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FAIR Fair Oaks Income Limited

0.00 (0.00%)
21 Jun 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Fair Oaks Income Limited LSE:FAIR London Ordinary Share GG00BNNLWT35 2021 SHS NPV
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.00% 0.55 76,798 08:00:22
Bid Price Offer Price High Price Low Price Open Price
0.54 0.56 0.55 0.545 0.55
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Trust,ex Ed,religious,charty 369k -687k -0.0017 -323.53 223.2M
Last Trade Time Trade Type Trade Size Trade Price Currency
14:05:55 O 7,500 0.5495 USD

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Fair Oaks Income (FAIR) Discussions and Chat

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Date Time Title Posts
30/5/202408:08Fair Oaks Income Fund349
13/11/201123:36Undervalued Natural Resources Stocks171
02/11/201110:37Undervalued AIM stocks discussion thread11
22/11/201009:52Exploration stocks still to break out3

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Fair Oaks Income (FAIR) Most Recent Trades

Trade Time Trade Price Trade Size Trade Value Trade Type
2024-06-21 13:05:570.557,5000.00O
2024-06-21 13:00:110.5510,0000.00O
2024-06-21 12:38:0943.4624,2980.00O
2024-06-21 10:28:080.5525,0000.00O
2024-06-21 09:37:310.5510,0000.00O

Fair Oaks Income (FAIR) Top Chat Posts

Top Posts
Posted at 22/6/2024 09:20 by Fair Oaks Income Daily Update
Fair Oaks Income Limited is listed in the Trust,ex Ed,religious,charty sector of the London Stock Exchange with ticker FAIR. The last closing price for Fair Oaks Income was US$0.55.
Fair Oaks Income currently has 405,815,477 shares in issue. The market capitalisation of Fair Oaks Income is £223,198,512.
Fair Oaks Income has a price to earnings ratio (PE ratio) of -323.53.
This morning FAIR shares opened at US$0.55
Posted at 22/5/2024 13:50 by euameus
I believe the correct comparison is today's discount versus the historical average. Since its inception, FAIR has consistently aimed to trade at NAV. I might have a go at calculating this later in the week.
Posted at 21/5/2024 16:54 by grahamg8
FAIR yield is higher. Which do you want, bird in hand or two birds in the bushes?
Posted at 17/4/2024 09:23 by davebowler
Liberum Structured CreditFair Oaks Income Good time to be allocating to CLO equityAnalyst: Shonil ChandeMkt Cap £183m | Share price $0.56 | Prem/(disc) -0.9% | Div yield 14.3%EventFair Oaks Income's NAV per share increased by 0.7% (+3.8% NAV TR YTD) in the monthly period to 31 March 2024, to $0.565. We summarise some of the main monthly market indicators below:US loan default rate: Decreased from 1.41% to 1.14% m-o-m.European loan default rate: Decreased from 1.86% to 1.65% m-o-m.Distress ratio (loans trading below 80c, a potential indicator of the direction of future defaults): Declined in the US from 5.08% to 4.95% and in Europe from 2.80% to 2.78%.Liberum viewAnother good update underlining why FAIR's CLO equity-focused strategy is an attractive place to allocate to given the lowering default rates in the broader leveraged loan markets, high distributions, relatively benign macro and the fact that CLO equity valuations have the potential to follow the normalisation path seen in CLO mezzanine debt.?This is a performing CLO equity portfolio that is attractively valued, with potential for higher valuations. We note the manager's comment (factsheet) that "the weighted average price for US CLO equity in the Master Fund's portfolio has decreased from 39.6c to 36.2c in the last 12 months while the weighted average loan bid price has risen from 93.7c to 96.6c in the same period and ii) cash-flow multiples: c. 3.5x based on March's valuations and annualised quarterly cash-flows."The chart below is a sensitivity based on the CLO portfolio, as at 31 December 2023. It shows the significant slack embedded into the valuation of the US CLO equity portfolio. We also note that the high yields in CLO equity are driven by the excess distributions to the equity holder once all liabilities are paid to debt tranches. The underlying loans that fund the CLO equity and CLO liabilities are senior secured bank loans that side above high yield debt and preferred stock and underlying loan spreads are typically in the 2.5%-4% range. We are BUYers with a target price of $0.66.
Posted at 22/1/2024 10:30 by euameus
Liberum on Fair Oaks Income
Investment case remains compelling despite discount closing
Analyst: Shonil Chande
Mkt Cap £177m | Share price $0.56 | Prem/(disc) -1.6% | Div yield 14.4%
Fair Oaks Income’s NAV per share of $0.564, as at 31 December 2023, represented a 0.14% monthly increase and a 12.9% NAV total return in the calendar year.
Default levels firmly lower than forecast a year ago
The European loan default rate increased from 1.42% to 1.62%, and the US loan default rate increased from 1.48% to 1.53% in December. These levels are significantly below market forecasts at the end of 2022. The forward-looking distress ratio decreased from 4.79% to 4.32% in Europe and from 7.30% to 6.36% in the US.
Liberum view
FAIR has performed very well over the past year, with the underlying performance of the CLO equity and debt portfolios very well supported by corporate measures, particularly the share repurchase programme. In the context of the near outright closure of FAIR’s discount, it may be tempting to view FAIR as relatively less attractive. We make a few key points to counter this. Firstly, At NAV (ie no discount), FAIR’s dividend yield is c.4 percentage points higher than the second highest-yielding alternative fund (market caps above £150m).
Secondly, with respect to increases in default rates and the impact this can have on CLO equity valuation, as opposed to distributions given that a far more punitive environment (overacollaterlisation tests continue to build in firm support) is required to divert distributions away from the equity tranches, it is the difference between expectations and actual rates that matters more than the directional trend. Therefore, default rates below prior expectations and the declining forward-looking distress ratio are positive indicators with respect to CLO equity valuations going forward. More than 80% of the European and US loan indices are now trading above 95.
The two charts below show 1) the downward trend in the core USD CLO equity valuations in particular, mitigating risk, and 2) the potential positive impact on NAV from upward moves in valuation. If the market has modelled overly pessimistic assumptions for USD CLO equity, the prices of some of the US CLO equity tranches could rally significantly. We also note the manager’s comment in the factsheet: “Assuming the US default scenarios forecast by S&P Global Ratings, we estimate that the gross IRR for the Master Fund would be 33%, 26% and 15% in an optimistic, base and pessimistic scenario, respectively.”

