Crystal Amber Fund Limited Monthly Net Asset Value

 
TIDMCRS 
 
13 October 2016 
 
 
                          CRYSTAL AMBER FUND LIMITED 
 
                     ("Crystal Amber Fund" or the "Fund") 
 
                            Monthly Net Asset Value 
 
 
Crystal Amber Fund announces that its unaudited net asset value ("NAV") per 
share at 30 September 2016 was 202.02p (31 August 2016: 189.96p per share). 
 
The proportion of the Fund's NAV at 30 September 2016 represented by the ten 
largest holdings, other investments and cash (including accruals), was as 
follows: 
 
Top ten holdings               Pence per share Percentage of investee equity 
                                               held 
 
Hurricane Energy Plc                58.7                     15.3% 
 
Grainger Plc                        33.2                     3.4% 
 
Northgate Plc                       25.1                     4.3% 
 
Pinewood Group Plc                  18.6                     5.7% 
 
Leaf Clean Energy Co.               14.4                     29.9% 
 
STV Group Plc                       13.9                     9.2% 
 
Sutton Harbour Holdings Plc          8.3                     29.3% 
 
FairFX Group Plc                     7.3                     24.9% 
 
Hansard Global Plc                   5.0                     3.3% 
 
Shepherd Neame Ltd                   2.6                     1.3% 
 
Total of ten largest holdings       187.1 
 
Other investments                   14.4 
 
Cash and accruals                    0.5 
 
Total NAV                           202.0 
 
Investment Adviser's commentary on the portfolio 
 
Over the quarter to 30 September 2016, NAV per share increased by 31.4 per 
cent. This was after the payment of an interim dividend of 2.5p. Adjusting for 
this, total returns in the quarter were 33.0 per cent. 
 
The top three positive contributors to NAV growth over the quarter to 30 
September 2016 were Hurricane Energy plc (21.7 per cent), Northgate plc (3.6 
per cent) and Grainger plc (1.7 per cent).  The main detractor was FairFX Group 
(-0.3 per cent). 
 
Hurricane Energy plc ("Hurricane") 
 
On 6 July 2016, Hurricane announced the spudding of its new exploration well in 
the Lancaster field. On 9 September 2016, Hurricane announced positive drill 
results from its Lancaster well, guiding towards contingent resources 
significantly higher than previous estimates of 200 million barrels, high flow 
rates (6,600 barrels of oil per day) and good quality oil.  The Fund believes 
that these results materially de-risk the assets for further development. 
 
The Lancaster 7 drilling campaign was funded by a placing of new shares in 
April 2016 led by Kerogen Capital and Crystal Amber.  In recognition of its 
strategic input, the Fund was awarded warrants over 23.3 million shares at 20p. 
 
Over the quarter to 30 September 2016, the share price increased by 131 per 
cent to 39.25p. 
 
Grainger plc ("Grainger") 
 
Grainger was established in 1912 and is the UK's largest listed residential 
property owner and manager. Its traditional reversionary business is based 
predominantly on regulated tenancies, which provide substantial and predictable 
cash flows. Its portfolio of 3,710 reversionary assets has a market value of GBP 
1.3 billion. As these properties become vacant, Grainger estimates that they 
will generate a surplus of GBP332 million. This surplus is not capitalised and we 
regard these gains as 'off balance sheet assets' providing probable future 
economic benefits. This reversionary surplus is the difference between today's 
market value as a lower yielding tenanted property compared to the vacant 
possession value at today's prices. It does not reflect any future benefit from 
house price inflation. 
 
We have long believed that annual administrative expenses of GBP36 million are 
excessive. This equates to an administrative expense ratio of 3 per cent on GBP 
1.2 billion of net assets, which is substantially higher than its peer 
group. In May 2016, Grainger announced that an operational review had 
identified a minimum of GBP8.6 million in overhead cost savings relative 
to September 2015, representing a reduction of 24 per cent, which will reduce 
the 2017 overhead cost to GBP27.5 million. Whilst the Fund welcomes this improved 
efficiency, we have identified far greater savings and efficiencies. 
 
The Fund continues to engage with the management of Grainger. As well as 
addressing the opportunity to lower the operating and financial costs of the 
company, the Fund is in active dialogue with management regarding optimising 
structures. We note that in July 2016, the company converted its PRS Fund, 
GRIP, into a Real Estate Investment Trust and commented on the suitability of 
this structure for PRS investment. Grainger's share price continues to trade on 
a discount to net asset value of more than 20 per cent. Despite our 
discussions, we note management's continued refusal to implement a share 
buy-back programme which would secure an immediate risk free return of 28 per 
cent and increase net asset value per share. As a result, the Fund is now 
seeking alternative solutions to release value within Grainger. 
 
Northgate plc ("Northgate") 
 
On 4 July 2016, Crystal Amber disclosed that it had acquired three per cent of 
the issued share capital of Northgate. The Fund announced it had written to the 
company setting out its assessment of the company's prospects with suggested 
actions, which included a strategic review to consider a potential sale of all 
or part of the business. 
 
During the quarter, Northgate's share price increased by 32.4per cent, 
recovering from its post Brexit decline.  The Fund maintains the view that 
there is a significant opportunity to better capitalise on the Northgate brand 
and market positioning.  During the quarter, the Fund increased its position in 
Northgate to 4.3 per cent of Northgate's share capital. 
 
Pinewood Group plc ("Pinewood") 
 
During the quarter, Pinewood received a formal takeover offer worth GBP320 
million (563.2p per share). The offer was made by Aermont Capital, a subsidiary 
of PW Real Estate Fund, reinforcing Crystal Amber's view that Pinewood's real 
estate portfolio was undervalued.  At 30 September 2016, the Fund held 3.2 
million Pinewood shares equal to 5.7 per cent of Pinewood's issued share 
capital. Since investing in April 2015, the Fund's total gains have been GBP6.1 
million, equivalent to a return of 43 per cent. on the investment cost.  The 
proceeds receivable from the offer are anticipated to be received on 18 October 
2016. 
 
Restaurant Group plc ("Restaurant Group") 
 
The Fund increased its position in Restaurant Group following the Brexit 
sell-off, which saw an immediate share price mark down of more than 20%. 
 
In August 2016, the company announced the departure of the CEO with immediate 
effect and the appointment of Andy McCue, former CEO of Paddy Power.  Following 
a 50% increase in the share price from post-Brexit lows, the Fund took profits 
and sold its position in the company, realising a gain of GBP1.3 million. 
 
Transactions in Own Shares 
 
Over the period, the Fund bought back 160,000 of its own shares at an average 
price of 157.7p per share as part of its buyback programme. These shares are 
held in Treasury. 
 
For further enquiries please contact: 
 
Crystal Amber Fund Limited 
William Collins (Chairman) 
Tel: [phone] 
 
Allenby Capital Limited - Nominated Adviser 
David Worlidge/James Thomas 
Tel: [phone] 
 
Winterflood Investment Trusts - Broker 
Joe Winkley/Neil Langford 
Tel: [phone] 
 
Crystal Amber Advisers (UK) LLP - Investment Adviser 
Richard Bernstein 
Tel: [phone] 
 
 
 
END 
 

(END) Dow Jones Newswires

October 13, 2016 02:00 ET (06:00 GMT)