 whereby shareholders will be able to redeem up to 15% of their shareholding at a price equal to the unaudited NAV per Share as at 29 January 2016 less 2.5%. Shareholders will also be given a continuation vote at the AGM in April.

In terms of portfolio composition, at the year end, the portfolio was invested with weightings of approximately 80.13% in equities and 19.87% in cash and net working capital. There were thirty investments. The company splits its investments into five distinct categories.

Private Equity and Venture has four holdings and represents 19.04% of NAV. The managers say that these are listed holdings and that trade at discounts greater than other closed-end funds, whilst the capital management at these funds has improved markedly. The managers say that they are attracted to funds that are in run-off or returning excess capital and/or actively managing discounts. They comment that the recent past has also provided an attractive environment for private equity realisations and that, whilst discounts have narrowed across the sector, they believe certain names still merit further re-rating.

Other listed funds comprises nine holdings representing 22.03% of NAV. The manager say that they are looking for a combination of attractive discounts and rational capital management policies. Once again they like funds that are in run-off and/or returning excess capital and/or actively managing discounts. The managers comment that the underlying exposures of these funds are extremely diverse. Approximately 43% of our Other listed funds, by value, are in the Real Estate sector. The Local Shopping REIT is one such real estate holding. Tetragon Financial Group is another fund holding. The managers say that it invests in a broad range of assets, including an asset-management business, and covers bank loans, real estate, equities, credit, convertible bonds and infrastructure. The trust also holds Blackstar Group, The Ukraine Opportunity Trust and St Peter Port Capital.

Holding companies trading at a discount comprises four holdings representing 24.30% of NAV. The manager’s comment that, in their view, Holding companies share many characteristics of closed-end funds and that it is a space where they consistently look for securities that trade at significant discounts to their estimate of their realisable net asset values. Examples are Sistema and Aker ASA.

Natural resources closed-end funds and natural resources companies comprises eight holdings representing 6.72% of NAV. The managers say that certain natural resource companies are currently valued at significant discounts to their asset values and in some cases, at discounts to their net cash. They comment that, in these circumstances they are most alert to the risk of the cash being rapidly depleted. They also say that they have experienced, and are alert to, the possibility of further NAV declines, which may justify the apparent discounts. Examples are Kolar Gold, Ovoca Gold and Sunrise Resources.

Corporates with rational capital management policies comprises four holdings that representing 8.04% of NAV. The managers describe these as companies with rational capital management policies such that their excess cash generation is, and can be, returned to shareholders in a variety of ways.

In terms of outlook, the managers say that they are very pleased with the Company’s portfolio and believe they have secured their investments at a sufficient discount to their estimate of the realisable value of those investments and that they are confident their investment strategy will continue to provide attractive returns in the medium and longer term.

They also believe the portfolio should continue to perform and say that the company retains a healthy cash balance and hence retains the flexibility to repurchase shares. The managers say that, whilst they do not make macro judgements, they believe quantitative easing has distorted markets and added downside risk. They comment that it therefore seems logical that if QE has inflated the prices of many risk assets, then its removal may at least lead to some volatility. However, they say that the Company is well positioned to take advantage of any such volatility in the prices of the securities they track and analyse.

Damille II remains focused on discount opportunities : DIL2

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…