QuotedData’s morning briefing 30 September 2022

In QuotedData’s morning briefing 30 September 2022:

• NextEnergy Solar Fund (NESF) has announced that it has increased the commitments available under its Revolving Credit Facility (RCF) with AIB Group (UK) Plc and NatWest from £75m to £135m – an increase of £60m. The additional commitments have been agreed at a margin of 120bps over SONIA (Sterling Overnight Index Average), available until June 2024. The extended facility increases NESF’s total RCF capacity to £205m and, as of 29 September 2022, NESF had £89.5m available for drawdown from all its RCFs. Gearing levels remain conservative at 41% (including preference shares and financial debt facilities) of the Company’s Gross Asset Value, which as of the 30 June 2022 was £1,198m.
• Merchants Trust (MRCH) has released its interim results for the six months ended 30 June 2022. During the period, MRCH provided an NAV total return (with debt at fair value) of 1.3%. That was ahead of its benchmark index, which returned -0.1%. The outperformance of the portfolio was driven by stock selection, rather than the choice of sectors. The biggest positive impact came from HomeServe, a provider of household repair and improvement services across plumbing, electrical and other related maintenance. Most of the other significant stock contributions reflected the two major market themes. Drax, SSE and Diversified Energy all benefited from rising electricity and commodity prices, which will boost their profitability. The top negative contributor was pharmaceutical company AstraZeneca, which was not owned in the portfolio, as the shares rallied on strong operating results and due to its defensive qualities. Elsewhere, several cyclical and market related shares were weak, on macro-economic concerns, including WPP, Tyman, DFS, St James’s Place and ITV. Of these shares, only DFS reported disappointing trading, although ITV surprised investors with an announcement of a large increase in spending on content for its TV streaming services.
• Schroder UK Public Private (SUPP) has released its interim results for the six months ended 30 June 2022. During the period, SUPP’s NAV per share decreased by 31.8% from 48.08p per share to 32.80p per share, while its share price decreased by 36.1% from 33.10p to 21.15p in the same period. SUPP’s chairman, Tim Edwards, says that the majority of the decline in NAV was a consequence of weakness in the Company’s public market holdings in a very challenging period for equity markets. Against a global backdrop of elevated energy costs, disrupted supply chains, sustained inflation and rising interest rates, investor sentiment towards ‘growth’ stocks fell sharply in the first half of the year. The Company’s listed holdings were not immune to these pressures. The Company’s private equity holdings were more resilient against this volatile backdrop, with the exception of Rutherford Health which was fully written off in June 2022. This was previously announced to the market and incorporated into the daily NAV on 6 June 2022. The decline in the share price of BenevolentAI since the end of June 2022 has now been well publicised. On 20 September 2022, SUPP’s Board announced the discovery of an administrative error by the Company’s outgoing AIFM which resulted in the valuation of this holding in the daily indicative unaudited NAV being mis-stated.
• 3i Infrastructure (3IN) has released a pre-close update. The key highlights are as follows:

  • Portfolio performing strongly: Our portfolio has continued to perform robustly and ahead of expectations set at March 2022. 3iN’s portfolio demonstrates a positive correlation between inflation, power prices and total portfolio value. In addition, our strategy of identifying resilient companies, positioned to benefit from structural mega-trends, provides the foundation for sustainable value growth and positive real returns across the portfolio. We expect to report growth in net asset value ahead of the Company’s target return for the Period.

  • No near-term portfolio refinancing exposure: Following the recent refinancing of Tampnet, there are no material refinancing requirements in the portfolio until 2026. Over 85% of our long- term debt facilities are either hedged or fixed rate.

  • Extension of 3iN’s credit facilities: The Company has extended its existing Revolving Credit Facility (‘RCF’) of £900 million to November 2025.

  • FY23 dividend target: The Company is on track to deliver the FY23 dividend target of 11.15 pence per share, up 6.7% from FY22, which we expect to be fully covered.

  • Income exceeded expectations in the Period: Income of £73 million and non-income cash of £25 million were received in the Period, both slightly ahead of expectations. This compares with income of £56 million and no non-income cash received in the same period last year.

