Compound Income
  • Blog
  • Scores
    • Scores Presentation
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact
  • New Page



The Ghost of Christmas Future...

21/12/2016

2 Comments

 
..or part three of the IT's a Christmas Carol Tale. So here it is Merry Christmas everybody's having fun, here's to the future now it's only just begun! The party is in full swing and the revellers are enjoying themselves but to recap the investment trust I mentioned in the last couple of posts continues to languish on a 20% or so discount. This is despite a decent long term track record, a 4%+ yield which I forgot to mention has increased for 29 years in a row too. Come on what is it I hear you cry - well we will get to that.

First lets look at the issue of performance which I also mentioned in the bear points yesterday. In terms of performance if we take the last three or five years and the underlying Net Asset Value Performance (NAV), this has been slightly ahead of the FTSE All Share, which is good, but toward the lower end of the sector performance, which is not so good. We also saw yesterday in share price terms that holders had underperformed the index over the last 10 year which is disappointing. Now some of this may be explained by discount movements and the drag of the expensive debt which I also mentioned yesterday and will come on to again in a moment.

Before that lets take a look at the Asset Allocation which I mentioned in the bear points as being unusual for its sector, the UK Equity Income Sector. In addition to the UK equities that they hold which are split 50/50 between FTSE and Mid / Smaller Companies they also hold around 30% of the fund in UK Property. Now this may or may not appeal, but personally I quite like exposure to equities and property as a way of growing and protecting my capital and income from the ravages of inflation. Now may be you are wary of property right now and that might put you off, but I'm not going to debate that here I'll just let their track record in this area (shown below) speak for itself.
Picture
That track record equates to an annualised total return of 13% according to the managers in the Annual report and accounts. This compares to an all in cost of the expensive debt that I mentioned (which they used to finance the properties) of around 9%. This figure is arrived at because apparently the two debentures which carry coupons of 9 3/8% & 11% were issued at a premium. Now of course if they wanted to repay these or refinance these in the short term the would also have to pay a premium which in last years reports and accounts was put at around £12m over te £40m book or par value. This is why the discount which is often stated with debt at par can be lower if you adjust the debt to market value.

Any way that is all a bit complicated and technical, but in this case it is not something you should have to worry about if you are prepared to buy and hold this one for the next 10 to 11 years or so. This is because in last years annual results the Chairman set out their plans to address the discount. Subsequently the AGM approved an ordinary resolution which requires the Board to put an Ordinary Resolution to Shareholders in 2024 in relation to the future direction of the Company, including proposals that provide an opportunity for any Shareholder to realise their investment in full at NAV, less costs, by 31 March 2027 at the latest. So with this in place you know you can look forward to the discount of 20% being closed over the next ten year which will give your returns around a 2% per annum tail wind. In addition as the debentures roll off in 2021 & 2026 any potential dilution from paying a premium to refinance them should have disappeared. Thus unlike most active funds which start off 1 to 2% behind due to costs this one in share price terms should at least be about 1% ahead if the discount reduced in a straight line, which odf course it probably won't.

Also Worth noting that to take advantage of the low rates for long term money, they have also borrowed £15 million from Santander UK plc for ten years at a rate of 4.5% p.a. including all costs. The money is being invested in properties with yields well above this, and it replaces the original £5 million loan arranged in February 2015. It enables them to look forward to their dividend prospects in the current
year with some confidence, although at the moment they said it was too early to make a forecast.

Summary & Conclusion
Sorry if that was all a bit boring and dull, but then it is a bit of a boring and dull idea and as I said before not one for Tiny Tim traders as it is unlikely to provide much excitement in the short term apart from the latest dividend of 2.6p which is due to go XD on 29/12/16. However, if you want some good Value & Income (VIN) from UK Equity & Property holdings then this could be a good one to lock away for the next tern years. In the meantime you should then be able to enjoy a 4% and likely growing yield which is now being paid out quarterly. If that has tempted you to join me as a shareholder in this one then I suggest you take a look at their website here and you should certainly take a look at the report and accounts which I attach below. Finally all that leaves is for me to wish you all a very Merry Christmas and a Happy and Prosperous New Year.
vit_annual_report_2016.pdf
File Size: 6435 kb
File Type: pdf
Download File

2 Comments
Des
22/12/2016 10:03:19 pm

Thanks for the really interesting string of articles Jamie I enjoyed reading them. I skimmed through the financial report but will dig deeper. It was refreshing to see they were written in plain english!Happy Christmas.

