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Icg-Longbow Share Discussion Threads
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ICG-Longbow Senior Secured UK Property Debt Investments
Strong interims but returns likely to decrease over medium term
NAV per share at 31 July 2016 was 102.7p per share which equates to a NAV total return of 5.5% for the six-month period. Returns have been ahead of of expectations because of prepayment fees relating to the Mansion and First Light loan repayments.
The portfolio comprises 10 loans with a weighted average LTV of 57.3% and expected gross IRR of 8.7%. The weighted average residual term was 2.3 years of which an average 1.2 years remains income protected.
There is potential for further loan repayments in the loan portfolio over the next year as the income protection period reduces. The manager has indicated that the redeployment of capital over the medium term will struggle to meet the existing return targets as interest rates on senior loans are significantly lower than at the time of the IPO. The manager expects to bring forward proposals to update the company's investment policy to allow the company to reinvest repayment proceeds having regard to current market conditions.
Interim results for the period to July 2016 were strong with the company's income protection providing a boost to returns from early repayments. The medium-term outlook for the company is uncertain as investors face the prospect of moving up the risk curve to maintain the level of returns or accepting a lower return for deployment in loans with similar risk characteristics to the existing portfolio. The company trades on a 0.3% premium to NAV (5.8% dividend yield).|
|Distribution period: 1 May 2016 - 31 July
Distribution amount 1.5 pence
Ex-dividend date: 22 September 2016
Dividend record 23 September 2016
Payment date: 14 October 2016|
|LBOW mentioned as cheap here -hTTp://citywire.co.uk/money/investment-trust-watch-did-svg-just-get-out-of-jail/a948979?ref=citywire-money-shooting-gallery-list|
|It's hard to fathom: comparison with SWEF is interesting, as it stands at a premium of about 5% to NAV and pays 6.5p. Its loans are also mostly subordinated, I think.
I seem to remember that HSLE (similar to LBOW but not property lending) had a fairly low payout and consistently traded at a few percent discount to its NAV. People will chase high yield even at risk to capital these days.|
|Surely its the reverse, i.e. they have a portfolio of loans at above current market rate so the shares should be trading at a premium.
Logically if in the future they push out loans at the current market rate they should trade at par (in respect of the new loans). Unless you take the view that the management fees are too high etc.
If the new strategy is unlikely to result in the shares trading at par (plus providing a reasonable yield) then the correct answer on the continuation vote become very easy!|
|That's a reasonable conclusion. The management fee is 1% and these things can be re-negotiated, after all they only have 11 loand.|
|ok but I suppose if they go for the lower dividend yield option the shares will trade at a NAV discount maybe 10% which would give a share price of around the 90p mark?|
|The current objective is to make senior secured property loans which will enable them to pay a 6p dividend. As loans mature and new ones made, the interest rate looks likely to be too low given continued yield compression.
The basic choice, then, is between targeting a lower dividend yield and going up the risk scale with unsecured and mezzanine loans. Of course, the continuation vote may not be passed, in which case the company will, presumably return cash and go into run-off.
Personally I wouldn't be keen on the riskier loans path, as SWEF is already there, and I have a holding in that.|
|I took the paragraph below from the last results.
What are the implications going forward? I'm tempted to buy but have no idea what LBOW culd potentially morph into. Any comments?
"As referred to above, given the shortening residual maturity of the loan portfolio and recognising that current market conditions would not support the re-investment of loan proceeds at similar risk and return dynamics as the existing portfolio, the Board together with the Investment Manager and now Cenkos is reviewing the Company's longer term strategy. This review will seek to identify changes to the investment objective (whether in terms of risk or return) that would be required in order to allow the anticipated future loan proceeds to be reinvested as the portfolio is realised. Recognition of shareholder views on the trade-off between yield and risk will of course be taken into account. The results of that review will be communicated to shareholders in due course and indeed well in advance of the continuation vote in 2017."|
|Brewin Dolphin have been buying - for discretionary clients with a cautious-leaning portfolio, I guess.
