Good to see returns being accelerated |
We’ve already had interim figures in late August. Next figures will be for the 3rd quarter to end Sept. |
Interims Tuesday |
Thanks Sky. Wishing I had waited till this morning to re-balance, but c'est la vie, as they say in your neck of the woods. |
Papy...
My confidence in both the sum and the timing of ASLI distributions is reflected in the recent Circular (see P.3).
There were a load of buyers going through Due Diligence machinations quite recently; so I'm still hopeful of early sale news, regardless of stock-market churn. |
 Hi Chucko1,
Your earlier post triggered me to look at my GABI and ASLI allocations. I have also traded a few GABI into ASLI today. I’d be very interested in any comments on what motivated your switch.
Following is my attempt at a rationale, (numbers based on today’s closing Offer prices).
Metric ASLI GABI IRR 22% 24.5%GRY 16.1% 6.0%Disc from Proceeds -15.9% -18.0%Uplift to Proceeds 19% 22.0%Months to breakeven 14 17
For ASLI I’m using Sky’s numbers (in the VL/ASLI headers/posts), and added what I hope is a reasonable time-distribution for the returns. Starting to get twitchy about where are the realisations announcements, or vacancy rate announcements. I have a more conservative scenario where returns are delayed, which does reduce the attraction significantly.
For GABI I’m using the original Realisation-Plan numbers (“base-case221;), as I have been unable to access any update to that or to the portfolio. I tend to think this base-case is rose-tinted. I’m starting to get twitchy about announcements of further realisations this Quarter.
Overall I think both are attractive, but GABI not sufficiently compelling for me to significantly overweight it vs ASLI, given its longer expected realisation-timescale. I have reversed the overweighting so ASLI is now my larger position.
My weakness (or one of them ! ) is not having a background /familiarity with either asset class, so your point on “it’s the quality of the remaining assets” is very well taken, but I don’t trust my judgement on that. I greatly appreciate the input of others on these boards who do have that familiarity.
Comments re the metrics:
“You can’t eat IRR” as someone memorably stated
YTM – I just used the expected total return and the final expected return date, so a bit “unfair” to GABI, which has 2 significant near term distributions expected.
I added “Months to breakeven” – as maybe an additional measure of how the returns are distributed in time ?
If SkinnyPope is still reading this board, I would be very interested in his ex-cash analysis of the two (or indeed, other comments).
Many thanks for any thoughts! |
The initial IRR was calculated with a share price of 71p and BEOFRE the significant return of capital.
For this reason, and the reason I posted a couple of weeks back about the mathematics/risk of actually achieving the calculated IRR, 78p is a mile or two away from 71p pre-cap.
Still OK, but is it now the top pick? That is my point and I have been buying ASLI in spades the past month. Further, not selling many of the others as I now see discount compression as being as good an asset (or better) than short duration IRR. Note how short this GABI duration now is, and forget about the cited 3.5 years which is another demonstration why Questor needs taking with aspirin. |
The fact is, the share rating is an anomaly. The reason for the “Johnny-come-lately” analysis is not being aware of this anomaly.
Now mentioned in the Telegraph, the attractiveness of this situation has now been highlighted to several hundred thousand individuals, many of whom have decided to be proactive.
If a serious anomaly existed at 76p, it will be equally compelling at 78p; all-the-more-so after the 0.25% cut in the base rate |
Yes, but with a Johnny-come-lately analysis. The keen buyers today can have a lot of my shares. |
Tipped by Questor |
Latest update contains what appears to be a fairly comprehensive summary of Watchlist and Problem Loans (representing 11.6% of the 30 June 2024 NAV). Haven't had a chance to see how this compares with the most recent update...
Quarterly Update - |
Wind-ups often drag on for years, even after assets and valuations have become Very low. Despite a large % share price gain last week, SLFRX has a market capitalization of just £5.6 million. SLFR £6.8M. SSIF only announced a de-listing date after assets fell below £7 million.. At which point interactive investor threatened to send me a share certificate, as I could no longer hold in an ISA. Later they simply transferred SSIF to my associated trading account. Further cash realisations are paid to my trading account as normal with notification via email and Corporate activity box as before.
Personally I'd rather they stay listed for as long as possible. As there can be greater percentage trading opportunities, as discounts rise to reflect greater risk and uncertainty, both real and perceived. |
At some stage, it becomes inevitable that such a transfer, or equivalent, is logical (and acceptable). There will be a level of costs of running the fund which has a lower bound whose magnitude approaches any expected benefits from the remaining assets. They seem to have already modelled this. |
Presumably Gravis could use the CGT fund to "move" some of these longer dated loans over to there by offering CGT a decent discount? Perhaps an easier/cleaner way rather than a complete merge. |
What I find odd is the use of "base case", which is in fact the most bullish of the five scenarios. That said, Gravis do mention their incentive to additionally pull forward the 2027 payments, which would represent a bull case, and which I think they actually will very much have to do.
