Month: February 2025 (Page 4 of 13)
Weekly Gainers
JPMorgan Emerging Europe, Middle East & Africa (JEMA) comes from nowhere to take top spot on Winterflood’s list of highest monthly movers in London’s investment company space and it seems it’s all down to one phone call. Schiehallion (MNTN), another new entry while Golden Prospect Precious Metals (GPM), BBGI Global Infrastructure (BBGI) and Tritax Big Box (BBOX) all retain their top 5 places.
The Top Five
New leader at the top of Winterflood’s list of highest monthly movers in the investment company space – JPMorgan Emerging Europe, Middle East & Africa Securities (JEMA). Shares are up +30.3% on the month with the majority of the gains made on 13 February 2025. No news out from the emerging markets investor but can’t be a coincidence that the share price added +18.5% on the day it was announced that President Trump had had a long chat on the phone with his Russian counterpart. Market thinking an end to the Russian/Ukraine conflict could be in sight which raises the prospect that there may well be some value in the trust’s frozen Russian assets after all.
Golden Prospect Precious Metals (GPM) is in second – shares are up +24.7%, an increase on the previous +22.2% gain. Still no material news out from the fund so put the strong share price down to the strong gold price. According to Reuters, gold hit a record high of US$2,942.7 on Tuesday 11 February. Just a hop and skip to US$3,000 from there.
BBGI Global Infrastructure (BBGI) edges up into third after seeing its monthly share price gain increase to +19.4% from +16.1%. Shares still basking in the afterglow of the 6 February announcement that BBGI has received, and is recommending, a 147.5p per share cash offer from a vehicle indirectly controlled by British Columbia Investment Management Corporation. Shares closed at 143p, so market not expecting a rival bid to emerge.
The Schiehallion Fund (MNTN), a new entry in fourth courtesy of a +15.9% share price gain on the month. Only news out from the growth capital investor this past week – more share buybacks. In all the fund bought back 500,000 of its shares at 111.5c a pop. A look at the graph though shows the shares have been on an upwards trajectory ever since the US election. MNTN’s largest holding, none other than Trump ally Elon Musk’s Space X – 9.7% of total assets as at 31 December 2024.
Tritax Big Box (BBOX) retains fifth spot with a +15.6% monthly share price gain. That’s an improvement on the previous week’s +11.2%. Last week, we reported that the shares had responded well to the fund’s 31 January full-year trading update. This week the shares got a further boost after a positive write-up by The Times’ Tempus Column on 11 February – Tempus – Should you buy shares in Tritax Big Box Reit? Don’t be fooled by the question in the title. The article went on to conclude “Advice Buy. Why? Tritax is on the verge of long-term transformation”. By the end of the week, the shares were up a further +3.5%. The power of the press.
The Telegraph’s Questor Column thinks markets are being “irrational” when it comes to valuing London’s renewable infrastructure funds and believes Bluefield Solar Income Fund (BSIF) is one of many bargains to be had; while The Times’ Tempus flags how a deal to develop a large data centre near Heathrow could be a game-changer for Tritax Big Box Reit (BBOX).
By Frank Buhagiar
Questor – There’s money to be made waiting for the regulator to fix its problems
The Telegraph’s Questor Column thinks markets are being “irrational”, at least when it comes to valuing London’s renewable infrastructure funds. That’s because share prices across the space continue to trade at gaping discounts to net assets despite news of the £1bn takeover of BBGI Global Infrastructure by a Canadian fund at a 21% premium to the then prevailing share price. “Remarkably, despite the obvious potential upside for investors if this turns out to be the first of many such deals, share prices of UK-listed infrastructure trusts barely moved. Share price discounts to net asset value (NAV) in the renewable energy sector, which shares many similar characteristics, actually widened.”
Questor blames the Financial Conduct Authority and unfair cost disclosures rules that discourage wealth managers from buying trusts for their clients. “There is considerable anger within the industry over this failing, but while we wait for it to be addressed, there are bargains to be had.” One of which is Bluefield Solar Income Fund (BSIF). Questor admits “It is not the cheapest of these trusts, yet it does trade on a discount that implies a greater than 50% upside if it reverted to trading at NAV, as it did for almost all of its life up until May 2023.” There’s also a double-digit yield based on a dividend that is well covered by earnings and cash flow. And it belongs to “a growing sector, where conditions are moving in its favour. It is also focused solely on the UK, so does not come with currency risk.”
