Gcp Infrastructure Inves... Share Discussion Threads

[spectoacc] 07/4/2023 08:14

Decent enough. Can be accretive quite a bit higher.

(I'd still rather they spent the cash on investments with a higher return mind).

[stewart64] 07/4/2023 08:08

I see GCP have made a modest start on the share buyback..100,000 shares at an average of 85.83p and a 25% approx. discount to nav.

[stewart64] 30/3/2023 10:00

Was looking just at how secure our FTSE 350 ranking was. Haven't got an up to date league table but,actually, the answer is very secure. You only have to worry about entering the micro caps when Market cap drops below half a billion. At 750 million we are about rank 300 along with the likes of Ferrexpo and Wetherspoons, two felled giants.

[panshanger1] 28/3/2023 15:48

New ISA year next Thursday will look to add also watching GABl GCP APIEPIC

[stewart64] 28/3/2023 15:20

Just goes to show how inefficient the Market is. At 84p ( an all time low btw today) and at a 120p high in the same rolling 12 months.
Fair enough if this was Equity but it's a known yield off debt with a set maturity. It's probably become the most interesting stock in the FTSE 350 just now because the pricing is so all over the place...and only good news on this one has been released in 2023.

Time will tell whether 120p or 84p is the right level.

Any supposed " Equity Stake" is going to have a tiny influence on the actual yield.

[williamcooper104] 28/3/2023 13:27

Investment trusts

[williamcooper104] 28/3/2023 13:27

Beaten down investment trucks tend to develop one way beta In that if the market goes down they tankMarket goes up and they go flat to down

[cc2014] 28/3/2023 13:10

#449

Price of gas has collapsed and along with it electricity prices.
Add to that interest rate at 4.25%
70% is renewables. The 10% in co-living is definitely not the sector to be in.

Question: If the FTSE goes to 7000 what then for the share price of GCP?

[donald pond] 28/3/2023 12:37

No idea, but you can always write to the manager and chairman. There will be a new NAV at the end of next month and it is an opportunity for the company to fully update the market. They should be doing well with inflation and electricity prices both elevated.

[dickiehhh] 28/3/2023 12:32

Can anyone explain the very poor performance of this recently? Is it oversold or are there fundamental reasons why it's now trading at circa 25 percent discountIt's basically a renewables trust as far as I can see so why has it fallen by 20 percent since start of the year?

[stewart64] 27/3/2023 12:37

Well if inflation doesn't come down Bailey is skating on thin ice. BOE projections have been beyond dreadful these last couple of years, inflation they have largely caused by dropping rates to zero in an overheating economy post Covid with supply side constraints.

A stopped clock has to be right twice a day. If inflation is not at 3 to 4% by the end of the year, Bailey is going to look like an even bigger idiot than he is already.

[donald pond] 24/3/2023 21:26

There is quite a lot of inflation linkage in the underlying assets too. The link to power prices is partly because as some loans have been restructured they have taken equity type interests, but I think just as big a factor is in the valuations: after years of power prices declining the coverage on some loans was thinner than originally anticipated but that has now been reversed. So there is a bump up in NAV reflecting that confidence that loans are covered and a bump in the equity like portion. The next NAV will be interesting but the dividend should be secure. If inflation comes down 8% yield and a closing of the 25% discount to NAV could be a decent return

[spoole5] 24/3/2023 21:00

In this space I think it's hard to beat SEQI and RECI.

[williamcooper104] 24/3/2023 19:52

Will have another look - I did hold this on and off from IPO - but HICL has the far better performer (a good example of not chasing yield) My problem was that as they tilted from PFI to renewables the "loans" didn't look much like loans - in that NAV kept moving on power prices - whereas you'd expect loans to have a good degree of protection Thus looked like the downside of renewables without the upside - basically selling put options Indeed the PFI loans were sub-debt so basically equity - but at least with operational PFI you'd very little risk

[spoole5] 24/3/2023 19:33

Looks decent value on the surface

[badtime] 24/3/2023 11:15

Anyone buying at this level

[stewart64] 16/3/2023 07:21

For Management to buy back shares they must be fairly confident that the shares are really worth the nav of 113p. That being so ( fair enough nothing is certain) then my maths tells me that buying your own shares back at an 18% discount supports the yield better than reinvesting the money in an 8% loan. There are less shares in circulation to attach a dividend and those shares have been extinguished at fire sale prices.

Even if shares continue to fall if the Market is still wrongly valuing GCP then the remaining assets will return a higher yield. That's assuming the Market is wrong, of course.

[kenmitch] 15/3/2023 12:29

Stewart64

Does it “make sense” for GCP to buy back? Where’s the evidence to support that claim?

I look at what actually happens when Trusts and Companions buy back. I.e instead of just promoting the theory, which I also think is convincing, I then look at what subsequently happened. And time and time again those buybacks are followed by share price falls, not least because those who benefit the most from buybacks are those selling, as they have a willing buyer for their shares!