Alignment and repurchases
FAIR has overseen a highly effective share repurchase programme since October 2022, with tangible impact across several metrics. A focus on CLO equity, which has historically delivered a double-digit cash yield, and CLO debt, meant that even after reducing its annual dividend, in 2022, from 9.5c to 8c to fund the repurchases, the dividend yield at NAV remained above 13%. Other initiatives include the fixed-life realisation share class and re-investing 25% of management fees whenever the shares trade at a discount. We are BUYers with a target price of $0.66.
Posted at 02/1/2024 17:00 by grahamg8
And also VTA/VTAS. FAIR are priced in USD, and at the current exchange rate 56c = 44.37p. VTA is priced in Euros but you might as well buy the same animal VTAS in pence. TORO is also priced in Euros. They are pretty similar but FAIR stick mainly to USA debt, TORO mostly European and VTAS split roughly 50/50. Otherwise the principal difference is the discount to NAV. TORO is the highest, FAIR lowest virtually evens and VTAS somewhere in the middle.
Posted at 28/9/2023 09:56 by davebowler
Half-year report confirms quality of investment portfolio
Analyst: Joachim Klement

Mkt Cap £176m | Share price $0.53 | Prem/(disc) -9.2% | Div yield 15.2%


Fair Oaks Income released its interim report for the six months ended 30 June 2023. For the reporting period, the NAV total return was 9.0% compared to -5.3% in the same period 2022. The NAV total return for the realisation shares was 9.7% (vs. -5.0% in the same period 2022). The increase in Nav has continued in the months since June. The August NAV was $0.581 for the 2021 shares for an additional 3% appreciation in NAV in the last two months.