As the name suggests, the portfolio is dominated by solar assets, all of which are operational: as at end of September 2024, the portfolio consisted of 824MW (megawatts) of solar and 58MW of onshore wind. To drive future NAV growth the fund has a 1.5GW+ development pipeline which, as well as solar, includes battery storage projects. Problem is, the wide discount means new shares cannot be issued to finance the pipeline. So, BSIF has secured funding from a consortium of UK pension funds. As for the discount, Questor notes that like most of the sector, BSIF’s discount widening was triggered by rising interest rates. Yet despite UK interest rates being cut three times from their peak, “the trust’s share price has continued to slide. Questor believes that Bluefield Solar is oversold.”
Tempus – Should you buy shares in Tritax Big Box Reit?
The Times’ Tempus appears to immediately answer its own question with its opening line “A deal to develop a large data centre near Heathrow will be a game-changer for the warehouse investor”. To be clear Tritax Big Box Reit (BBOX) is already no tiddler – the £3.6bn market cap has a portfolio of warehouses let to blue-chip customers including Amazon, B&Q and Ocado.
So, what’s the big deal about the big deal? BBOX plans to turn 74 acres near Heathrow airport into a major data centre. Work to create 448,000 sq ft of data halls across three floors is due to start in the first half of next year and there could be scope to add further capacity in the future. The scheme is subject to planning approval, but as Tempus notes “it would be a brave local authority that turned this down in defiance of a government desperate for economic growth.” And doesn’t sound like BBOX intends to stop there – management has said they want data centres to become “a meaningful part of the portfolio”. Tempus thinks this would have a positive impact on profits as the data centre project is set to generate a 9.3% yield compared to 7% for new logistics centres.
In terms of funding, Tempus points out BBOX has “plenty in the locker”. Last year’s all-share acquisition of UK Commercial Property Reit added higher yielding small warehouses as well as hotels, offices and leisure centres to the portfolio which were expected to be sold post-merger. Meanwhile, debt currently stands at a relatively low 29% of NAV and there is £500m available to borrow. All of which leads Tempus to conclude: “Advice Buy. Why? Tritax is on the verge of long-term transformation”
“The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard” – Benjamin Graham
Investors sometimes forget to rebalance their portfolios periodically. Over time, certain investments may outperform or underperform others, leading to an imbalance in the portfolio’s asset allocation. This means your potential returns over the longer term are more at risk. Rebalancing simply means making the trades necessary to bring a portfolio back to its intended asset allocation (investment mix) after fluctuations in the market has caused your portfolio mix to change. By rebalancing regularly, investors can sell high-performing assets and buy underperforming ones, ensuring their portfolio maintains the desired risk profile and potentially maximising their returns over the long term. On occasions when the asset allocation mix (small-cap stocks, large-cap stocks, funds/investment companies, bonds), are distorted to the extremes the now over-weight segment of the portfolio can be reduced/re-sized back to its original intended percentage and the under-weight segment can be increased if/when it appears undervalued. Long-term this rebalancing and buying of undervalued assets can lead to the regularly rebalanced portfolio outperforming the pure buy-and-hold portfolio.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”. – Peter Lynch
Attempting to time the market is a common mistake made by Investors. Trying to predict the market’s highs and lows is extremely challenging and often results in missed opportunities or poor timing. Even when fundamental analysis has led investors to add to their armoury by using technical analysis, this can be fraught with long-term regret. Instead, investors should adopt a systematic approach, such as pound cost averaging, where regular investments are made regardless of market conditions. This can mitigate the effects of market volatility and potentially enhance long-term returns. Whilst also reduces the emotional urge to scalp quick gains which are not always easy to replicate and enables the prudent investor to focus on investing and the power of compounding.
NextEnergy Solar Fund Limited
(“NESF” or “the Company”)
Unaudited Quarterly Net Asset Value & Operational Update
NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, announces it has today published its Q3 Net Asset Value and Operational Update for the period ended 31 December 2024.
Key Highlights
Financial:
· Net Asset Value (“NAV”) per Ordinary Share of 97.4p (30 September 2024: 97.8p).
· Ordinary Shareholders’ NAV of £565.7m (30 September 2024: £572.2m).
· Gross Asset Value of £1,071m (30 September 2024: £1,104m).
· Financial debt gearing (excluding Preference Shares) of 28.6% (30 September 2024: 30.2%).
· Total gearing (including Preference Shares and total look-through debt) of 47.2%
(30 September 2024: 48.2% ).
· Weighted average cost of debt (including Preference Shares) of 4.9% (30 September 2024: 4.9%).
