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Trust Watch: UK small-cap star sheds premium in Brexit blues

We’ve an interesting new addition to our ‘cheap’ list this week from the competitive UK Smaller Companies sector.

Fallen small-cap star

We’ve an interesting new addition to our ‘cheap’ list this week. The UK Smaller Companies sector is generally packed with great fund managers many of whose trusts can be bought at discounts to their net asset value (NAV). One notable exception – whose shares were recently trading at a premium over NAV – has de-rated in the past month and now trades at close to ‘par’ or NAV.

Just to recap, the first two of our four tables rank investment trusts and investment companies by their ‘Z-scores’, which is a measure used by analysts to put their discounts – shares trading below net NAV – or premiums – when shares stand above NAV – into historical context.

Roughly speaking a Z-score of -2 or below shows a trust is getting cheap compared to its own trading history and may provide a buying opportunity (first table). By contrast, a Z-score of 2 or more is getting dear and may signal an opportunity to take profits (second table).

Next: Widdowson’s window of opportunity

If you want to view the slides on one page, click here.

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Fallen small-cap star

We’ve an interesting new addition to our ‘cheap’ list this week. The UK Smaller Companies sector is generally packed with great fund managers many of whose trusts can be bought at discounts to their net asset value (NAV). One notable exception – whose shares were recently trading at a premium over NAV – has de-rated in the past month and now trades at close to ‘par’ or NAV.

Just to recap, the first two of our four tables rank investment trusts and investment companies by their ‘Z-scores’, which is a measure used by analysts to put their discounts – shares trading below net NAV – or premiums – when shares stand above NAV – into historical context.

Roughly speaking a Z-score of -2 or below shows a trust is getting cheap compared to its own trading history and may provide a buying opportunity (first table). By contrast, a Z-score of 2 or more is getting dear and may signal an opportunity to take profits (second table).

Next: Widdowson’s window of opportunity

If you want to view the slides on one page, click here.

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'Cheap' trusts Share price premium (- discount) to net asset value % 12-month average premium (- discount) % Z-score
CVC Credit Partners Euro Opps - £ (CCPG) -3.4 0.7 -3.2
Odyssean IT (OIT) -0.9 5.0 -3.1
Axiom European Financial Debt (AXI) -9.1 0.6 -2.9
BMO Managed Portfolio Growth (BMPG) -3.8 0.6 -2.8
Invesco Perpetual Select - Balanced Risk (IVPB) -4.5 -0.9 -2.8
Marble Point Loan Financing (MPLF) -4.9 5.0 -2.7
Doric Nimrod Air Two (DNA2) 9.2 21.6 -2.6
Ecofin Global Utilities & Infrastructure (EGL) -16.9 -12.0 -2.5
BMO UK High Income - B Shares (BHIB) -10.7 -6.9 -2.5
VPC Specialty Lending (VSL) -17.9 -12.5 -2.4
Schroder Japan Growth (SJG) -12.2 -8.3 -2.3
JPMorgan Multi-Asset (MATE) -9.6 -5.4 -2.3
JPMorgan Elect - Managed Income (JPEI) -4.0 -2.2 -2.3
European (EUT) -12.8 -10.5 -2.2
Pershing Square Holdings (PSH) -27.2 -23.6 -2.2

Source: Numis Securities 21/3/19

Widdowson’s window of opportunity

If you missed out on buying shares in Odyssean (OIT) when star smaller companies fund manager Stuart Widdowson raised £87.5 million for its launch last April, now could be a good chance to do so when they look inexpensive.

Since the start of last month Odyssean shares have slipped from a 6% premium and at yesterday’s close stood at a small 0.9% discount to NAV to give them a cheap -3.1 Z-score and second place in our first table.

Compared to the 7% average discount on other smaller company trusts, that doesn’t look cheap, but relative to the trust’s own short history it’s attractive. Widdowson made his name running Strategic Equity Capital (SEC) where a combination of applying private equity valuation techniques and engagement with the management of a small number of companies generated impressive results. In his seven years in charge he grew SEC’s NAV by 377% and delivered a total return of 508% to shareholders.

Odyssean has got off to a slower start. Brexit has discouraged investors from the genuinely small end of the UK stock market that Widdowson and co-manager Ed Wielechowski like to trawl through, with the added hindrance of European ‘Mifid’ regulations reducing the number of corporate brokers and market makers, thus making many stocks illiquid and hard to trade. As a result any hint of bad news can generate sharp falls, which is why 11 months after launch the NAV per share remains stuck on just over 98p and the shares stand at 97.25p, down from their 100p flotation price.

If you’re a long-term investor, however, there is deep value here and these two managers may be the ones to unlock it. Alternatively, Widdowson’s old fund SEC now trades 16% below NAV and, given it shares with Odyssean interests in share registrar Equiniti and publisher Wilmington, may also offer a bargain.