Buyback fans always respond to posts critical of buybacks including evidence to support that criticism, ONLY with the theory. I agree with the theory too.

e.g Abdn have been buying back since 2017. They started at £5 and the share never again reached that price, and despite year after year of buying back, the share fell to just £1.40p for a 70% share price fall….despite those buybacks.

e.g Whitbread “rewarded̶1; their shareholders by returning nearly all the £2 billion or so proceeds they got from the sale of their Costa business via buybacks. Again shareholders didn’t get a penny in reality because the share price never again reached the starting price of those buybacks.

Of course sometimes share prices DO go up when Companies and Trusts are buying back, but that’s when others in the sector are also seeing share price gains. And what evidence there is (e,g Morgan Stanley Research on buybacks) showed that often share prices of Companies buying back, underperformed others in the sector that didn’t.

[donald pond] 15/3/2023 12:02

I think there are 2 issues with the NAV: the first is the pull to par point. As a lot of GCPs investments are long term, it will be longer before they get back the final capital bullet payment. The second is the exposure to social housing, which clearly is a sector shrouded with doubts at the moment. But the fund was established originally just after the GFC precisely to be a vehicle that could steadily perform. The gyrations of the share price really don't seem to reflect the steady, generally undramatic performance of the underlying assets.

[stewart64] 15/3/2023 11:52

I don't think you can compare PDSL to GCP. One is plain vanilla debt and the other is rental from property.
There is very little room for getting the nav wrong on GCP. There is a known yield to the end of the various loans and the loan book is by and large good quality and highly rated by all analysts bar none. I could be wrong but a nav discount of 20% seems a tad high on such a high yield. I get a large discount on rental property where voids come into play. But if you have a "void" when a loan comes due because no opportunity presents it makes sense to buy back shares. With property you are stuck with an empty building. Also you have the risk of leverage on property.

[cc2014] 14/3/2023 13:32

Good posts.

But part of the reason the London market is dying is because the fund managers have over the years used any wheeze they can to raise the NAV so that often the NAV bears insufficient correlation with actual asset values.

Over and over I look at the fashionalble DCF's models on some IT's and move straight to wanting a discount. I am never going to pay NAV based on the crazy starting point.

So, the funds struggle at a discount but the buy-backs don't help because fundamenatally everyone knows they are overvalued.

It does my head in.

[hpcg] 14/3/2023 13:15

Kenmitch - you do understand what higher interest rates would do to low yielding Berlin housing? The buybacks are / were irrelevant. Now to be fair management could also have anticipated higher rates and that the NAV was a chimera, but they can't admit that and be compliant with a fiduciary duty to shareholders.

The situation here is probably different. I say probably because if we get runaway inflation then buybacks will not help at all. Firstly it provides support for shareholders that wish to reduce or leave. These are still shareholders. Secondly we have had the bump in interest rates, the event all FI investors fear, so the timing looks good. Thirdly the discount is material; trying generating the same IRR by investing in something. Fourthly, tax free returns all round. Fifthly it will be dividend accretive.

One of the reasons the London market is dying is its nonsensical aversion to buybacks.

[kenmitch] 14/3/2023 12:39

For those convinced that buybacks are a good idea, this is a section of a post I put on the PDSL (Phoenix Spree Deutschland) earlier today. How successful were their buybacks? What happened with PDSL happens over and over again!


“PSDL started their last series of buybacks in June 2021 when the discount to NAV was 17% “a level that does not reflect the track record and performance of the Portfolio.”

The share price at the start of those buybacks was 397p compared with 236p now.

When those buybacks concluded in July 2022 the share price had fallen from the near £4 at the start of them to £3.20 and that “too wide discount” had widened further.

Earlier in September 2019 “the Company has bought back 5.1% of its shares as part of a buyback strategy designed to limit the downside risk to the share price.” Share price then was 390p.

Did those expensive buybacks achieve their aim of “limiting the downside risk to the share price?”

In their interim results in September 2022 (two months after completion of buybacks) PSDL reported “€63 million has been returned to shareholders from dividends and buybacks.”

Really?

The share price has fallen 40% from £4 at the start of those buybacks, to just £2.36! Is that really “returning money to shareholders” or is it in reality a 40% loss?

Now that the share price looks really cheap and at a massive 52% discount, compared with the 17% discount PSDL were keen to narrow via buybacks, perhaps there IS a case for buying back now. But they have stopped buybacks!

I bought PSDL too soon and am 16% down. I’m looking to average down but will wait for their results just in case there’s a big fall in NAV (I think a small fall is more likely) or any shock bad news that might explain the exceptionally wide NAV discount. If no such shocks PSDL looks a stunning bargain priced buy.”

[hpcg] 14/3/2023 10:48

Very welcome. It is difficult to make sense of the discount even in a high inflationary environment. The investor still has to find somewhere better; there aren't big signs up pointing to vehicles with positive inflation adjusted returns.