Barings Emerging EMEA Opportunities (BEMO) is hiking dividends and streamlining its investments as the £87m investment trust looks to win back the large minority of disaffected shareholders who voted against the company’s continuation in October.
Outgoing chair Frances Daley said BEMO had delivered an “outstanding” annual result with a 28.3% investment return for the year to 30 September that beat its benchmark’s 21.2% gain.
Shareholders in the £87m investment trust reaped an impressive 47.6% total return as investors switched to emerging markets after the dollar weakened in response to US President’s tariff policy.
The shareholder return was further boosted by the discount to net asset value (NAV) on the shares more than halving from 21% to 10%, although the valuation gap has since widened back out to 15%.
This lifts the annualised underlying growth in NAV to 14.8% over three years and 7.7% over five years, with shareholders receiving 17% and 9.6% over the same periods. These also beat the benchmark’s 8.3% and 6.2%.
Daley said: “The outstanding result in the latest financial year extends a multi-year run of outperformance, as a result of which the company is now firmly above the benchmark over one-, three-, five- and ten-year periods. This achievement confirms the board’s belief that the company offers a distinctive and attractive investment proposition, which provides exposure to high-growth economies in a region underrepresented in investment portfolios.”
The total return included the 6p per share interim dividend paid earlier in the year. BEMO is proposing to pay a final dividend of 13.5p, up from 12.5p last year to give a total of 19.5p up from 18.5p and put it on a 2.5% yield. The increase comes even though revenue per share fell to 17.9p from just under 19p to leave the payout slightly uncovered.
Following a 33% shareholder vote against the company’s continuation in October, BEMO is moving to an “improved”, progressively rising dividend policy.
“This policy is to pay an increased dividend each financial year and is expected to be paid from a combination of both income and capital,” BEMO said.
Fund managers Matthias Siller, Adnan El-Araby and Alay Patel also plan to increase their focus on their highest-conviction stocks, concentrating the portfolio on around 35 stocks compared to 44 currently.
They will also reintroduce gearing, the borrowing that investment companies can use to boost long-term returns, through the use of index futures.
These moves come in tandem with the revised tender offer mechanism announced in October. Having controversially backtracked on a previous commitment to let investors sell up to quarter of their shares on a narrow discount, and passed the continuation vote, the company committed to provide a 100% tender offer in 2028 if it has not beaten its index over three years.
It will also report back in six months’ time on steps it has taken to engage with shareholders who voted against the continuation vote.
Our view
James Carthew, head of investment company research at QuotedData, said: “This is a strong set of results from BEMO, with the NAV approaching levels last seen before Russia attacked Ukraine. More of the same will be needed to pacify those shareholders who voted against continuation and who have been disappointed by the discount widening since the tender offer was pulled. However, the manager puts forward a number of reasons to be optimistic.”
