Cqs New City High Yield Fund Limited

0.70 (1.43%)
Share Name Share Symbol Market Type Share ISIN Share Description
Cqs New City High Yield Fund Limited LSE:NCYF London Ordinary Share JE00B1LZS514 ORD NPV
  Price Change % Change Share Price Shares Traded Last Trade
  0.70 1.43% 49.60 411,949 09:06:53
Bid Price Offer Price High Price Low Price Open Price
49.00 49.80 49.60 49.60 49.60
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Unit Inv Tr, Closed-end Mgmt 7.97 4.01 0.80 48.95 258.47
Last Trade Time Trade Type Trade Size Trade Price Currency
09:34:28 O 508 49.07 GBX

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Date Time Title Posts
26/5/202318:05FOR INCOME SEAKERS493

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Posted at 26/5/2023 16:53 by marktime1231
No, I am not sure either, no conclusive signs that turbulence in global debt markets is easing, it is still clobbering us but there will come a point where NCYF is safer cheap income again. Watching.
Posted at 25/5/2023 12:01 by marktime1231
I was lucky enough to get 56p when I sold out here a couple of years ago, spooked by management warnings that the dividend might be cut because income was not covering it and a suspicion that they were gearing up to compensate.

Since then NCYF has dropped to sub 50p but is maintaining a healthy premium to NAV and is able to issue new shares regularly, there must be high yielding bargains available and plenty of institutional demand. More confidence here than SMIF for example where the premium has evaporated.

Is the worst over? Is it worth trying here again, noting a probable 1.49p final is coming up and annual yield of 9% is on offer. Risky perhaps, but so is everything.

Or is the strong premium enough to warn NCYF is expensive whereas SMIF, on a 3% discount (temporarily?), is a bargain on paper?

Posted at 27/4/2023 10:04 by cc2014
Same old story though. They pay out more in yield than the underlying earnings so the share price just keeps falling.
Posted at 27/4/2023 09:44 by jong
XD Today - 1p per share payable on Fri 26 May
Posted at 18/1/2023 17:58 by shalder
The share price premium to nav seems to be getting rather frothy to me, so have just sold @ 53.8 which is a 12% premium to latest asset value. Seems to me better value to accept somewhat smaller running yield at less heady valuations.
Posted at 15/9/2022 18:59 by fordtin
guitarsolo - have a look at page 10 of this research note from May 2022;


Other holdings are quote by bond price, DEC is quoted by share price.

also, from 30 June 2020;

"Diversified Gas & Oil ( owns and operates natural gas & oil wells that are primarily located in the Appalachian Basin in the United States. DGOC’s production operations are concentrated within Tennessee, Kentucky, Virginia, West Virginia, Ohio, and Pennsylvania, where it describes itself as being one of the largest independent conventional producers. The company has grown its output in recent years, both through acquisition (it has been acquiring assets from industry players who have been refocussing their businesses on shale production) and by enhancing the efficiency of its existing operations. Its assets typically have predictable production rates, long-lives (40 to 50+ years), and relatively low rates of decline in output.

DGOC is a holding that CYN has in common with its sister fund, CQS Natural Resources Growth and Income (also a client of Marten & Co – click here to see our most recent note). Ian added it to NCYF’s portfolio when it was trading around its March low of 60p per share and it is now trading around 100p per share (although it has closed as high as 110p during the last month). Ian describes it as a very sensible holding that pays around a 10% yield. The NCIM team say that DGOC’s low cost of production means that it is well positioned to weather the current low oil price environment (its geographical focus affords it economies of scale). It should also benefit from a reduction in the output of gas from shale production as this has become uneconomic for many producers at present.

The managers also observe that DGOC is very cash-generative and its significant land bank offers it the opportunity to grow organically through infill drilling. As a recognised player, DGOC benefits from good deal flow, which has been strong given the current market backdrop. Furthermore, with both experienced management and its efforts concentrated in resource rich locations that are well known to the company, DGOC’s operations tend to be reasonably low-risk. The company says that, where the commodity pricing environment is favourable, it can activate a low-risk development program that ensures a quick return on its investment. This could offer significant potential upside should oil markets tighten. In the meantime, DGOC continues to offer an attractive yield (11.9% as at 29 June 2020 – Source: Bloomberg)."


