Daily News 16 Mar 2023

AVI Japan Opportunity (AJOT) | Annual results 

Market Cap:

£168m

Yield:

1.2%

(Disc)/Prem:

(1%)

Sector:

Japanese Smaller Companies

Annual results for year to 31 December 2022. NAV TR was -4.3%, compared with -1.0% benchmark return. Share price TR was -4.5%, as the rating moved from 0.1% premium to 1.6% discount. 400k shares repurchased during year, which have since been re-issued. Full-year dividend was 1.55p (FY21: 1.40p). Largest contributors included DTS, Fujitec and Teikoku Electric, whilst Wacom and Pasona dragged on returns. ¥4.3bn debt facility renewed in February 2022, with ¥2.5bn drawn and net gearing of 5.1% at 31 December 2022. Shareholders voted not to use exit opportunity in October 2022.  

CC Japan Income & Growth (CCJI) | Subscription share cancellation   

Market Cap:

£211m

Yield:

3.1%

(Disc)/Prem:

(10%)

Sector:

Japan

Board announced that, further to their suspension on 9 February, subscription share listings have been cancelled from 15 March. Shares with unexercised share rights have lapsed and have been reclassified as deferred shares, which will be repurchased for nominal consideration and cancelled.

Rights & Issues  (RIII) | Share split  

Market Cap:

£118m

Yield:

2.0%

(Disc)/Prem:

(15%)

Sector:

UK Smaller Companies

Board announced intention to subdivide each share into 10 new shares. Split is subject to approval from shareholders at AGM on 23 March, admission to the Official List of FCA and trading on the London Stock Exchange’s main market. Following the split, the ISIN and SEDOL will be updated.

Schroder Asian Total Return* (ATR) | Annual results  

Market Cap:

£441m

Yield:

2.0%

(Disc)/Prem:

(6%)

Sector:

Asia Pacific

Annual results for year to 31 December 2022. NAV TR was -12.7%, compared with -7.1% reference index return. Share price TR was -17.4%, as discount widened from 0.2% to 5.8%. 3.9m shares bought back at average discount of 5.1%, in accordance with policy to buy back at discount of more than 5%. Revenue per share +35% to 12.5p (FY21: 9.3p), full year dividend +29% to 11p (FY21: 8.5p). Detractors included Taiwanese and Korean semiconductors, Indian stock selection and US housing-related plays, whilst hedging and net exposure management contributed +20bps over FY22. Key change over year was to reduce China exposure, particularly in technology. Proceeds used to add financial stocks in Singapore and Hong Kong, as the manager views the latter as a more attractive play into the China reopening given relatively cheaper valuations. Gearing remained at c.10% from October to year-end.

Secured Income Fund (SSIF) | Interim results 

Market Cap:

£6m

Yield:

1.2%

(Disc)/Prem:

(35%)

Sector:

Debt: Direct Lending

Half-year results to 31 December 2022. NAV TR +6.8% and share price TR +31.3%. NAV at 31 December 2022 was 18.39p. H2 2022 EPS 1.41p (vs loss of 2.68p H2 2021). Provision for SME Loan Company (2^nd largest position) increased due to further delays in refinancing following borrower entering administration. Fund issued and redeemed B shares equivalent to 3.0p per share. Net assets £9.7m (vs £13.2m a year prior), as fund approaches £7m NAV target that will trigger delisting. Board expects to realise most of remaining portfolio within next 12-18 months.

On 15 December 2022, special resolution approved which involved cancellation of capital redemption reserve to increase support for B share scheme. This took place on 28 February 2023, with proceeds credited to distributable reserves on 10 March 2023.  

abrdn Private Equity Opportunities Trust plc (APEO) | NAV Update 

Market Cap:

£692m

Yield:

3.1%

(Disc)/Prem:

(40%)

Sector:

Fund of Funds

NAV per share +2.0% (+14.4p) to 745.9p over the month of February. 76.3% of portfolio valued as at 31 December 2022 (31 January 2023 was 98.8% dated 30 September 2022). £10.8m of drawdowns and received £1.5m of distributions. Outstanding commitments of £699.1m at the month-end with £73.8m unlikely to be drawn. £238.4 of liquidity (cash balances plus undrawn credit facilities).

