Good returns help Henderson Far East grow

Good returns help Henderson Far East grow – over the year ended 31 August 2019, Henderson Far East Income returned 6.5% in NAV terms and 7.6% in share price terms, both well-ahead of comparative indices and the AIC’s Asia Pacific Income peer group average.

The dividend was upped by 3.7% to 22.4p,an amount that was reasonably well covered by income. The statement points out that weak sterling continues to flatter overseas income.

The shares continue to trade at a premium. 7.9m shares were issued in the year to the end of August (raising £27.9m) and another 3,330,000 shares have been issued since, raising an additional £12.1m. Demand for shares has been so strong that additional shareholder authority is being sought at an Extraordinary General Meeting which will be held on 3 December 2019 to expedite the issue of up to a further 5% of the issued share capital. This will be superseded at the AGM in January when the usual resolution will be put to shareholders to allow the trust to issue up to 10% of its issued share capital. All shares have been issued at a premium, enhancing the net asset value for existing shareholders and enabling the fixed costs of the company to be spread over a wider asset base.

Extract from the manager’s report

“At the stock level there were notable contributions from Chinese consumer stocks as well as real estate and infrastructure trusts and telecommunications. Kweichow Moutai, the Chinese high-end alcohol producer, and Anta Sports, China’s third largest sports apparel company rose 76% and 90% respectively and epitomised our strategy of focusing on domestic sectors and favouring local brands over foreign. Although not quite as dramatic, the list of next positive contributors featured some high yielding stocks such as infrastructure trusts Macquarie Korea Infrastructure, Digital Telecommunications Trust in Thailand and telecommunications stocks HKT Trust & HKT in Hong Kong, Telekomunikasi Indonesia and Intouch in Thailand. All of these had total returns greater than 20% over the period reflecting the demand for yield in a falling interest rate environment.

The stocks that disappointed were more industrial in nature. Our exposure to the energy and materials sector through refiners SK Innovation, China Petroleum and Chemical (‘Sinopec’) and Star Petroleum were disappointing as was contractor Lend Lease in Australia, which disappointed with an unexpected provision on its engineering division.”

HFEL : Good returns help Henderson Far East grow