• abrdn Property Income Trust (API) posted a 11.7% NAV total return for the six months to 30 June 2022. NAV rose 9.6% to 110.7p, while the company paid out dividends of 2.0p per share. This was covered by EPRA earnings per share of 2.0p. The group has a low loan to value (LTV) ratio of 19.8%. On the outlook for the sector, chairman James Clifton-Brown says: “Whilst the UK commercial real estate market had positive performance in in the first half of the year, the manager’s market outlook for the next 12-18 months is for a correction. They expect a negative impact on pricing and capital values across all UK real estate sectors, driven by low economic growth, the increased cost of capital and a narrowing yield margin over other asset classes. The extent and duration of this price correction is unclear; however, the company has a portfolio that has focused on affordable assets that meet the needs of tenants, and we believe that will help mitigate against the initial yield shift being seen on prime low yielding assets currently.”
• UK Commercial Property REIT (UKCM) reported a 12.3% NAV total return in the six months to 30 June 2022. NAV was up 10.7% to 112.9p and the company paid dividends totalling 1.55p. EPRA earnings per share was up 36% to 1.58p. The group is one of the lowest levered in the property sector with a loan to value (LTV) of 13.7%.
• Independent Living REIT (LIVE) has postponed its intended IPO. In a statement, the company said: “given current market conditions, the Board of Directors has decided not to proceed with the Initial Issue at the current time. The Company has received a broad level of support from a significant number of investors and has been encouraged with the response to the investment proposition. All funds committed by investors pursuant to the Initial Issue will be returned.”
• Honeycomb Investment Trust (HONY) says that the all share combination between it and its manager Pollen Street Capital Holdings, as announced by Honeycomb on 15 February 2022 has successfully completed. [The business should now move across from the investment companies sector to the financials sector and we will cease to cover it.]
• EPE Special Opportunities (ESO) has announced that it intends to start repurchasing its shares, subject to these being available on attractive terms. The proposed buy backs will be funded from ESO’s cash reserves and shares repurchased will be held in treasury. ESO’s board say that it believes that the current low level of liquidity in its issued ordinary shares may limit the progress in buying back shares. Accordingly, ESO has agreed that on any given trading day a buyback of shares may exceed 25 percent of the average daily trading volume on each trading platform on which the Company’s shares are traded. Where a buyback of shares exceeds 25 per cent of the average daily trading volume on any trading platform, the Company will not fall within the exemption contained in Article 5(1) MAR. ESO may also undertake Share Buy Backs at a price that exceeds the higher of the price of the last independent trade and the highest current independent purchase bid on the trading venue where the purchase is carried out (being the price stipulated by Article 3(2) of the Commission Delegated Regulation (EU) 2016/1052 (Commission Delegated Regulation), as referred to in Article 5(6) of the Market Abuse Regulation).
• CT Global Managed Portfolio Trust (CMPI/CMPG) has announced that it has agreed to remove the performance fee with immediate effect. There will be no change to the annual investment management fee charged by the Manager. The last performance fee generated and payable to the Manager was in the year to 31 May 2021 and no subsequent performance fee has been accrued. Over recent years, the use of performance fees, which are often complicated and costly, has reduced across the investment trust sector. The removal of the fee reflects will helps to simplify and reduce the level of fees incurred by the Company in the future.
• SLF Realisation (SLF) has released its annual results for the year ended 30 June 2022. During the year, the NAV total return per ordinary share was -2.86% and the NAV total return per 2016 C share was +1.81%. The chairman describes the realisation program for both the Ordinary Share class and the 2016 C Share class as having has made excellent progress during the year, including returns of capital  of 8p per ordinary share (£28.5m in total) and 42p per 2016 C share (£58.3m in total). In addition, post year-end, the fund has returned a further 1p per ordinary share (£3.6m in total) and 5p per 2016 C Share (£6.9m in total). Other key metrics are:
  • For the year ended 30 June 2022, the Company has reported a combined loss after tax of £1.20m,compared to a profit of £15.06m for the year ended 30 June 2021.
  • The ordinary share NAV at 30 June 2022 was £62.07m (17.44p per ordinary share) compared to £93.24m (26.19p per ordinary share) as at 30 June 2021.
  • The 2016 C share NAV at 30 June 2022 was £26.10m (18.79p per 2016 C share) compared to £82.95m (59.71p per 2016 C share) as at 30 June 2021.
• Dolphin Capital (DCI) is selling its entire interest (effectively a one third stake) in the One&Only at Kea Island project for a pro rata consideration of €17.92m, a premium of 17% to the valuation of  Dolphin’s valuation as at 31 December 2021. The deal is expected to complete during the fourth quarter of 2022. The disposal proceeds will first be applied towards the repayment in full of the existing loan facility that Dolphin drew down on 7 June and 16 July 2021, of which €12.8m was outstanding at 31 August 2022. Following this repayment, all debt at the company level would have been fully repaid. All remaining funds will be retained to meet current liabilities and working capital requirements.

We also have:

• JLEN Environmental Assets and Foresight Solar Fund’s acquisition of a 49.9MW battery storage project,
• annual results from Bluefield Solar,
• annual results from JPMorgan Emerging Markets,
• annual results from JPMorgan Global Growth and Income, and
• annual results from Crystal Amber.