Excellent 6 month chart. |
hxxps://event.webcasts.com/viewer/event.jsp?ei=1056868 |
Westhouse;
Blackrock Frontiers (BRFI.L, +4.2, Sell)
We recently highlighted this stock as a trading
Buy,
when the overspill from the recent panic in emergin
g markets knocked frontier fund pricing
(despite little evidence of any accompanying intrus
ion into asset pricing in the frontier
markets). The fund has as expected partly re-rated,
though it is also worth noting that
Advance Frontier Markets (AFMF.L, -7.5%, Buy)
has outperformed BRFI at the NAV level in
recent weeks, so it is worth watching this gap in p
ricing for profit taking and switching
opportunities. |
 Outlook for 2014
In 2013, Frontier Markets attracted increasing attention from international
investors and subsequently saw substantial inflows. However, with an
institutional AUM of approximately $20bn in Frontier Markets, the asset class
is still small versus the approximately $1 trillion of institutional assets
under management which tracks emerging markets. As a result, the typical
investor base within Frontier Markets remains significantly different to more
developed markets and Frontier Markets remain relatively immune from the
short-term vagaries of global financial markets.
Whilst Frontier Markets have shown relatively strong performance since the
inception of the Company, we would highlight that the majority of the index
performance has been driven by earnings growth rather than an expansion in
valuation multiples. Therefore, in general, Frontier Markets are no more
expensive now than they were just over 3 years ago when we launched the Company
and we continue to find attractive investment opportunities across various
countries.
Within certain Frontier Markets, the recent performance has been exceptionally
strong, a fact that has not gone unnoticed by a number of unlisted companies in
these countries. We expect 2014 to be the year when both private and state
owners of companies take the opportunity to crystallise the value of their
holdings by listing their companies on the stock market and anticipate the
start of an IPO (initial public offering) boom in Frontier Markets. |
westhouse;
Blackrock Frontiers (BRFI.L, +7.2%, Sell)
Very expensive. By its own very high standards,
BRFI has had something of a poor quarter (relative
and absolute) in terms of its NAV
performance. Yet the rating has improved. A pricing
gap of over 16 percentage points with
the weaker performing
Advance Frontier Markets (AFMF.L, -9.4%, Buy)
does look
somewhat attractive for advocates of the asset clas
s. |
NAV 15 Jul 105.88p Including current year income Sterling (pence) |
Boldly going into frontier markets...
Over the longer term, Global Emerging Market (GEM) equities have made strong contributions to well-diversified investment portfolios. Emerging markets' combination of strong rates of economic growth, positive demographic trends, an emergent consumer class and still-undemanding equity valuations continue to provide a supportive backdrop for equity investing.
Venturing into the newest equity markets sometimes known as 'frontier' markets can enhance GEM investors' opportunity sets still further. By holding potentially high-returning frontier market ideas within a broader GEM portfolio, investors may gain access to both return and diversification benefits.
Tapping into early-stage investments in economies that are growing fast can offer access to compelling return potential. At the same time, investing in selected frontier companies may provide a degree of insulation from prevailing global macroeconomic trends. This is because many frontier markets remain relatively local in character, with the companies that are growing most strongly being driven by predominantly domestic economic and political dynamics.
In Nigeria, for example, Nestle Nigeria seems to enjoy strong structural growth opportunities as the spending power of its large population continues to rise. The company is a product leader in most of its categories and sales of its well-established brands are growing fast. These brands include Maggi seasoning, a quintessential ingredient in many African foodstuffs. We believe that Nestle Nigeria has scope in particular to increase sales of higher margin products to increasingly affluent Nigerian consumers.
Alongside the emergence of strong domestic demand within selected frontier markets, an associated theme is the growing importance of trade within the developing world itself. This can result in relatively sustainable growth rates for some frontier market companies given their limited reliance on the global trade cycle.
