Funds on the Watch List this week include: SMT, SSIT, FSF, CRS, BEMO, BSRT, MATE JGGI, BIPS, CORD, APEO, CGT, TIGT, CCJI, LWDB

Welcome to this week’s Watch List where you’ll find golden nuggets on trust discounts, dividends, tips and lots more…

ByFrank Buhagiar•29 Jan, 2024

BARGAIN BASEMENT

Discount Watch: 11

Our estimate of the number of investment companies whose discounts hit 12-month highs (or lows depending on how you look at them) over the course of the week ended Friday 26 January 2024 – four more than the previous week’s seven.

Two of the 11 were on the list last week: Digital 9 Infrastructure (DGI9) from infrastructure; and SDCL Energy Efficiency Income (SEIT) from renewable energy infrastructure.

Renewable energy infrastructure also accounts for three of the nine newbies too: Gresham House Energy Storage (GRID); Harmony Energy Income (HEIT); and Aquila Energy Efficiency Inc (AEET). Two more come from Japan: Baillie Gifford Japan (BGFD); and Baillie Gifford Shin Nippon (BGS). One from North America equity income: BlackRock Sustainable American Inc (BRSA). One from UK equity income: Finsbury Growth & Income (FGT). Another from debt: NB Distressed Debt (NBDD). And finally, Custodian REIT (CREI) from property.

ON THE MOVE

Monthly Mover Watch: Seraphim Space (SSIT)

Back at the summit of Winterflood’s list of top-five monthly movers in the investment company space. Still no new news out since the December shareholder letter, but that didn’t stop the space investor from extending its monthly gain from 26.1% to 48.1% over the course of the week. Some shareholder letter…

Next Foresight Sustainable Forestry (FSF) jumps from fifth to second after its share price gain on the month doubled to +26.2% from 12.4% a week earlier. A look at the graph reveals the shares have been on a tear since mid-January, rising from the 63p level to around 76p. No news out though…for now.

Three newbies to run through, although in the case of Crystal Amber (CRS) (+10.7%) in fourth not such a newbie, as the small cap investor, which is in wind-down mode, has been something of a feature among Winterflood’s top-fivers in 2024. Baker Steel Resources (BSRT) another not so new newbie takes third – shares up +12.8% on the month. Last top-five appearance? End of December 2023 and, speaking of December, this week the co. reported a +16.3% uplift in NAV per share for the month.

That just leaves fifth spot which goes to Barings Emerging EMEA Opportunities (BEMO) (+9.3%). This month the fund had some good news to report: “The Company recently sold its holding in TCS, a Russian depositary receipt…for total proceeds of USD 669,834. Based on the most recent net asset value, this would represent approximately 0.7% of the Company…Prior to realising this holding, it was valued at zero in the Company’s net asset value…the Company remains focused on how best shareholder value can be preserved, created and realised in relation to the holdings of Russian assets.”

Scottish Mortgage Watch: -0.6%

Scottish Mortgage’s (SMT) monthly share price loss as at Friday 26 January 2024 – an improvement on last week’s -4.5% monthly deficit. NAV also improved, closing flat on the month compared to being off -3.6% the previous week. Finally, the wider global IT sector finished the week up +1.5% compared to a minuscule -0.1% loss seven days earlier.

THE CORPORATE BOX

Combination Watch: JPMorgan Multi-Asset Growth & Income (MATE) JPMorgan Global Growth & Income (JGGI)

To tie the knot: “JPMorgan Multi-Asset Growth & Income…is pleased to announce that it has signed Heads of Terms with the Board of JPMorgan Global Growth & Income…in respect of a proposed combination of the Company and JGGI to be effected by way of a section 110 scheme of reconstruction of MATE…and issuance of new ordinary shares of JGGI as consideration for the transfer of all of MATE’s assets…”

Comment from MATE Chair Sarah MacAulay: “Your Board has been conscious for some time that MATE’s relatively small size reduced its appeal to investors, while prospects for the Company’s growth have been limited by difficult market conditions. Unfortunately, size does matter due to the implications for costs and for the liquidity of MATE’s shares. The Board believes that the proposed combination with JPMorgan Global Growth & Income plc offers shareholders exposure to a large, liquid company with significantly lower costs and a well-established dividend policy. Furthermore, it offers a degree of continuity, given that approximately 50 per cent. of MATE is currently managed by the same investment team that has an excellent performance record from investing in a globally diversified portfolio.”

Raise Watch: Invesco Bond Income Plus (BIPS)

Announced “…a placing (the ‘Placing’) and retail offer of Shares in the Company…via the Winterflood Retail Access Platform…” As the company explains “Throughout the course of 2023, the Company demonstrated continued strong performance, and the Company’s shares…have traded at an average premium to NAV of 1.55 per cent…The Board also notes the recent announcements by Henderson Diversified Income Trust plc (HDIV) in connection with its winding up…Consequently, the Board has decided to undertake a Fundraising to provide new and existing investors, including retail investors and HDIV’s shareholders who have elected to receive the cash offer, the opportunity to maintain their high yield exposure by purchasing Shares at a modest premium to NAV.”

