Downing Strategic Micro-Cap on journey to grow as it publishes good results – Downing Strategic Micro-Cap (DSM) has posted its final results for the year ended 28 February 2022. During the period under review, the trust saw a 5.3% increase in its NAV and 1% increase in its share price . It maintained its NAV with a current value per share of 87.37p, against 81.16p at the 2021 financial year end and 89.79p a year ago.
Through this particularly stressful period, since the year end, the portfolio and its NAV have performed well. However, even though the latest NAV per share is 87.37p, the shares stand at 69.5p mid and the discount is 20.5% which is wider than this time last year.
Over the 12 months, the board addressed the issue of DSM’s discount with buyback programmes when appropriate. It said it will continue to do that but DSM has now achieved two years of distinctive performance and so it deserves more market attention followed by realisable corporate growth.
Improving the rating of the company’s shares should in turn enable the board to tackle another of its objectives which is to build a larger company. The current net asset value of the company, at under £50m, is too small for the long term. By getting the discount in, coupled with continuing performance, DSM hopes to get to a position to be able to raise capital and build the company. If size and performance also mean that shareholders do well and not all seek to redeem, we will have started to reposition DSM. Success in that objective will enable us then to repeat similar plans to maintain that stronger rating for shareholders.
Statement from the chair:
As I write, disruptions in supply chains, rebounds from Covid, labour market imbalance, cheap money and fiscal endeavours have triggered threateningly high inflation. Geopolitical shortcomings and short-sightedness have led to another war, with critical consequences. Globalisation is splintering, both politically and economically. Central banks have left matters late and if inflation proves stubborn that may leave them little alternative other than to constrain economies with slower growth, even to recession. The outcome looks like continuing inflation and more volatility, with maybe low and middle-income consumers under pressure. Will we still see Jamie Dimon’s “The consumer is unstoppable” or will the consequence be stagflation? Consensus is that the UK ‘will get by’, hopefully. Meanwhile most portfolios have taken at least a breather, if not a battering. This is a time for resilient business models.
Outlook
The DSM portfolio consists of value stocks, dynamically managed with strong balance sheets, appropriate to the foreseeable economy and held at modest valuations. Their quoted prices are significantly below the value at which DSM’s managers, using conservative estimates and noting evident catalysts, place their achievable market value. Time is then the spur to results. That leads us, your board, to consider how best to deliver that prospect to shareholders.
DSM : Downing Strategic Micro-Cap on journey to grow as it publishes good results