Over the period, the Master Fund received total distributions of $33.2m (H1 22: $45.0m). Distributions in January were negatively impacted by large movements in Libor and Euribor which affected the CLO assets and liabilities differently due to timing issues. Distributions recovered in April. The focus on originating and controlling CLO subordinated notes has resulted in fundamental performance above the market average. Origination and control allowed the Master Funds to veto specific loans when the transactions were launched and to monitor and influence the CLOs over time. Lower fees in primary investments also allowed CLO managers to construct more conservative portfolios with no need to reach for yield. As a result, the Master Funds have benefitted from underexposure to sectors such as retail or energy.

Liberum view

In our in-depth note in August (Fair Oaks Income (BUY, TP $0.7) - Attractive CLO equity return outlook (43 pgs)) we emphasised the opportunity in CLO markets at the moment. As FAIR is marking its CLOs to market rather than mark-to-model, the downside is already reflected in the price and the ongoing recovery in loan markets leads to a significant pull on NAV higher. Add tot hat the sector-leading dividend yield of 15.4% and we recommend BUYing the fund with a TP of $0.66.
Posted at 23/8/2023 11:17 by euameus
Stifel comment below. Interesting given recent price action.

Fair Oaks income - Is it really that different to TwentyFour Income?

One of the vagaries of investment trusts are that some trade close to NAV largely based on historical reasons while others seem to be overly punished. TwentyFour Income is a well managed fund and while fundamentally the securities it invests in (UK residential mortgages and CLO debt) may be secure, there is clearly headline and pricing risk in residential mortgages - especially the residential equity book (c.17% of NAV). The share price is currently trading in line with the NAV with a dividend yield of 8%. Fair Oaks Income which invests in CLO equity and debt trades at a 12% discount to NAV with a 15% dividend yield. Both are well managed vehicles, but we would be far more comfortable investing in CLO equity with its diversified pool of leveraged loans that can be actively traded versus a UK residential portfolio that has a static pool. In addition, Fair Oaks Income has a limited life structure, which means (assuming a 1-year extension) that the fund enters run off in 2024/5 unless investors opt for a roll over.

The question we are pondering is one of valuations. On a relative basis Fair Oaks Income appears cheap and likely better insulated from further macro pressure (on a NAV basis). There is also likely more potential for consolidation in the CLO sector with either of its peers (Volta Finance or Marble Point).
Posted at 16/8/2023 10:11 by cwa1
davebowler16 Aug '23 - 09:57 - 647 of 647
0 1 0
Liberum commentary on FAIR -
Strong distribution momentum from second highest yielding AIC fund at NAV
Analyst: Shonil Chande

Mkt Cap £170m | Share price $0.53 | Prem/(disc) -11.4% | Div yield 15.0%


Fair Oaks Income’s NAV per share increased by 2.5%, to $0.598, in July 2023. This represented a 2.5% increase in the month (+11.8% YTD). Quarterly distributions received by the Master Fund in July totalled $21.1m, reflecting a 21.6% annualised yield on NAV and a 24.4% yield on yesterday’s closing price. Distributions have been increasing over recent months, with the portfolio benefitting from an increasing arbitrage spread of the underlying loan pool over the cost of CLO financing.

Based on July 2023 distributions, we calculate that the CLO equity portfolio was valued at a 4.0x multiple to cash flows, with the USD CLO equity portfolio valued at 2.9x and the EUR CLO equity valued at 4.9x.

Default rates in the US increased by 0.4ppts to 1.75% and by 0.53ppts to 1.51% in Europe. The European increase was due to Casino defaulting on a €1.4bn of senior debt.

The forward-looking distressed rate declined from 8.47% to 7.55% in the US and increased from 4.13% to 4.17% in Europe. This measures the proportion of loans trading below 80c, and a decline is a forward-looking indicator that suggests improving sentiment towards leveraged loans. FAIR’s July factsheet notes the potential impact on European and US leveraged loan indices from issues at Altice Group.

