Daily News 16 Feb 2023

Herald Investment Trust (HRI) | Annual results

Market Cap:

£1.2bn

Yield:

0.0%

(Disc)/Prem:

(15%)

Sector:

Technology

Annual results for the year to 31 December 2022. NAV TR -22.8%, vs -21.9% and -28.4% for reference indices. Share price TR -28.9% as discount widened from 7.9% to 15.1%; 2.6m shares repurchased (4.0% share capital) for £50m. No dividend has been declared for the year. Decline was relatively uniform across all four of regions in the portfolio (UK, North America, Continental Europe and Asia).

Aquila Energy Efficiency Trust (AEET) | NAV and dividend update

Market Cap:

£68m

Yield:

3.4%

(Disc)/Prem:

(32%)

Sector:

Energy Efficiency Infrastructure

NAV per share -2.5% (-2.48p) to 95.4p over the 6 months to 31 December (net assets: £95.42m), driven primarily by two dividend payments of 2.25p per share that were not fully covered by earnings.

Dividend declared for Q4 2022 of 1.25p per share, resulting in total dividend of 3.5p per share for FY22, in line with target. AEET is targeting 5.0p dividend for 2023 (+1.5p on 2022), currently anticipated to be “substantially covered by net income”.

Atrato Onsite Energy  (ROOF) | Portfolio update

Market Cap:

£140m

Yield:

2.7%

(Disc)/Prem:

1%

Sector:

Renewable Energy Infrastructure

ROOF has entered into a 20-year PPA with Tesco for a 370kWp rooftop solar project on a supermarket site in Thetford, Norwich, due to commence in Q2 2023. This is the first installation under the heads of terms agreement between Supermarket Income REIT, which was struck at the time of ROOF’s IPO. Following this installation, the fund will have 19 rooftop solar PV systems on Tesco supermarkets across the UK.

In addition, ROOF has been selected as a PPA framework provider to Tesco, with initial expectations to deliver solar PV projects at up to 20 sites as a first step under this new framework. The fund now has a pipeline of 69 Tesco solar development projects.

Foresight Solar Fund (FSFL) | Notice of results

Market Cap:

£714m

Yield:

6.1%

(Disc)/Prem:

(7%)

Sector:

Renewable Energy Infrastructure

FSFL will publish its annual results for the year ended 31 December 2022 on 15 March.

Riverstone Credit Opportunities Income ($) (RCOI) | Annual results

Market Cap:

£72m

Yield:

8.1%

(Disc)/Prem:

(13%)

Sector:

Infrastructure Debt

Annual results for year to 31 December 2022. NAV TR +14.5%, with NAV per share increasing to $1.08. EPS 14.08c (FY21: 4.86c). Declared Q4 2022 dividend of 2.0c and special dividend of 1.0c, bringing total FY22 DPS to 9.0c (FY21: 7.0c). Repurchased 0.7m shares. Ongoing charges were 3.24% (FY21: 1.95%), including profit share component.

Rebalancing of portfolio to energy transition-focused investments now complete, with all 10 loans in portfolio either “green” or “sustainability-linked”. Portfolio valuation 1.12x gross MOIC and 1.07x net MOIC. $15m RCF in place to optimise cash management (RCF balance $6.7m and $1m cash held as at 31 December). $68.8m invested in sustainability-linked loans in H2 2022: $9m to Seawolf, $14m to Epic Propane, $14m to Hoover Circular Solutions, $14m to Clean Energy. Invested $5m in loan to Max Midstream post period-end, portfolio now fully invested. Four realisations totalling $44.5m in H2 2022 at a net IRR between 7.8% and 11.3%. RCOI has now cumulatively invested $247m in 24 loans since IPO in May 2019, with 16 realisations at an average net IRR of 13.0%.

RM Infrastructure Income (RMII) | NAV update

Market Cap:

£99m

Yield:

7.7%

(Disc)/Prem:

(9%)

Sector:

Infrastructure Debt

NAV as at 31 January 2023 was 93.10p (+0.608p from 31 December 2022). NAV TR +0.66% over the month, driven by net interest income of 0.611p and a portfolio valuation decline of 0.003p.

Portfolio valuation £126m as at 31 January across 38 investments. Average yield of 9.26%, weighted average loan life remaining of 1.41 years. Portfolio 96% invested in private market assets and 4% in public bonds. 2023 forecast net interest income of more than 7p per share.