Reply
Jamie link
23/12/2016 08:15:14 am

Thanks for you feedback & support this year. Probably no rush on VIN with markets at these levels. Might be one to watch and pick up in the next down swing perhaps?

Seasons Greeting
Jamie

Reply



Leave a Reply.

    RSS Feed

    Google+

    Archives

    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    August 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014

    Categories

    All
    32Red
    Aberdeen Am
    Admin
    A G Barr
    Alliance Pharma
    Alternative Telecoms
    AMEC
    Amino Technologies
    Amlin
    Anglo Pacific
    Asset Allocation
    Auto Trader Group
    BA Systems
    BATS
    Behavioural Finance
    Bellway
    Berendsen
    BHP Billiton
    Bloomsbury Publishing
    Bodycote
    Books
    Bovis Homes
    BREXIT
    Britvic
    Catlin-group
    Central Asia Metals
    Centrica
    Character Group
    Churchill China
    Cineworld
    City Of London Investment Group
    Clarkson
    Commercial Property
    Compound
    Computacenter
    Connect Group
    Croda
    Currencies
    Demographics
    Diageo
    Diploma
    Directors Dealings
    Dividends
    Easyjet
    Economics
    Emerging Markets
    Emis
    Empiric Student Property
    Etfs
    Fairpoint
    Ferguson
    Ferrexpo
    Finsbury Foods
    Food Retailers
    Forterra
    Games Workshop
    Gateley
    Go Compare
    Goid
    Greene King
    GSK
    Hargreaves Services
    Hays
    Headlam
    Hedge Funds
    Hill & Smith
    House Builders
    Howden
    HSBC
    IG Group
    Imperial Tobacco
    Indivor
    Inflation
    Insurance
    Intermediate Capital
    Interserve
    Investec
    Investment Trusts
    It
    ITV
    James Halstead
    Jarvis Investment Management
    JLT
    Jupiter Fund Management
    KCOM
    Kingfisher
    Legal & General
    Lloyds Bank
    Maintel
    Man Group
    Market Timing Indicator
    Market Valuation
    Marston's
    Matchtec
    Media
    Merlin Entertainment
    Micro Focus
    Mining
    Mitie
    Miton Group
    Moenysupermarket
    Mondi
    Moneysupermaket.com
    Music
    National Grid
    N.Brown
    News
    Next
    Nichols
    Norcros
    Oil
    Page Group
    Paypoint
    Pennon
    Persimmon
    Personal Finance
    Pharmaceuticals
    Phoenix Group
    Photo Me
    Photo-Me
    Plus500
    Podcasts
    Polar Capital
    Politics
    Portfolio
    Portmeirion
    Provident Financial
    PZC
    Qinetiq
    Ramsdens Holdings
    Rank Group
    Reckitt Benckiser
    Renewable Energy
    Renew Holdings
    Renishaw
    Research Papers
    Restaurant Group
    Retailers
    RIO
    RM Group
    Rolls Royce
    RPC
    RPS
    Safestore
    Sage
    Sainsburys
    Savills
    Schroders
    Scores
    SCS Group
    Sell Discipline
    Shareholder Yield
    Share Picks
    Short Interest
    Somero
    Spectris
    Sprue Aegis
    SSE
    Stock Spirits
    S & U Plc
    TalkTalk
    Taptica
    Tax
    Technology
    Telecoms
    Tobacco
    Trading Ideas
    TSB
    TUI
    UK Market Update
    Unilever
    Utilitywise
    Value
    Victrex
    Vodafone
    VP.
    Water Utilities
    WH Smiths
    William Hill
    Wynstay
    XL Media
    XP Power
    Yield
    Zytronic

    googleda4a17cac6d02bb9.html
    File Size: 0 kb
    File Type: html
    Download File

Powered by Create your own unique website with customizable templates.
  • Blog
  • Scores
    • Scores Presentation
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact
  • New Page