· Weighted average cost of capital of 6.6% (30 September 2024: 6.6%).
· Weighted average discount rate across the portfolio of 8.0% (30 September 2024: 8.0%).
Dividend:
· The Board is pleased to reaffirm its full-year dividend target guidance of 8.43p per Ordinary Share for the financial year ending 31 March 2025.
· The full-year dividend target per Ordinary Share is forecast to be covered in a range of 1.1x – 1.3x by earnings post-debt amortisation.
· Total Ordinary Share dividends paid since IPO of £346m.
· As at 19 February 2025, the Company offers an attractive dividend yield of c.12%.
Portfolio:
· 101 2 operating assets (30 September 2024: 102 ).
· Total installed capacity of 934MW 2 (30 September 2024: 983MW ).
· Remaining weighted asset life of 25.0 years (30 September 2024: 25.6 years).
Share Buyback Programme:
· As at 31 December 2024, the Company had purchased 10,089,403 Ordinary Shares for a total consideration of £7.8m through its up to £20m Share Buyback Programme, producing a NAV uplift of 0.4p per Ordinary Share.
· As at 19 February 2025, 12,484,767 Ordinary Shares have been purchased for a total consideration of £9.4m and are currently being held in the Company’s treasury account.
Capital Recycling Programme:
· As at 19 February 2025, the Capital Recycling Programme has:
o Sold three asset sales totalling c.145MW of capacity from the 245MW Programme.
o Raised £72.5m total capital.
o Added a total estimated Net Asset Value uplift of 2.76p per Ordinary Share.
· The remaining 100MW in the Programme is progressing through a competitive sales process to third-party buyers. The Company will publish further updates about Phase IV of the Programme in due course.
Capital Structure:
· As at 31 December 2024:
Debt facilities
Original size (£m)
Amount outstanding (£m)
Long-term amortising debt
£212.5m
£148.6m
Short-term revolving credit facilities
£205m
£134.4m
· Short-term revolving credit facilities drawn of £134.4m (30 September 2024: £153.4m).
· Long-term amortising debt paid down by £60.4m (30 September 2024: £52.4m). The remaining outstanding long-term debt of £148.6m is on track to fully amortise in line with the remaining subsidy life of the portfolio’s government subsidies.
· Of the Company’s total debt of £481.4m :
o 72% remains at a fixed rate of interest (including the Preference Shares).
o 28% remains at a floating rate of interest via the short-term revolving credit facility.
· Total look-through debt of £23.6m (30 September 2024: £23.5m). This represents the total combined short and long-term debt in the Company’s investment into NextPower III LP, and its two co-investments (Agenor and Santarem) on a look-through equivalent basis. This is included in the Company’s total gearing ratio of 47.2%.
ESG & Sustainability:
· Published its first Nature Strategy Report in November 2024 outlining the Company’s strategic plan for nature and nature targets, which includes commitments to strong nature-related governance, evidence-led action plans, use of Science-Based Targets, and ongoing transparent disclosures.
Investment Manager Update:
· NextEnergy Group announced that it bolstered its leadership and senior management team with several key appointments and promotions. This adds significant expertise and experience to ensure its successful trajectory for NextEnergy Group’s next wave of anticipated global growth across the renewables sector.
o Ross Grier: Promoted to Chief Investment Officer of NextEnergy Capital.
o Andrew Newington: Appointed as Senior Advisor and Chair of the Investment Committee of NextEnergy Capital.
o Carrie Cushing: Appointed as Group Chief People Officer of NextEnergy Group.
o Armin Sandhövel: Appointed to NextEnergy Group’s Advisory Board.
o Zoey Carver: Appointed as Group Chief Technology and Information Officer
Management Fees:
· As part of its ongoing detailed dialogue around the future strategy of the Company, the Board is in discussion with the Company’s Investment Manager on its management fee structure. A further announcement in connection with this is expected to be made after the end of the Company’s financial year, 31 March 2025.
Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:
“NextEnergy Solar Fund is pleased to report stable Q3 performance given the backdrop of financial markets, global politics, and adverse weather conditions. The Board and the Company’s Investment Manager have an acute focus on proactively narrowing the share price discount, making good progress over the quarter by purchasing c.4.5m shares from its up to £20m Share Buyback Programme, and raising £72.5m in total capital from its Capital Recycling Programme to date.”
REGIONAL REIT Limited
(“Regional REIT” the “Group” or the “Company”)
Q4 Dividend, Year End Valuation and Trading Update
2024 Lettings 13.5% Above ERV
Regional REIT (LSE: RGL) today announces its portfolio valuation as at 31 December 2024, Q4 dividend and a positive update for both EPC ratings and rent collections.
