Share Name Share Symbol Market Type Share ISIN Share Description
Funding Circle Sme Income Fund Limited LSE:FCIF London Ordinary Share GG00BYYJCZ96 ORD NPV
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.0% 82.70 0.00 01:00:00
Bid Price Offer Price High Price Low Price Open Price
82.40 83.00 0.00 0.00 0.00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 17.24 8.41 9.8 258
Last Trade Time Trade Type Trade Size Trade Price Currency
- O 0 0.00 GBX

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Date Time Title Posts
26/4/201923:01Funding Circle SME12

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DateSubject
17/10/2019
09:20
Funding Circle Sme Income Daily Update: Funding Circle Sme Income Fund Limited is listed in the General Financial sector of the London Stock Exchange with ticker FCIF. The last closing price for Funding Circle Sme Income was 82.70p.
Funding Circle Sme Income Fund Limited has a 4 week average price of 0p and a 12 week average price of 0p.
The 1 year high share price is 104p while the 1 year low share price is currently 79.40p.
There are currently 312,131,793 shares in issue and the average daily traded volume is 0 shares. The market capitalisation of Funding Circle Sme Income Fund Limited is £258,132,992.81.
12/4/2019
21:18
pyufak: So here is my best shot at a deep dive into this one. My conclusions are twofold. 1. FCIF has limited downside from here unless the UK economy really craters, I bought FCIF as I think it's good risk reward from here given we have a Brexit delay. It's purely a play that the fund wind up will be >86.6p. 2. Stay away from P2P lending - I believe their implied default rates are far far too low and their incentive structure is wrong --> i think this is the reason the institutional investors want this fund unwound - they want out of this sector and I wholeheartedly agree. So using recent fact sheets and last year's annual report I get the below Net assets 315 Cash 22.05 (7% of the fund is in cash from end Feb) Loans 292.95 Income 28.41615 (9.7% avg int rate 2016+; matches '18 fin statement) Costs 4.743 (from '18 fin statement, excludes FX charge and NPLs) I-C 23.67315 (Income - costs = NPL capacity) Below is the capacity for non-performing loan write downs for respective recovery rates just using the income generated by the loan interest less costs. Googling recovery rates I have found figures between 30-40% for Italian banks. However to be conservative I used the 10 & 20% recovery rates for my investment decision. NPL implied @ 0% R 8.08% NPL implied @ 10% R 8.89% NPL implied @ 20% R 9.70% NPL implied @ 30% R 10.51% NPL implied @ 40% R 11.31% To me, these default rates look quite realistic for UK SME lending. If anyone can find a good data series on this I would be interested. All I found was a European report - UK SME default rate in 2015 at ~11%, add in the 30% recovery rate commonly cited and this fund is returning negligible NAV gain. This view is corroborated by FC's own statistics: hxxps://www.fundingcircle.com/uk/statistics/ where '16 & '17 NPLs are developing on significantly steeper gradients. To be fair to FC this assumes zero recovery. Could I see 16, 17 and 18 defaults going 10%+ on a zero recovery? - it seems unlikely unless we get a very significant economic deterioration. Yet, nor is this fund going to organically gain significant NAV value in my opinion - which would also explain the wind down. So why did I buy? I have updated the implied recovery rates above to account for the market cap of the fund as opposed to NAV. Using 86.6p / (9.1%). Discount to NAV @ 9.1% = cash 28.66 NPL implied @ 0% 17.86% NPL implied @ 10% 19.65% NPL implied @ 20% 21.44% NPL implied @ 30% 23.22% NPL implied @ 40% 25.01% Now we're getting into territory where I like the risk reward. Lending Club (US P2P lender to households and businesses NPLs in '08 was 15%). I find it difficult to see FCIFs default rate getting towards these figures. My base is defaults of ~10%, 20% recovery rate and so no organic growth but should over time realise the 9.1% discount. Lastly, FCIF have stepped up their buybacks of their own shares since March. In Feb they bought 2.137m shares resulting in a 0.06% addition to NAV however after the fund wind up was announced they stepped this programme up and have bought 7.825m (+0.22% NAV) shares in March and in April are on course to buy 8.8m (+0.25% NAV). This appears to be the main way they can create NAV growth if the share price remains at such a discount - they will have significant incoming cash monthly from loan rolls offs to continue this. I do also take this as an indication of the boards outlook - the statement highlights they will use cash balances to correct material deviations of the share price from NAV which implies the default rate is not running away higher in my view. The risks: 1. it's a 10% trade with potential for ~5% further upside if things go better than planned but over what time period? Rolling off the loan book we'd be talking years and that isn't a great return over that period. This is why I have personally done this trade on margin rather than pure cash investment. Margin also allows me to play for a much greater return on equity and given I think the downside is limited I am comfortable with this in my wider portfolio. 2. Hidden aspects as mentioned above we just can't see. High unwind fees (even though fees should start coming down as they use less banking facilities etc). Thoughts welcome
07/4/2019
19:12
pyufak: Surprised no one checking in on this post the news Friday. I see some value in the fund from this point despite the deteriorating outlook for UK SME credit and would be interested in others opinion. 95.3p NAV 86p share price so a 9.75% discount to NAV. In addition for the Feb end of month the company holds 7% in cash. In effect, we're factoring in a 17% default rate with 0% recovery (unlikely) or a higher default rate of above 20% if we assume a low recovery rate of 0.2 on NPLs; if it's a higher recovery rate we're talking about default rates I would be very surprised if realised outside of a hard Brexit - I don't want this to turn into a Brexit debate. Lastly the company continues to buy 405k shares a day back when the board deems the fund is trading at a significant discount to its NAV which to me indicates they feel confident the NAV discount is market pricing and not justified by any credit deterioration in the portfolio (at present).
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