From below 5% to 5,478,965 shares, 5.0628% of company.|
|Investment Manager comments following Brexit and confirmation of NAV increase to 102.45p:
4th July 2016
ICG-Longbow Senior Secured UK Property Debt Investments Limited (the Company)
"Following the "Leave" outcome of the UK Referendum on EU membership, we are now entering a period of volatility, uncertainty and adjustment in the UK which will affect the property investment and property finance markets. The Investment Manager has considered the impact of this outcome and remains confident in the underlying quality and resilience of the Group's security portfolio from both a capital and income perspective, given the senior secured risk positioning, diversification at portfolio level by sector and region and at loan level through exposure to predominantly multi-property or multi-tenanted security.
In particular, the Group's 11 loans are underpinned by a security portfolio comprising 74 properties and 275 tenants (plus 325 hotel rooms) which benefit from the conservative risk metrics of 57.1% loan to value ratio and 174% interest coverage ratio, whilst each loan also benefits from strong financial covenants. The loan portfolio has no exposure to the Central London office or residential markets, which the Investment Manager believes may be disproportionately affected by the outcome of the vote, nor any imminent loan maturities. As a consequence, the Investment Manager believes the Group's loan portfolio to be well positioned to withstand any short term volatility and downside risk, whilst supporting the maintenance of the quarterly dividend payment."
The Factsheet also confirms that the Company has declared a dividend of 1.5 pence per share in respect of the quarter ending 30 April 2016 and that the Company's NAV has increased to 102.45 pence per share following the repayment of the Mansion loan, together with associated exit and repayment fees.|
|Latest stated was 102.1p (Oct 2015) plus 2.5p referred to in post #55 ... should be about 104.6p now. Loans are all secured.|
|This is no longer priced at a premium to NAV so decided to buy today at 102.5p for that almost 6% yield.|
|Mansion loan repayment and loan redeployment - net result an increase of 2.5p in NAV. I was expecting that to be added to the share price at the open.
Even taking account of lower yield (6.0 vs 6.5), LBOW is a bit cheaper than SWEF. It also has a higher NAV now than SWEF.|
|I'd forgotten there would be a continuation vote in 2017:
The Board has appointed the Investment Companies Team at Cenkos Securities plc to act as their broker and financial adviser with immediate effect.
Having regard to the likely maturity profile of the Company's investment portfolio and the current investment policy and objective, the Board will be undertaking a shareholder consultation via Cenkos and ICG-Longbow in early 2016 to ascertain the views of the Shareholders in anticipation of the continuation vote resolution to be put forward at the AGM in 2017 and in the context of prevailing market conditions.|
|RNS says factsheet to 30 April available.
It isn't yet, but when it arrives, it should be here:
EDIT 8:50 am - it's there now.|
|The one before late?|
|Although receipt of a quarterly dividend 2 months after the end of the quarter to which it relates isn't really early.....|
|Surely this dividend is coming rather soon after the last one?
Or was the last one late...
Interim Dividend Announcement
The Company is pleased to declare an interim dividend covering the period 1 February 2015 to 30 April 2015.
Distribution period: 1 February 2015 - 30 April 2015
Distribution amount per share: 1.5 pence
Ex-dividend date: 11 June 2015
Dividend record date: 12 June 2015
Payment date: 3 July 2015|
|XD 1.5p today...PayDate 22nd May.|
|Yields 5.66% @ 106p. Continues to tick the box for a small corner of my SIPP...
Will continue to rely upon asset discount plays to push up the annual return to more acceptable levels.
Currently at 34% in Private Equity trusts and 34% in propcos - many shared with badtime...|
|Thankfully, a non-event ...
All investments are performing to business plan with no covenant breaches.
Barring unforeseen circumstances, we expect the Company to continue to pay a dividend in line with its target of 6.0 pence per share per annum whilst the portfolio remains fully invested.|
|Results and div then|
|I agree with jonwig. It's fully listed and the bid offer spread isn't too bad so okay as a place to park cash waiting something better. I think they are targetting an 8% IRR so the NAV should drift up slightly if they stick to a 6p dividend (which they seem to have achieved already - 1.5p per quarter).|
|Thanks for the info, jonwig.|