Trading Update
The Group traded robustly during 2024 completing 61 new lettings totalling £3.2m rent roll, with these lettings being 13.5% above 2023 ERV.
Full Year 2024 Valuation and Portfolio Update
· The like-for-like value of the portfolio decreased by 8.2% from 1 January 2024 to 31 December 2024, after adjusting for capital expenditure, acquisitions and disposals during the period (7.1% excluding capital expenditure adjustment); a decrease of 3.1% in the period 1 July 2024 to 31 December 2024
· Portfolio valuation £622.5m (2023: £700.7m), with disposals amounting to £30.8m (before costs) during 2024 in line with their respective sale valuation dates (2023: £26.1m)
· Net loan-to-value ratio 41.8% (2023: 55.1%)
· Gross annualised rent roll £60.7m (2023: £67.8m); ERV £83.2m (2023: £87.0m)
· Total rent collection to date for 2024 has remained high at 98.1% compared with 98.4% for 2023
· Excellent progress on EPC ratings with c.82.7% (2023: 73.7%) of the portfolio EPC C or better
· 126 properties (2023: 144); 780 tenants (2023: 978)
· England represented 77.1% (2023: 78.4%) (by value), Scotland 16.6% (2023: 16.2%) and Wales 6.3% (2023: 5.4%)
· EPRA Occupancy (by ERV) at 77.5% (2023: 80.0%)
· Average lot size c. £4.9m (2023: c. £4.9m)
· Gross borrowings £316.7m (2023: £420.8m); cash and cash equivalents £56.7m (2023: £34.5m)
· Group cost of debt (incl. hedging) decreased to 3.4% pa (2023: 3.5% pa) -100% fixed and hedged ensuring the maximum cost of debt in 2025 will not exceed 3.4%
· Weighted average debt duration 2.9 years (2023: 3.5 years)
Stephen Inglis, Head of ESR Europe LSPIM Ltd., the Asset Manager, commented:
“2024 has been another challenging year for the property market, the REIT sector and the regional office market. Undoubtedly, we are beginning to see improvement in sentiment in the UK office market and companies’ attitudes to staff attendance in the office. This will result in enhanced rents for the quality accommodation that Regional REIT provides and improving occupancy levels following our Capex programme, leading to an improved net income position.
With the restated strategy of Regional REIT continuing to be a high dividend paying REIT, coupled with an additional focus on pursuing added capital value through initiatives such as obtaining higher value planning consents, this does mean we are holding some vacant and part vacant assets for longer, which does have a short term impact on occupancy and net income. It is expected that the value improvement upside will be substantial on those assets.
The Company’s LTV remains a core focus for the Board, and the management continues to pursue options to reduce this, with all the Company’s debt remaining 100% fixed and hedged to ensure that the maximum cost does not exceed 3.4%.
We look forward to updating shareholders on additional progress made by the Company’s management team at the Company’s full year results in March.”
Capital expenditure programme
Further to the 13 November 2024 announcement, an additional two capital projects have been approved for £1.5m resulting in ten current projects involving a total investment of £16.5m.
Highlight:
· Capitol Park, Leeds – £1.2m deal led refurbishment of Truman House (10,297 sq. ft). delivering an annual rent of £0.3m (£23.09 /sq.ft.), an expected valuation uplift of c.£1.8m and raising the rental tone benefiting other assets in the Company’s portfolio at this location.
Q4 2024 Dividend Declaration
As previously indicated, the Company is pleased to declare that it will pay a dividend of 2.2 pence per share (“pps”) for the period 1 October 2024 to 31 December 2024. The entire dividend will be paid as a REIT property income distribution (“PID”).
The key dates relating to this dividend are:
| Ex-dividend date | 27 February 2025 |
| Record date | 28 February 2025 |
| Last day for DRIP election | 14 March 2025 |
| Payment date | 04 April 2025 |
Prior to the capital raise and share consolidation* the Company declared a Q1 2024 dividend of 1.2pps. Post the capital raise and subsequent share consolidation the Company declared a Q2 2024 dividend of 2.2pps on 10 September 2024, Q3 2024 dividend of 2.2pps on 13 November 2024 and is now declaring a Q4 2024 dividend of 2.2pps.
*On 29 July 2024, the shares in issue were consolidated by ratio of 1 new share for every 10 shares.
The level of future payment of dividends will be determined by the Board having regard to the UK REIT requirements, the financial position and performance of the Group at the relevant time, the interest of shareholders and the long-term future of the Company.
