Investment trust insider on abrdn Property Income – James Carthew: If rates have peaked, API and UK Reits look too cheap
For many reasons, including those I highlighted last week, the investment companies UK commercial property sector is out of favour. Abrdn Property Income (API) released a positive update last week without much impact on its depressed share price so is worth a closer look.
The attention-grabbing numbers on API are a very wide and cheap discount of 39% and a yield of 8%. One problem API has is it is relatively small with a market value of £193m. Another is its 2.2% ongoing charges ratio. The recent underlying investment performance with net asset value (NAV) down 16.3% over the past 12 months is off-putting too and merits some investigation.
The investment trust has some debt, which has amplified the NAV fall, but this does not look excessive with a loan to value (LTV) ratio of 28.1% as at 30 June, although it rose quite a lot from 22.6% at the end of last year.
The £467m portfolio is biased heavily towards industrial property, which accounted for 54% of the company at half-year stage. This had been a big contributor to API’s returns in 2021/22, but as interest rates have climbed, yields on even this popular part of the property market have advanced too, pushing down valuations…. read more here