Civitas Social Housing (CSH) | Debt facility

Market Cap:

£377m

Yield:

9.1%

(Disc)/Prem:

(44%)

Sector:

Property: UK Residential

CSH has closed a new 5-year term debt facility of £70.875m with a major European bank lender. The facility has been deployed in full to redeem the fund's existing £60m facility with Lloyds Bank as well as providing additional liquidity. The drawdown of the facility will increase CSH’s LTV to 35.3% (based on 31 December 2022 gross portfolio valuation). The fund’s long-term stated objective is to have a ceiling for average gearing of not more than 40%. All debt facilities are now at 100% fixed or capped rates.

Home REIT (HOME) | Update and strategic review

Market Cap:

£301m

Yield:

n/a (shares suspended)

(Disc)/Prem:

n/a

Sector:

Property: UK Residential

HOME’s two brokers, Alvarium Securities and Jefferies International, have recently resigned; Smith Square Partners was appointed as financial adviser on 13 February. The Board yesterday received a report from Alvarium Home REIT Advisors following a review undertaken by Simpact Group. For the quarter ending November 2022, only 23% of rent has been collected. In addition, the rent forecast to be collected for the coming months is “highly uncertain”, due to issues surrounding tenants' ability, or willingness, to pay. Statutory demands have been served on 7 of the defaulting tenants and HOME retains its right to forfeit leases of defaulting tenants and continue to pursue arrears. The Board has asked the investment adviser, assisted by Simpact, to assess the impact of its report in terms of rental and capital values going forward. The report also indicated that, based on information provided by tenants for c.67% of the portfolio (by beds), c.25% of this sample requires at least some level of refurbishment. The cost of this is estimated to be £15m – £20m. Vendors are contractually responsible for the refurbishment of properties, and so it is therefore hard to quantify the net exposure to HOME. There is c.£10m of retentions held by solicitors that may become available to the fund if the required refurbishment works are not undertaken by certain vendors.

In light of the report, the Board is considering all strategic options, including the possible sale of the fund. HOME has received an unsolicited approach from Bluestar Group Limited regarding a possible offer for the entire issued share capital of the fund. Any offer by Bluestar would likely be in cash. Bluestar is required, by not later than 5:00pm on 16 March, to do one of the following: (i) announce a firm intention to make an offer for HOME; or (ii) announce that it does not intend to make an offer. This deadline can only be extended with the consent of the Takeover Panel.

The Board has also noted media “speculation” of allegations of wrongdoing. The Board confirms that it instructed Alvarez & Marsal, independent forensic accounting experts, to investigate these allegations in early January 2023. This investigation is ongoing. The fund continues to engage with BDO for the purposes of finalising the enhanced audit of its accounts for the year ended 31 August 2022. The fund is also engaging with its lender, Scottish Widows. Except for the payment of any distributions which may be required for it to maintain compliance with its obligations as a UK REIT, the Board has suspended the payment of quarterly dividends for the foreseeable future.

Winterflood View: This was yet another concerning update from HOME, with both of its brokers resigning and the review undertaken by Simpact highlighting significant issues, particularly in terms of rent collection. It is difficult to imagine any way in which the fund can recover from the current situation and survive as an ongoing listed vehicle, even if the share suspension is lifted.

The Board stated that when considering strategic options it would not lose sight of the “paramount importance of preserving shareholder value”. It will be interesting to see what value Bluestar Group places on the portfolio if it makes a firm offer and what the impact of rental defaults on property valuations is expected to be. We suspect that any value realised for shareholders will be considerably lower than the latest NAV as at 28 February 2022 (111.20p), given that much of the value of the properties were linked to the long-term income attached to them, which now appears to be highly uncertain. While the assets will clearly have some alternative use value, we note that the required refurbishments will have a negative impact.

Tritax Big Box REIT (BBOX) | Notice of results

Market Cap:

£2.8bn

Yield:

4.6%

(Disc)/Prem:

(37%)

Sector:

Property: UK Logistics

Annual results for year to 31 December 2022 will be announced on 2 March. A presentation for analysts and investors will take place on the day at 9:00am via a live webcast and conference call. Registration for live webcast here.