Posted at 23/6/2022 12:20 by cc2014
Thank you for your detailed response Redhill and well done on your purchases at very low prices on NCYF.

I can understand how this creates an attachment to a share as it's always a good feeling to be getting a great yield but be sitting on the capital gain as well. The question though as you state is whether the capital is put to better use elsewhere, although I completely get the over-attachment and not wanting to over-trade as it's something I find myself doing too often.

On the upside for NCYF with interest rates probably going to around 2.5% in the UK, NCYF will be able to start replacing some of it's maturing assets with better yields, which will improve my 6.5% number. Indeed the market has already anticipated this move and yields on new high yield debt are much higher. However, the market is still moving down the prices of existing assets to match those for new isses. It's to be expected so this is going to keep the NAV under pressure for some time longer and worsens the 6.5% number.

On the downside NCYF has about 20% equites in it's portfolio, mostly things like property REITs and I think these assets will fall in value as we head into recesssion. This is back to the permament capital loss thing.

You ask about other funds and I would offer two that interest me at the moment. Both are debt funds and hold no equity (noting that I'm counting pref shares as debt for this)

The first two hold mostly floating rate assets so as interest rates move up so does their income. I like this because it's removes the interest rate risk element and means the value of the underlying assets won't fall as interest rates rise. Also, they don't pay out the same dividend every year but adjust it as the underlying yield on the portfolio moves around (i.e. as interest rates change). Both are trading on a decent discount. They have very different risk profiles to NCYF and far less bank regulatory capital exposure.

1. CVCG (used to be CCPG). 83% floating rates assets and the current yield on the underlying assets is 9.4% with a yield to maturity of 10.6%. The last NAV is a little out of date from 1st June but then it was 103.35p so let's call it 101p now. Today I bought some at 91.8 and 92.0 so that's a 9% discount to NAV for a fund which after the management charges will yield around 8.4%.
The dividend is only 5p but I bet will rise on the next one. So, some returns from the dividend and some from the capital gain.

2. NBMI. 67% floating rate assets. and the current yield on the underlying assets is 7.8% with a yield to maturity of 8.2%. NAV is 85.2p and I bought some yesterday just below 80p (although my much larger holding was purchased lower down) so around a 5% discount.
The dividend is about 5.5p (there's an extra one at year end) so again some dividends and some capital gain

Posted at 23/6/2022 10:53 by redhill9
CC2014, thank you for your response.

I agree with most (not quite all!) of what you say.

First, absolutely right about Raven being, most probably, a write-off and I’d certainly suggest NCYF should have sold out at the first hint of a Russia invasion but, trying to be fair, very few people thought the invasion would actually happen and was mere posturing and also we don’t know if selling once it happened was achievable (although I’d guess they probably could have sold at some price). Hindsight, of course. However, the point perhaps to be recognised is that NCYF is a High Yield fund and as such there will be risk – anyone who expects high yield without commensurate risk is in the camp of “both wanting cake and eating it”.

More important is your point about the effect of dividends being paid from capital, which I understand and referred to it in my post, but the question is how much this is likely to continue/accelerate in the future.

You mention that the share price has reduced from 100p to around half but, for perspective, my own situation is I hadn’t heard of NCYF until March 2020 when, on the advice of a friend, I had a look and started buying at 38p and then bought several more tranches in the following months. My average book price is just under 49p so the current annual dividend of 4.47p means a book yield of over 9%. That fact alone may influence my perspective on continuing to hold NCYF. Also, it may be relevant to add that, currently, all dividends received within my income portfolio are reinvested into other income stocks so when NCYF repays capital as an element of dividend this becomes reinvested somewhere else. I’m comfortable with this, so long as I remain aware that the yield contains an element of capital.

For my own position, I see two key questions. The first question is: having bought the shares with the intention of a long term hold, how will the yield be affected over the foreseeable future? The second question is: would I be better to sell at the current share price of 53.6p, and giving up a current market yield of 8.3%, and invest elsewhere? Your answer for the first question is to suggest the long term return is more like 6% if the capital reduction is on average 2.5% per year. That may be correct but may I ask what timescale are you using for that calculation? For the second question, my own view is that, barring some significant change in known circumstances, I’m happy to continue holding NCYF within my income portfolio unless I can find a similar fund that offers a better yield allowing for normal considerations of risk/reward plus the impact of capital reduction. Do you know of any? A fairly extreme example may be Marble Point (MPLS) which is an investment company paying a yield of over 12% and I hold a small % in my portfolio, far less than NCYF, but MPLS is (I consider) much higher risk than NCYF.