In Ukraine, poultry and grain producer MHP is fast growing its exports, with a large proportion of overseas sales going to other developing markets (principally in the Middle East, Africa and CIS countries). MHP grows a range of crops to feed its poultry livestock and this vertical integration has cost benefits since the grain is cheaper than buying in poultry feed. MHP also benefits from Ukraine's fertile soil and low agricultural production costs. These factors combined mean that MHP is in the enviable position of being able to increase its grain output at a very low cost. In future, we believe MHP will utilise this advantage to raise poultry production and sales into export markets.
While we believe that selected frontier market investments can bring both return and diversification benefits to GEM portfolios, we also believe that significant research resources are required to uncover this potential. In our view, a bottom-up and research-intensive focus on those companies whose underlying fundamentals are not yet fully reflected in their share prices can prove a particularly rewarding strategy.
Standard Life Investments |
Frontier Markets
BlackRock Frontiers (BRFI) interim to 31/03/13
¢ The NAV total return was 22.4% vs MSCI Frontiers Index 18.6% (both in GBP, which flatters returns over the year). Outperformance was due to holdings in the Nigerian banking sector, positions in the UAE & an underweight in Kuwait.
¢ Since the period end, the company's NAV has increased by 8.6% and the share price has increased by 2.9% (both on a sterling basis with net income reinvested).
¢ The Board is currently in the process of identifying the extent of investor demand for a C-share issue and it is expected that a further announcement will be made in the next few weeks.
¢ The Board declared an interim dividend of 2.00 US cents per share payable on 5 July 2013 to shareholders on the Company's register on 7 June 2013. This was an increase of 67% in relation to the interim dividend of 1.20 US cents for the period to 31 March 2012.
¢ Consequently, to avoid dilution of revenue return to existing shareholders, the Board are also declaring a special interim dividend of 3.40 US cents, representing the additional revenue expected to be generated between 1 April 2013 and the anticipated C share conversion date. In total this will equal dividends of 5.40 US cents per share for the year to 30 September 2013, an increase of 42.1% over total dividends of 3.80 US cents paid in relation to the year ended 30 September 2012.
¢ At the company's fifth AGM in 2016 the board will provide shareholders with an opportunity to elect to realise the value of their ordinary shares at NAV per share less costs. The route which will be used to provide shareholders with an exit will depend on the level of uptake anticipated at the time and will be established following shareholder consultation and is likely to be achieved through a tender offer or a reorganisation of the company. To the extent shareholders elect for cash we expect that they will receive their proceeds within approximately six weeks of the relevant AGM.
¢ For the six month period ended 31 March 2013, the company's shares have traded at an average discount to NAV of 4.4%.
Investec Insight:
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oledata.mso |
From update........Frontier Markets stand out for their low valuations and high dividend yields.
Positive structural reforms, high growth and well-capitalised, liquid banking
systems leave several Frontier economies well placed in the current global
environment. Frontier stocks, particularly in the domestic or consumer sectors
are valued at a fraction of their emerging peers despite higher growth rates
and higher margins.
21 March 2013 |
Extract from this article-
Frontier markets frontier markets seem among the least likely places to find high yielding shares, but, As Sam Vecht, manager of the BlackRock Frontiers investment trust says, these countries have some of the higher yielding and fastest growing companies in the world. Corporate management in these countries increasingly recognises the need for international capital and international capital likes to get its money back through dividend payments. The BlackRock trust currently pays an income of 3.2 per cent and Vecht says this is a 'natural' yield that is, he is not striving to pay a yield, it is simply a natural consequence of the companies he is buying. |
5Nov NAV 85.85p Including current year income Sterling (pence) |
16 Apr NAV 85.00p including current year income. |
I thought there was a rule about IT's not hollding more than 15% of another investment trust. BlackRock seems to be all over its own share register here. Potential accident waiting to happen IMHO. |
Good update today |
NAV 87.5p (incl. income). Premium to NAV is narrowing, but with over half of assets in cash, is a premium deserved?
EDIT: only 3.5% of assets in cash - used out-of-date information. |
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