Utilico Emerging Markets Share Discussion Threads

[davebowler] 07/7/2016 11:42

Edison;
Valuation: Discount wider than historical averages
UEM’s share price discount to cum-income NAV of 11.3% is wider than the 12-month average of 10.4% (range of 3.9% to 16.3%), and wider than the averages of the last three, five and 10 years of 8.2%, 7.9% and 8.3% respectively. UEM has a history of stable or rising dividends, compounding at an annual rate of 4.24% over the last five years. UEM’s current dividend yield of 3.3% compares favourably to the peer group average of 2.9%.

Current portfolio positioning
The portfolio typically holds c 60-90 names. At the end of May 2016, the top 10 positions accounted for 44.3%; this was a decrease in concentration from 52.8% at the end of May 2015 (see Exhibit 1). Reflecting the long-term nature of investments, nine companies are common to both periods. The new name in the top 10 list is Transgaz, a Romanian gas transmission company in its third regulatory cycle with a regulated rate of return of 7.7% until September 2017. There is a long tail of investments in the portfolio as initial position sizes are often small, either for liquidity reasons or to allow the manager to build confidence in the management of investee companies.
Formerly the largest position in the portfolio, Malaysian IT services company MyEG is now the sixth largest holding, with the manager selling down as the shares are considered to be fully valued. The position in Malaysia Airport Holdings is now the largest single exposure. The manager expects good passenger growth at both its Malaysia-based airports and its now wholly owned investment in Sabiha Gökçen International Airport in Istanbul, Turkey.
The fund typically invests/disinvests c £100m per annum. In FY16 £96.1m was invested and £130.5m realised as profits were taken on a number of Chinese H-share positions in the April 2015 market rally, although China remains the largest country exposure. Looking at sector exposure, over the last 12 months the largest increases have been in electricity (3.6pp), gas (2.8pp) and airports (2.3pp), while the largest decreases have been in satellites (3.3pp), other infrastructure (2.9pp) and toll roads (2.1pp).



Dividend policy and record

UEM pays dividends quarterly in September, December, March and June. Despite the focus on capital growth, the board aims for a flat or growing annual dividend; this has been achieved every year since fund inception in 2005. In FY16, the dividend of 6.4p was a 4.9% increase versus the prior year. Over the last five years, dividends have grown at a compound annual rate of 4.24%.
UEM is able to distribute from both income and capital when necessary, which allows a smooth progression of the dividend even though income levels may fluctuate significantly. For the 12 months to 31 March 2016, total income rose by 45.9% to £21.3m. This was a yield on gross assets of 4.8% versus 3.0% in the previous year. Most of the increase was as a result of the special dividend distributed by Asia Satellite Telecom in H116. Higher income, coupled with lower costs, led to a revenue return of £17.5m in FY16 versus £10.6m in FY15, meaning that dividend payments were more than fully covered.

Peer group comparison


Exhibit 9 shows a comparison of UEM with AIC Global Emerging Markets sector trusts that have market caps greater than £50m. Given its focus on specific areas of the market, UEM cannot be compared directly with the peer group; however, its emerging market exposure provides some relevance to the comparison. UEM has outperformed the peer group average over one, three, five and 10 years, ranking second over three and five years and first over 10 years. In terms of risk-adjusted returns as measured by the Sharpe ratio, UEM is in line with the peer group average over one year and higher over three years. Its discount is narrower than average and it has one of the lowest ongoing charges, although a performance fee is payable. UEM’s 3.3% dividend yield ranks it third out of the five peers that pay a dividend.

[8w] 24/4/2016 12:18

These are taking a bit of a thrashing at the mo. Any specific reason ? Looks like a big buyer notified on Friday ?

Am expecting to top up at some time this year, no rush.

[davebowler] 06/4/2016 16:18

NAV £2.02

[8w] 08/2/2016 13:32

hmmm not likely to be buying subscription shares this Feb.