Significant overcollateralisation headroom

The overcollateralisation tests continue to leave significant headroom before a breach would kick in and divert cash flows away from CLO Equity tranches. As an approximation and assuming a 70% recovery rate in the event of default, we estimate that a c.13% cumulative default rate would be required before the 4.0% overcollateralisation threshold was breached. This is an indicative calculation based on the most recent weighted-average overcollateralisation cushion of 4% divided by the 30% loss from each default.

FAIR’s ‘GFC scenario’ models a gross return of 6% based on NAV and 11% based on the share price, as at 31 July 2023.

FAIR’s CLO equity assets have consistently demonstrated stronger credit performance than the broader CLO market, which in turn has significantly outperformed other corporate debt categories on returns and default rates. There is additional de-risking via a shareholder-friendly structure.

Liberum view

Distribution momentum is strong and leveraged loan indices have performed well over the past several weeks. Given that the US CLO equity portfolio’s mark-to-market valuation stands at a median 34%, de-risking is built into the valuation and there is potential for valuations to improve.

FAIR’s shares have been amongst the best performers over the past year with the 27% share price TR ranking third amongst alternative funds (ex-3i). We believe the shares continue to present attractive value given the underlying strong distributions, and the potential for higher US CLO equity valuations.

FAIR’s share repurchase programme, in place since last October, has driven a significant reduction in its bid-ask spread in absolute terms and relative to peers. We believe it is attractively positioned compared to most peers and that the relative discount is not justified, in most cases.
Posted at 23/6/2023 22:44 by cerrito
I see that Moodys has issued a warning about the private credit market signalling funds managed by Ares and Owl Rock.

The name Ares rang a bell and I checked on the latest FAIR fact sheet. It has USD18m of a 2015 Ares deal with an equity position
with a 30pc valuation. Moodys were mainly concerned about loans made in 2020 /1 but I guess some of these may have been inserted into the 2015 deal. Interestingly the cushion on this deal at 1.09, a big detioriation from the 2.27 at end February and 1.38 at end of March. There does seem to be something odd here as the total weighted average cushion for the whole FAIR portfolio has detioriated far less since February - from 4.46pc to 4.12pc.
They have a small mezzanine position in an Owl Rock deal.
I feel we are about to enter into a storm despite the upbeat comments on defaults by the managers of VTA, which I also hold, as well as FAIR. I note the comment from FAIR in recent months that CLO:s are underpriced as well as the discount, which despite the buybacks are at a high level compared to the last 3/4 years. I also note that this April's quarterly distributions were 3.3pc per share ie a 26.7 pc dividend yield based on the share price.
All in all I am not buying more FAIR or VTA but not selling either.
Any of you more adventurous??
Posted at 17/5/2023 10:12 by cwa1
Courtesy of davebowler on the VTA board...

Liberum on FAIR-

Default rates remain below expectations
Analyst: Shonil Chande

Mkt Cap £156m | Share price $0.48 | Prem/(disc) -17.9% | Div yield 16.7%


Fair Oaks Income's NAV per share at 30 April 2023 was $0.5847, representing a total return of 1.1% in the month (+5.7% YTD). Default rates continue to be significantly lower than the forecasts for 2023 issued at the end of 2022. The default rate in the US remained stable at 1.3% while in Europe it rose from 0.4% to 0.6% in April. The distressed ratio in the US remained at 8.7% and in Europe it dropped from 6.4% to 6.1%. CLO valuations continue to lag other assets, potentially as a result of investors modelling unduly negative market scenarios.

Liberum view

The resilience in default rates is notable and challenges the assumptions made in company models to calculate the NAV. The company points out that in early 2020, the median price of the Master Fund's US CLO equity investments fell from 67 cents to 30 cents based on predictions of increasing loan defaults due to the pandemic. However, the median price recovered to 63 cents by spring 2021 when it became clear that default rates would not increase as expected. Today, the median price of the same investments is 32 cents, indicating once again a substantial recovery potential in the NAV if default rates continue to remain below projections.

We continue to be Buyers of the fund with a target price of $0.60 (+25% upside from current share price)
Fair Oaks Income share price data is direct from the London Stock Exchange

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