Regarding your point about Aviva Prefs drifting down to 100p and then being redeemed at par, I think I’m right in saying that after the debacle several years ago when they slipped into their financial report (apparently without the non-execs appreciating the implications) a comment that they were considering doing just that and the subsequent furore across the investment industry, resulting in the Aviva CEO and CFO each losing their jobs, Aviva announced that any future redemption of irredeemable prefs would only be by tender (as NWBD did recently at a premium to sp, a tender that wasn’t fully taken-up by a long way). Also, with that in mind, if Aviva Prefs drift down to 100p wouldn’t that, all other things being equal, likely be a reflection of the overall market rather than just prefs themselves?

We may not wholly agree on NCYF and that may be partly due to different perspectives, but I do appreciate you're post above as it is always good to have someone challenge a point of view.

Posted at 21/6/2022 10:38 by cc2014
"If holding a fixed interest stock long term the share price may go down, which reduces the NAV of a fund such as NCYF, but the income continues."

Well, yes, no, sort of but not really. I understand what you are saying and I see your point but:

1. Recently the value of RAVP went to zero. RAVP has been delisted and there may be some debate about future dividends but right now it's zero. The total capital of around 3% of the fund has been wiped out, or very nearly wiped out depending on your view of Russia. There is no longer an income stream and this is part of the risk with investing in high risk/high yield funds like NCYF.
2. The prefs you mention do not have maturity dates so they will drift up and down depending on interest rates and the health of the underlying company. Whilst the Aviva prefs give a yield of around 7% at 120p it's no good if they drift down to 100p and then Aviva redeem them as they won't be regulatory capital in 2024. Again the capital would be reduced and the income doesn't continue.

I could run the argument another way though. Please allow me some breath over the exact details here but let me run with the broad outline.

Over the last 20 years since the fund was started the share price has halved from 100p to 50p because the fund manager has made a few bad investments but more validly every year he is paying out more dividends than the value generated within the fund.
If in another 20 years time the share price has halved again to 25p will the fund still be paying 4.5p dividends?

Of course if interest rates rise to 2.5% the fund manager has a far better chance of making enough to pay the dividends. That looks far more feasable going forward.

Look, I'll try and given you my overall view. The fund has a dividend of around 8.5% but it loses around 2.5% a year in capital on average. If you own it in the knowledge it's making around 6.0% in the long term that's fine. I've owned NCYF in the past myself when I've been farily sure interest rates were in my favour.

Since I take the view the return is about 6% a year, then there are lots of other investments yielding similar that don't seem to carry the same risk. The market is entitled to price NCYF at whatever it likes but my guess is that the price is being held up by investors who are focussed on the yield but haven't fully considered the likely capital losses.

The overall problem though is that it loses alot when the economy is under stress through bad investments. I'm anxious we are heading that way right now as the consumer is under pressure through inflation. A little bit of inflation is good for bank debt as the banks improve their NIM. A lot of inflation is very bad indeed as consumers start struggling to pay their debts.

Posted at 21/6/2022 09:58 by redhill9
Not sure about your logic there.

New funds can, for example, currently be invested in Prefs (which are a key constituent of the portfolio) at good yields. For example, AV.A, SANB and STAB can be bought for a yield of around 7% - throw in a bit of the additional gearing then available and the yield increases to well over 7.5% (less cost of debt). Your suggestion that all the cash raised is used to pay dividends seems a little off?

If holding a fixed interest stock long term the share price may go down, which reduces the NAV of a fund such as NCYF, but the income continues. This is why the NCYF share price remains steady while the NAV has reduced. If holding fixed interest stocks in a long term portfolio for retirement income - as I do - it's the income on those stocks that matters not the share price at any point in time. Certainly the dividend currently payable by NCYF is going to come under some pressure over future years but I'd suggest there's enough leeway in the current high yield for that not to be a major concern as it will still remain attractive for some time yet.

It's certainly not the disaster you seem to want to suggest (and the market seems to agree with me, hence the premium to NAV).

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