I say this because there doesn't seem much point in running a quoted IT from the end of 2025 with a NAV of around £31m [and market cap around £25m?] and paying all the fixed fees and costs on such a small fund.
I also think it's worth acknowledging the writedowns that they model [final column page 9], notably on Property Co 2 where they model a ~20% discount to pull forward the loan i.e. the base case is not blindly bullish in my view.
Lastly while thinking about the base case, they have already delivered with the redemption two days ago of £10.1m i.e. they are walking the talk :-)
I've played around with the numbers a bit and reproduced / modelled the scenarios in Excel.
- added an "upside" scenario, where the fund winds up at end of 2025 with the 2027 payments pulled forward at 20% discount. (There could even be further upside given the recent track record of redeeming loans above NAV, but I have left that out for now)
- assigned a probability weight to each scenario - 50% for "base case" and 10% for the other scenarios [including my "upside"]
- on 76p share px I get weighted average IRR of 24% [table below]
Base case. 27.9%
Larger rump. 19.3%
Acceleration discount. 24.7%
Higher rump discount. 17.6%
Downside. 12.3%
Upside. 29.5% |
Good illustration There's actually a very rarely used function in excel that allows you to set your reinvestment rate - MIRR |
From page 10 of managed realisation plan:-
CONCLUSIONS
The base case realisation plan is forecast to return cash to shareholders with a present value of c. 86 pps.
• The Company has made significant progress with returning capital to shareholders, with a June compulsory redemption of 37.5% of the shares.
• The base case plan forecasts material returns of capital in the remainder of 2024, totalling 51.4 pps. By the end of 2025, a total of c. 83 pps is forecast to be returned.
• Ongoing target of 6.325 pps annual dividend.
• Scenario analysis shows attractive IRRs against current share price even in downside scenarios.
• Gravis is incentivised to bring asset level realisations forward to accelerate the return of capital. |
As it currently stands, a 13.5% loss rate is something to heavily bet against. Even 4.5% (on the current portfolio) requires some pretty bad luck.
But as the capital gets returned, these numbers change significantly. Their high IRRs were calculated as of April 1st, prior to the first RoC, so that must be borne in mind. The Watchlist loan repayment was quite significant, and paints a picture of a conservative management - hence of a likely decent asset quality that supports a low loss rate.
Very few of these asset backed loan ITs are likely to be around in a few years, and I would cash in. Sometimes, they are problematic along the way, but always seem to provide a decent entry point allowing high returns. And GABI seem to have a better management than most, notwithstanding the connected loan issues. |
Good post. Loss rates tend to increase at the end of the wind up process. Problem loans are a bigger proportion of whats left.
I think that's why 4.5% is a lot more reasonable than 0.5%. Also, when very few long dated loans remain the fixed overheads of running GABI outweigh returns so it's better to sell what's left at a discount and return the proceeds. I have no idea if 13% or 4.5% is realistic. I guess one very bad loan would swing it one way or another but personally fwiw I think 0.5% is too low. |
Analysis of the portfolio with resulting IRRs have been discussed on this BB well in advance of their own publication. There is literally nothing new in terms of what has been published other than their view of certain scenarios. But they are just scenarios, with no probabilities attached, and hence no house view (which might indeed be new information).
That said, the 5th scenario which cites a specific loan suggests something quite specific to keep an eye on, although they have previously cited specific loans as being on either a Watchlist or of greater concern.
They have continuously published the portfolio, and we have been able to look at scenarios that result in pretty well the same IRRs. Actually, theirs are a little higher, but not materially so. Recall that I (and one or two others) have written in the past that the current share price (as was then - 71p) implied a mighty 13.5% default rate and the NAV (as was around 89.5p) implied a 4.5% default rate. Historically, they have experienced a 0.5% default rate.
Why this is not new information is that they could still simply be wrong - they could suffer high default rates on a particular loan grouping - and would look a little daft for not having considered this variation. I would say, on reading their analysis, that they have been a little aggressive in having such a serene downside. But it is one which is not inconsistent with their low loss rate over a long timeframe.
Amongst all the IT wind downs, I have seen this as the best of the bunch. And even after the returns of the past few weeks, it's still up there, although with a more uncertain return schedule. |
This update was imparted to a select few and was very price-sensitive. Within a few hours 3.4 million shares traded traded and the share price rose significantly. Did people deal on the update?
The update/presentation document should have been firstly issued as an RNS, thus available to all shareholders simultaneously…;…..net effect is…level playing field, i.e. nobody is made an insider.
The non-insiders were significantly disadvantaged, given that availability to all happened P.M. on the following day. |
Astonishing they update a select few investors and no doubt more colour was given on the webinar than is written in the slides but private investors are denied the chance to participate. I’d been led to believe Gravis was a decent outfit, but it stinks to be honest. |
Assuming they use the same method of returning cash, dividends will reduce as cash is returned, on an absolute basis. Nothing to stop you reinvesting your cash returned to keep you divi amount though. |
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