Next: Alpha gets real

 

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'Expensive' trusts Share price premium (- discount) to net asset value % 12-month average premium (- discount) % Z-score
Lazard World Trust Fund (WTR) 3.9 -36.4 4.3
Alpha Real Trust (ARTL) -1.4 -21.0 4.0
Schroder UK Mid Cap (SCP) -10.2 -15.4 3.3
Primary Health Properties (PHP) 24.5 10.8 3.3
Fidelity China Special Situations (FCSS) -6.8 -11.8 3.0
Merian Chrysalis (MERI) 14.7 6.2 2.8
Sherborne Investors (Guernsey) B (SIGB) 7.6 -4.1 2.6
Aberforth Smaller Companies (ASL) -6.5 -10.7 2.6
NextEnergy Solar (NESF) 10.0 5.4 2.5
Raven Property Group (RAV) -12.7 -23.3 2.5
Edinburgh IT (EDIN) -6.8 -8.7 2.5
Bluefield Solar Income (BSIF) 13.1 6.6 2.4
North American Income (NAIF) -0.4 -5.4 2.3
Temple Bar (TMPL) -2.2 -5.4 2.2
SDCL Energy Efficiency Income Trust (SEIT) 4.3 2.7 2.1

Source: Numis Securities 21/3/19

Alpha gets real

Shares in Alpha Real Trust (ARTL), an eclectic property company encompassing a stake in a Spanish shopping centre and rental developments in Leeds and Birmingham, have responded to a trading statement this month showing its sale of a Frankfurt data centre contributed to a 15.6% rise in net asset value to 205.6p per share in the fourth quarter of last year. The shares have shot up 15% in the past month but at 162p remain on a wide discount to asset value.

Nick Greenwood, manager of Miton Global Opportunities (MIGO), who holds a big stake in the trust, said: 'Alpha has proved to be a solid performer, its shares have returned over 180% since the end of 2014 yet this move has lagged steady progress in the underlying portfolio leaving Alpha trading on a 32% discount. This is partially because Brexit uncertainties have weighed on most London-listed property trusts irrespective of whether there is any London exposure.'

Next: Oakley impresses

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Week's big risers Thursday's closing price (p) Previous Thursday's close (p) Change
Origo Partners (OPP) 0.28 0.18 57.1%
Alpha Real Trust (ARTL) 160.50 146.00 9.9%
BlackRock Frontiers (BRFI) 141.00 130.50 8.0%
LXB Retail Properties (LXB) 1.70 1.58 7.8%
Globalworth Real Estate (GWI) 8.93 8.30 7.5%
Independent (IIT) 580.00 548.00 5.8%
Oakley Capital Investments (OCI) 200.00 189.00 5.8%
Diverse Income (DIVI) 96.50 91.20 5.8%
CC Japan Income & Growth (CCJI) 144.00 136.50 5.5%
Syncona (SYNC) 259.50 246.50 5.3%
Templeton Emerging Markets (TEM) 766.00 731.00 4.8%
Baillie Gifford Japan (BGFD) 769.00 735.00 4.6%
Tritax Eurobox (EBOX) 97.50 93.20 4.6%
Polar Capital Technology (PCT) 1300.00 1244.00 4.5%
European Assets (EAT) 102.51 98.10 4.5%

Source: Numis Securities 21/3/19

Oakley impresses

Alpha Real Trust is prominent in our list of risers, up nearly 10% following the trading statement we just mentioned.

BlackRock Frontiers (BRFI) and life sciences fund Syncona (SYNC) also had good weeks advancing 8% and 5% respectively after their recent de-rating and share price fall, which Trust Watch has highlighted. 

Oakley Capital Investments (OCI), the tech and media private equity fund best known for its investment in Time Out listings magazine, gained nearly 6% after full-year results confirming a 16.3% total return on net assets. At yesterday's close of 200p the stock stands at a 28.5% discount to Numis' estimate of 279.8p NAV per share, with the broker pleased to see the board promising to up the level of buybacks to try to narrow the yawning gap.

Next: fund manager buys more Vinaland 

 

 

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Week's big fallers Thursday's closing price (p) Previous Thursday's close (p) Change
Vinaland (VNL) 0.01 0.01 -10.3%
Yatra Capital (YATRA) 3.52 3.80 -7.4%
Better Capital 2012 (BC12) 8.50 9.00 -5.6%
Altamir Amboise (LTA) 15.32 16.08 -4.7%
Schroder Real Estate Investment Trust (SREI) 55.10 57.70 -4.5%
Athelney Trust (ATY) 235.00 245.00 -4.1%
Princess Private Equity £ (PEYS) 817.00 850.00 -3.9%
Dolphin Capital Investors (DCI) 5.50 5.70 -3.5%
Lazard World Trust Fund (WTR) 314.50 325.50 -3.4%
Aberdeen Japan (AJIT) 517.50 535.00 -3.3%
Hansa Trust (HAN) 1060.00 1090.00 -2.8%
AEW UK REIT (AEWU) 91.90 94.50 -2.8%
Aberdeen Standard European Logistics Income (ASLI) 95.80 98.40 -2.6%
BMO Private Equity (BPET) 340.00 349.00 -2.6%
BH Macro - £ (BHMG) 2285.00 2345.00 -2.6%

Source: Numis Securities 21/3/19

Fund manager buys more Vinaland

The biggest faller of the week was Vietnamese property fund Vinaland (VNL) which fell 10% as its fund manager increased its stake to 49.6%. The company, which is winding up, was blocked by shareholders from delisting from the stock exchange before Christmas. Asia Investment & Finance, a subsidiary of VinaCapital Group, has been building its stake in what is probably preparation for another attempt at going private. 

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