Note from Winterflood: “BIPS has announced a placing and retail offer at a 0.75% premium to latest NAV; issue price to be announced on 6 February…The fundraising will be capped at £15m, of which the retail offer value is limited to €8m.”

Insider Watch: 1,000,000

The number of Cordiant Digital Infrastructure (CORD) shares purchased by Chairman and co-founder Steven Marshall at a price of 73p a share on 23 January 2024: “Following this purchase, Mr Marshall owns a total of 7,927,957 ordinary shares. The number of ordinary shares held by the Directors of the Company and the Investment Manager (either directly or by its staff) now represents 1.34% of the entire issued share capital of the Company.”

Buyback Watch #1: 8.1 million

The number of abrdn Private Equity Opportunities (APEO) shares that could be bought as part of the fund’s share buyback programme: “During the last 18 months, like many of its peers, APEO’s share price has diverged materially from its NAV, resulting in the Company’s shares trading at a material discount…It is the Board’s view that APEO’s current share price presents an exceptional investment opportunity for the Company. Notably, APEO has in recent months proactively undertaken a series of partial secondary sales of its co-investment in Action for portfolio construction reasons. All of these disposals have been achieved at 100% of the most recent quarterly valuation of that asset…The Board has decided to use a portion of the €34.6 million of proceeds realised from the most recent sale…to commence a buyback programme.”

Buyback Watch #2: Capital Gearing Trust’s (CGT)

Zero discount policy may soon be unshackled once more. As announced in October 2023, the policy has had to be put on the back burner due to the fund’s limited distributable reserves available to effect share buybacks. This is set to change however following approval from the High Court of Justice in Northern Ireland for the cancellation of £1.1bn in the share premium account and the crediting of an equivalent amount to distributable reserves.

Dividend Watch: 4%

The percentage increase in Troy Income & Growth’s (TIGT) total dividends for the year: “The total dividends for FY23 totalled 2.05p, representing a 4% increase on the prior year. Over the year this was above the peer group rate of dividend growth.”

8 – the number of consecutive years CC Japan Income & Growth’s (CCJI) dividend has been increased: “…the Board declared a second interim dividend of 3.75p per Ordinary Share, making a full year distribution of 5.30p per Ordinary Share and representing an 8.2% increase over last year… This is the eighth year of dividend increase for the Company with the annual dividend increasing by 76.7% since launch in December 2015. We currently pay a dividend yield of around 3% out of covered income.”

MEDIA CITY

Tip Watch #1: Law Debenture (LWBD)

Tipped by The Telegraph’s Questor Column. In Buy into this unique trust while its shares are depressed, Questor highlights how “Uncertainty over the timing of

interest rate cuts and Houthi attacks on Red Sea shipping have weighed on the new year stock market and depressed shares in Law Debenture Corporation, creating a good opportunity to buy the leading UK equity income investment trust…”

In terms of LWDB’s uniqueness, the article adds: “Launched 135 years ago, Law Debenture is a £1bn listed fund that seeks to generate income and growth from a portfolio of British stocks managed by Janus Henderson and a set of specialist financial services businesses…This unique combination – which underpins a strong dividend and diversifies investors’ returns – has impressed us for a long time. We first recommended the shares at about 578p in July 2017 and continue to regard Law Debenture as a good core holding for private investors at today’s share price of 773p.”

Tip Watch #2: Scottish Mortgage (SMT)

Given the once over by Shares Magazine. In What should investors do with Scottish Mortgage? Shares points out that “For the first time in years Scottish

Mortgage Investment Trust (SMT) investors are contemplating selling up and moving on. Over the past month, it is the most sold investment trust on the AJ Bell platform, accounting for 14.6% of all trust sales. This is almost unheard of, and it is meaningful too. For most of the 21st Century, long-term investors have backed Scottish Mortgage to the hilt, enjoying a seemingly endless supply of successes, including stakes in Amazon…long before the rest of the market caught on. It is a run that has made Scottish Mortgage a foundation stone of thousands of private investor portfolios, powering the trust into the FTSE 100.”

The last three years have been tough however: “During the three years to 31 December 2023, the shares lost 32.8%, according to manager Baillie Gifford, versus a 28.7% gain for its FTSE All World Index benchmark. Even over five years, typically the period joint managers Tom Slater and Lawrence Burns prefer to be judged on, it has barely tracked the benchmark’s 77.8% returns…A big part of that underperformance comes from Scottish Mortgage’s decisions on the thorny issue of owning stakes in private companies, notoriously difficult to value and especially so during dry spells for funding rounds and an IPOs (initial public offerings) drought.”

There could be light at the end of the tunnel though. As Shares writes: “Many believe 2024 will see the IPOs market pick up again, which will help established private company valuations and dispel some of the worries investors might have.” The article concludes: “…for those willing to accept the volatility inherent in the share price, this remains a clearly focused investment trust aiming to capture outlier returns amid market risk aversion from many of the largest investment themes around, such as AI, (artificial intelligence), energy storage, digital commerce, and healthcare technology. We believe this means share price performance will improve and could repeat the benchmark-beating return of the past decade’s 318.9% versus 193.2%.”