Drivers: (i) +2.2% constant currency uplift in the valuation of investments as at 31 December 2022 received to date; (ii) +1.7% appreciation in the dollar versus sterling during February; and partially offset by (iii) a -0.7% depreciation in the euro versus sterling during February.

Downing Renewables & Infrastructure* (DORE) | NAV update 

Market Cap:

£192m

Yield:

5.0%

(Disc)/Prem:

(12%)

Sector:

Renewable Energy Infrastructure

NAV per share +0.8% to 118.6p over the three months to 31 December 2022 (net assets: £217.2m). NAV movement was driven by the offsetting effects of FX (-1.8p) and update to long-term power prices (-0.8p). NAV TR +19.5% over the year to 31 December.

Assumptions: Discount rates (DR) unchanged over the quarter: portfolio DR, 7.7%; Operational levered UK solar DR, 8.0%; Swedish hydropower portfolio DR, 6.3%; and unlevered Swedish wind farm DR, 6.3%. Power price forecasts in the UK were largely in line with the previous quarter with prices forecast to return towards more normalised levels a little sooner in the medium term. in Sweden, the power price forecasts have reduced in the period 2023-2026 with the longer-term assumptions (2027 onwards) consistent with those of the prior quarter. UK 2023 inflation forecasts increased to 6.42% from 2.75% and increased from 2% to 3.78% in Sweden. No changes to inflation assumptions from 2024 onwards.

Operational performance: Q4 2022 revenue was 63% above budget and operating profit 75% above expectations, despite generation across the hydro portfolio 21% below budget

Policy impact: Guidance reconfirmed that the GB Electricity Generation Levy will have minimal impact on profitability. UK generation will fall below the levy 50GWh threshold, and receipts from sales of wholesale power are not forecast to exceed the £10m allowance. EU price cap of EUR180/MWh will have an immaterial impact on valuations.

Winterflood View: DORE continues to demonstrate the benefits of diversification across technology, revenue source and geography, with revenue 63% above budget for the quarter despite lower than forecast generation from Hydro. The flexibility of Hydro allows the manager to further take strategic decisions to protect revenues. Hydro revenue was 80% above budget over the quarter following the decision to hold back water in the reservoirs for the winter months. DORE’s scale relative to its peers has given it an  advantage against the impact of  windfall taxes and levies.

However, clarity on how much buffer DORE has relative to the various tax thresholds would be appreciated. As the portfolio grows we expect the buffer to erode. Whether the tax “savings” can be passed onto shareholders as higher dividends will be on investors’ minds.

RM Infrastructure Income  (RMII) | NAV update 

Market Cap:

£95m

Yield:

13%

(Disc)/Prem:

(9%)

Sector:

Infrastructure Debt

NAV TR +0.41% over the month of February and +5.56% over the last 12 months. Portfolio yield was 9.61% with a weighted average loan life of 1.72 years. Current run rate income for the reporting period has exceeded the net interest income requirement for the annual dividend target, and is on track to deliver a net interest income per share of 7p or more. The fund is “not aware of any direct nor indirect exposure to SVB and Signature Bank”.

VH Global Sustainable Energy Opportunities (GSEO) | Notice of results 

Market Cap:

£422m

Yield:

3.8%

(Disc)/Prem:

(8%)

Sector:

Renewable Energy Infrastructure

Annual results for the period ended 31 December 2022 will be released on 28 March 2023.

Ediston Property Investment Company (EPIC) | Strategic review

Market Cap:

£129m

Yield:

8.2%

(Disc)/Prem:

(24%)

Sector:

Property: UK Commercial Specialist

EPIC was launched in 2014 and in 2021 it revised its investment strategy to invest exclusively in the retail warehousing sector for the foreseeable future. It subsequently sold all its office and leisure assets, and currently has cash to take advantage of opportunities in the sector. While the Board believes that the fund is well positioned from an investment perspective, and has a “very capable” investment manager in place, both the Board and the manager recognise that EPIC, like many of its peers, remains of a size that might deter some potential investors. In addition, the fund’s rating, while better than many of its peers, still reflects a material discount to NAV.