[davebowler] 20/11/2015 09:54

Westhouse;

We continue to remain cautious on emerging markets. Within emerging markets we recommend that investors buy Utilico Emerging Markets* (UEM), trading at a 9.8% discount (cum, fair, undiluted). UEM has just announced that it has increased its quarterly dividend payments to 1.625p, for the quarter ending September 2015, which leads us to forecast an annual distribution of 6.4p. With an expected dividend yield of 3.8%, UEM is one of the highest yielding emerging market funds. Its investment in companies which have tangible income producing assets makes it an ideal vehicle for investors looking to maintain or increase their exposure to emerging markets.

 

[jonwig] 02/10/2015 16:38

The subs shares (ticker UEMS) are trading at 9.75-11.50.

[getscenic] 30/9/2015 14:32

Good spot Dave, interesting piece.

[8w] 24/9/2015 11:09

183p subscription price, it would be nice to think that'll be good value by the time we have opportunity to purchase

[jonwig] 04/9/2015 17:17

bingham - thanks. I do seem to have misread the RNS, in particular the term "bonus issue". And I'll get them anyway, without having to do anything.

[bingham] 04/9/2015 16:32

There free and will have a value.

[jonwig] 03/9/2015 14:47

This looks (on quick scan) to be very tightly priced, with no bargain for existing holders ... naturally!

If you think the company's historic outperformance will be re-established, and EMs will pull through their depression, it will be a decent earner. But the issue price is still a premium to the current sp, so why not just buy more of the ords?

So these are expiration warrants -

The Subscription Share Rights may be exercised on the last business day of each of February 2016, August 2016, February 2017, August 2017 and February 2018, following which they will lapse.

And no dividends for - potentially - 2.5 years. What's the silver bullet here?

This looks a big zero ... OK, what have I missed?

EDIT: the above is wrong - please ignore.

[davebowler] 03/9/2015 13:20

Bonus Shares to be issued 1 for 5 ords;
Chairman's Letter

"To holders of Ordinary Shares and Depositary Interests

INTRODUCTION

The Board announced today a bonus issue of Subscription Shares to Existing Ordinary Shareholders. Implementation of the Bonus Issue requires amendments to the Bye-laws to provide for the rights of the Subscription Shares. The Bonus Issue is therefore conditional on the passing of the Resolutions to be proposed at the Special General Meeting of the Company to be held at Vineyard Hotel, Colinton Road, Newlands 7700, Cape Town, South Africa on Tuesday 22 September 2015 at 9.05 a.m. (local time).The Bonus Issue is also conditional on the admission of the Subscription Shares to the standard segment of the Official List and to trading on the Main Market of the London Stock Exchange.

The purpose of this Prospectus is to provide you with details and to explain the benefits of the Bonus Issue and to set out the reasons why the Directors are recommending that you vote in favour of the Resolutions.

THE BONUS ISSUE

The Company is proposing to issue Subscription Shares to Qualifying Shareholders on the basis of one Subscription Share for every five Existing Ordinary Shares, subject to the passing of the Resolutions set out in the Notice of Special General Meeting. The Subscription Shares will be issued by way of a bonus issue to Qualifying Shareholders and will be listed on the standard segment of the Official List and tradable on the Main Market of the London Stock Exchange. The ISIN of the Subscription Shares is BMG931071374 and the ticker is UEMS. Up to 42,648,758 Subscription Shares will be issued pursuant to the Bonus Issue and their par value of 0.005 pence per share (being GBP2,132.44 in aggregate if 42,648,758 Subscription Shares are issued) will be paid up in full out of the Company's share premium account.

Qualifying Shareholders' entitlements will be assessed against the Register on the Record Date, being 22 September 2015. Fractions of Subscription Shares will not be allotted or issued and entitlements will be rounded down to the nearest whole number of Subscription Shares.