Real Estate Credit Investments Limited (the “Company”)
Ordinary Dividend for RECI LN (Ordinary shares)
Real Estate Credit Investments Limited announces today that it has declared a third interim dividend of 3.0 pence per Ordinary Share for the year ending 31 March 2025. The dividend is to be paid on 4 April 2025 to Ordinary Shareholders on the register at the close of business on 14 March 2025. The ex-dividend date is 13 March 2025.
Investment trusts offer a world of opportunities to tap into but how can investors sort the wheat from the chaff ? In our Investing Analyst column, experts run the rule over what’s on offer.
The activism of Saba Capital, which I discussed in my last column, has created a challenge for all boards of investment trusts and we are already seeing its effect.
Lots of trusts are trading on wide discounts, and their boards are justifiably afraid of becoming a target of Saba, or another activist, aiming to take control of the company and potentially merge it away.
It certainly seems possible that this was behind the series of measures announced by abrdn Asian Income Fund (AAIF) recently.
Thomas McMahon, of Kepler Partners, takes a look at dividends
These measures had an instant impact on the share price, which saw a decent bounce in the following days. I’m pretty sure it will have been the dividend policy that has led to this reaction, judging by past such announcements.
This is to be 1.5625 per cent of NAV each quarter, which equates to 6.25 per cent annualised. As the trust’s shares are on a discount, the implied yield on the share price is higher, at c. 7 per cent at the time of writing.
This is almost 2.5 percentage points higher than the 10 year gilt yield, and from a portfolio which has the growth potential of Asian equities to offer too.
This sort of manufactured or enhanced yield has become increasingly popular in recent years. It is one of the features of the investment trust structure that can’t be replicated in the open-ended or ETF world.
Assuming they have first received the right shareholder permissions under company law, boards can essentially decide what dividend they want to pay out without any regard to what income they have earned.
Trusts can invest the dividends they receive, and then sell their holdings when they have to pay a dividend. There is no requirement to keep income in cash for distribution.
This is a mistake people often make when considering another feature of income-paying trusts: revenue reserves. This refers to past year’s income which can be held back by a trust for distribution in future years.
While we talk about it as being placed in reserve, all that really means is that an account is written up on a virtual ledger, while the money is invested back into the portfolio. When trusts pay from revenue reserves or from capital, they don’t have to keep cash on hand through the year but can simply sell some assets and pay the cash out.
These features of investment trusts thus offer incredible flexibility to boards and really underline the credentials of the investment trust structure as the preeminent one for income-seekers. Boards can draw up a dividend policy without worrying about the income received from the portfolio changing from year to year.
Investors like trusts paying dividends
While paying from capital has some critics, the market’s judgement overall is clear.
Consider JPMorgan Global Growth & Income (JGGI), for example. At c. £3bn in market cap, JGGI is one of the largest trusts in the sector, and sits on the mid-cap FTSE 250, just below the threshold for FTSE 100 inclusion. While most of the AIC Global Equity Income sector is trading on a wide discount, JGGI has been on or around a premium for most of the past five years.
Performance has been really good, the trust being ahead of all other vehicles in the Global or Global Equity Income sectors over five years, as well as ahead of global equity indices. The dividend policy is to pay 4 per cent of NAV each year, from capital wherever necessary. This means the managers are completely free from the need to worry about picking income stocks and they can just invest where they think the best growth is.
Paying a dividend from capital therefore allows income investors to invest in high growth areas while still earning a substantial yield, and I think it is this combination of yield and the strong performance from investing in global growth equities, that has led to the premium rating.
Could biotech be an income and growth opportunity?
Another good example of growth combined with income is International Biotechnology Trust (IBT). As the name suggests, it invests in companies developing new medicines, from those in clinical trials to those that are already generating sales and profits. These companies don’t pay dividends themselves, but IBT has a similar policy to JGGI, paying 4 per cent of NAV out each year in a dividend.
Biotechnology looks pretty cheap by historical standards, and has been out of favour as the market has adjusted to high interest rates. This means that, unlike for JGGI, the discount on the shares is considerable at the time of writing, around 12 per cent. This does show that an enhanced yield on its own is not enough to assure a narrow discount.
I think biotech could be an area to benefit if the market starts to broaden out from large-cap tech, which has taken so much investor attention and cashflow in recent years, while large-cap pharma companies are desperate to replace their expiring patents, which should see takeovers of the earlier-stage companies like those in IBT’s portfolio.