Growing the fund has been a stated objective of the Board for a number of years. However, the Board has concluded that it is unlikely to be able to raise new capital in the short or medium term. This is described as “particularly disappointing given the opportunities which the Board and Manager anticipate may arise to acquire properties that could substantially enhance returns to shareholders over the medium term”. The Board and manager recognise that the challenges facing EPIC are also faced by many of its peers, and they have concluded that these challenges may be best addressed by achieving consolidation in the sector. This would be expected to enable investors to benefit from the medium-term recovery in the real estate sector through a re-rating of the REITs' share prices and the attractive investment opportunities that are available to larger REITs.

Accordingly, the Board has announced that it is undertaking a strategic review of the options available to the fund to maximise value for shareholders. The Board has a preference for structuring a merger with one or more REITs, but will consider all options available, including selling the entire share capital of the fund, undertaking some other form of consolidation, combination or merger, and selling the fund's portfolio assets and returning proceeds to shareholders.

Winterflood View: Following a number of strategic reviews initiated in the investment trust universe in recent weeks, this is yet another demonstration of a Board recognising the challenges faced by a sub-scale fund on a wide discount and acting in the best interest of shareholders. We have sympathy with the fact that the real estate sector is enduring a difficult period at present in an environment of elevated Gilt yields and macroeconomic concerns. As a result, we agree with the opinion of the EPIC Board that a merger with another REIT could be the best way forward, enabling a larger vehicle to take advantage of any opportunities that may arise. However, it is also positive that the Board is considering all options and we would hope that the strategic review incorporates engagement with shareholders to understand their preferences regarding the fund’s future.

Home REIT (HOME) | Strategic review update and PUSU extension deadline

Market Cap:

£301m

Yield:

n/a (shares suspended)

(Disc)/Prem:

n/a

Sector:

Property: UK Residential

Following the announcement by HOME on 16 February, the Board has provided an update in relation to certain aspects of its strategic review. Following consultation with a range of shareholders, the Board is considering all options for the ongoing management of the fund’s assets, and is initiating a process to consider candidates to act as investment adviser. Discussions have commenced with a number of candidates. Alvarium Home REIT Advisors continues to work closely with the fund and will work towards an orderly handover at the appropriate time.

The Board continues to explore all options, including an orderly realisation of some or all of its assets and/or a sale of the fund to maximise value for shareholders. The fund is in close contact with Scottish Widows, its main lender, and is “grateful for its support to date”. The Board is continuing to work with BDO to seek to finalise the audit of its accounts for the year ended 31 August 2022. The investigation by Alvarez & Marsal is continuing. The investment adviser and Simpact continue to work closely with the fund's tenants to restore rent payments and maintain service provision for the occupants. The fund is considering whether material changes to its investment policy are necessary or advisable at this stage to continue as a listed company. Any such changes would require the approval of the FCA and shareholders.

The fund previously announced that it had received an unsolicited approach from Bluestar Group Limited regarding a possible offer (likely to be in cash) for the entire issued share capital of HOME. Discussions with Bluestar remain ongoing. Therefore, at the fund's request, the Panel on Takeovers and Mergers has consented to an extension to the deadline by which Bluestar is required either to announce a firm intention to make an offer or announce that it does not intend to make an offer. Such announcement must now be made by not later than 5:00pm on 13 April.

Winterflood View: This morning’s announcements provide some colour on the ongoing strategic review, but the future of HOME is perhaps now even more uncertain, with possible outcomes including: a continuation under a new investment adviser; an orderly realisation; a takeover by Bluestar group; and a ‘material change’ to the investment policy. In addition, uncertainty remains regarding the investigation into allegations of wrongdoing and the outcome of the enhanced audit of the fund’s annual results.

Highbridge Tactical Credit Fund (HTCF) | Company update 

Market Cap:

£3m

Yield:

n/a

(Disc)/Prem:

(9%)

Sector:

Hedge Funds: Multi-Strategy

The Board has announced a compulsory redemption at £2.368 per share (Dec 2022 NAV) for 95% of outstanding shares following the final distributions received from Highbridge Multi Strategy Master Fund and Highbridge Tactical Credit Master Fund.

The Board will no longer produce quarterly NAVs, as the remaining holdings are cash and an interest in the AllBlue Funds , with an uncertain carrying value. Therefore, the 30 December 2022 is the final NAV which reflects AllBlue valuation as at July 2018. The liquidation of the fund from the LSE will be delayed until October 2023 to allow any potential distributions received from AllBlue to be passed to shareholders with ease. Options are being explored to issue an alternative share class.