THE SUBSCRIPTION SHARE RIGHTS

Each Subscription Share will confer the right (but not the obligation) to subscribe for one Ordinary Share on exercise of the Subscription Shares Rights and on payment of the Subscription Price. The Subscription Share Rights may be exercised on the last business day of each of February 2016, August 2016, February 2017, August 2017 and February 2018, following which they will lapse. Subscription Shareholders will be sent a reminder of their Subscription Share Rights in advance of these dates. The Ordinary Shares arising on exercise of the Subscription Share Rights will be allotted within ten Business Days of the relevant exercise date. To be exercised, a notice of exercise must be received by Computershare no later than 5.00 p.m. on the Business Day before the relevant Subscription Date. Subscription Shares will rank equally with each other and will not carry the right to receive any dividends from the Company or to attend and/or vote at general meetings of the Company (although the Subscription Shareholders have the right to vote in certain circumstances where a variation of the Subscription Share Rights is proposed). However, Ordinary Shares arising on the exercise of the Subscription Share Rights will rank pari passu with the Ordinary Shares currently in issue.

The full terms of the Subscription Shares are set out in Part 6 of this Prospectus.

SUBSCRIPTION PRICE

The Subscription Price will be equal to the unaudited published NAV per Ordinary Share as at 5.00 p.m. on 22 September 2015, plus a one per cent. premium to such NAV per Ordinary Share, rounded up to the nearest whole pence. The NAV for the purposes of calculating the Subscription Price will be the unaudited value of the Company's assets calculated in accordance with the Company's accounting policies (including revenue items for the current financial year) less all prior charges and other creditors at their par value (including the costs of the Bonus Issue). Prior charges include all loans and overdrafts that are to be used for investment purposes.

The New Bye-laws will provide that the Subscription Price is subject to adjustment upon the occurrence of certain corporate events affecting the Company before the Final Subscription Date in February 2018. The relevant corporate events include consolidations or sub-divisions of share capital, pre-emptive offers of securities to Ordinary Shareholders, takeover offers and the liquidation of the Company. Such adjustments serve to protect either the intrinsic value or the time value of the Subscription Shares, or both.

The percentage premium applying on exercise and the resulting Subscription Price reflect the Board's confidence in the Company's medium to long-term prospects and its hope that Qualifying Shareholders will be able to exercise their Subscription Share Rights and acquire Ordinary Shares on favourable terms in the future.

It is expected that an announcement setting out the Subscription Price will be made on 23 September 2015.

[davebowler] 28/8/2015 10:06

Westhouse;


Investment Funds - Idea - Switch to Utilico Emerging Markets*


In our view, deflationary risks in emerging markets are still high and at least in the short term there remains significant downside risk to Chinese equities. We would ignore the day-to-day movements of the Shanghai Composite Index, which has consistently seen annualised volatility above 20%. Within emerging markets, we recommend investors switch part of their exposure from JPMorgan Global Emerging Markets Income Trust (JEMI), trading at parity, into Utilico Emerging Markets* (UEM), trading at a 10% discount. Over the last one, three and five years UEM has outperformed JEMI on a NAV TR basis.

[jonwig] 22/8/2015 09:25

David Stevenson in FT today on China, Pacific, etc. -

I also think adventurous investors should slowly accumulate the Utilico Emerging Markets fund. This is focused on investing in infrastructure assets in the developing world but with a very strong Asian focus. China and Hong Kong-based stocks account for just under 30 per cent of the portfolio, while Malaysia accounts for another 16 per cent.

This fund — managed out of Bermuda by Charles Jillings — is in the core of my own portfolio as a more defensive play on the rise of emerging economies, with big airports and transport-based infrastructure, which is likely to be the focus of aggressive regional governmental initiatives. The yield is currently running at 3.4 per cent, with the fund’s shares (listed on the main market) trading at a 9 per cent discount to the book value of all assets.

I’d also argue that adventurous types should check in to Utilico’s investment trust (ticker UEM). If confidence does begin to slowly resurface in Asia, we’ll see local stock prices move up sharply and that will benefit the fairly concentrated portfolio of positions — the top ten holdings in the fund usually represent about 50 per cent of UEM’s holdings.

UEM’s holdings include MyEG Services Berhad, which runs systems that allow Malaysian citizens and businesses to transact with the government electronically, Malaysia Airport Holdings Berhad (which also owns Istanbul’s second airport) and satellite telecoms businesses such as Asia Satellite Holdings Ltd (Asiasat) and APT Satellite Holdings.