Gcp Infrastructure Inves... Share Discussion Threads

[hindsight] 30/5/2023 17:04

cc2014, thx fair enough, but they maybe slightly false too in so much as it gives capital for equity sales to chase at maturity
Presume you know gilts quite good, tn25 4.80% and gilts cgt free

[cc2014] 30/5/2023 13:14

#531

Some of them no. I wouldn't lend to if not protected. That's a fair point.

But some of them yes. Investec at 5.15%. Shawbrook at 5.06%. Close Brothers at 5.01%

[spectoacc] 30/5/2023 12:51

@dp - "inflation only becomes entrenched when it is fuelled by wage rises and raising interest rates, in the face of a tight labour market, does that"


There's a job at the Turkish Central Bank waiting for you ;)

Wages rising at over 6% atm, which goes a long way to explaining why Core is 6.8%. Higher interest rates are needed to press down harder on demand & create unemployment.

Or, we could go further down the immigration route. Or find an answer to the c.2.5m on the sick.

In other news, GCP appears to be bouncing a little off the bottom.

[hindsight] 30/5/2023 12:34

cc2014, lets be honest the FSCS bonds are a false market, would you lend to those banks if it was not protected ?

[stewart64] 30/5/2023 11:33

So why then with a wall of quarter of a trillion pounds of private lockdown savings and an economy opening up to supply side constraints did the MPC preside over zero interest rates and continued to print. It's simply beyond any reason and poured fuel onto a fire already out of control, not least in the housing Market where they caused a boom that we needed like a hole in the head. And though house prices aren't part of CPI, higher costs feed through to general inflation and wage demands.

( reply to Donald Pond, concur with CC2014)

[cc2014] 30/5/2023 11:31

I wanted to reply to your post Stewart but tbh I really don't know where to start without having a rant about the incompetenance of central banks and government treasury departments which would go on and on and on.

I will try to be brief.

It is obvious in economics regardless of whether you prefer John Maynard Keynes or Milton Friedman that printing money causes inflation. Well obvious to me anyway. Obvious to Theresa May too with her "there is no Magic Money Tree" quote a vieled reference to MMT (Modern Monetay Theory) all the central banks experts were promoting

So, we had the QE from the 2007/08 which never got unwound. Then we had the Brexit QE which never got unwound and then Covid arrived.

And the Covid QE is where things get really bad because the Covid QE was pushed into circulation with little economic output. I point this out very carefully as at least with all the other QE it kind of ended up being spent on stuff. Hospitals or roads were built. They might have been built inefficiently at too high a price but at least there was some asset produced of benefit to society. The Covid cash produced very little economic output. True helicopter money.

And the rest we know.
"Inflation won't occur"
"Inflation is transitory"
"Core inflation won't rise"

To sort of use a medical analogy. If every time the patient is ill, the patient is given higher and higher doses of drugs to keep them happy, eventually it becomes apparent the drugs are no longer helping the patient but harming them. Now we have to wean oursevles off the drugs. And the patient is going to kick and scream because the withdrawal symptoms are going to be long lasting and painful.


The challenge is that if I look at markets they are still completely screwed up. Base rate at 4.5%, FSCS protected bonds paying 5% for 5 years. Tesco corporate bonds with 6 years to go paying around 4.95%. And if I take the view that Tesco bonds rates are simply just wrong due to QE then the price of everything else is still just wrong.

[donald pond] 30/5/2023 11:19

I take the opposite view. Inflation was entirely the result of pandemic savings meeting an energy and food price squeeze. But those one off pressures are over. inflation only becomes entrenched when it is fuelled by wage rises and raising interest rates, in the face of a tight labour market, does that. What will someone do when their mortgage rises by £100 a month? Cut back on (non existent) discretionary spending or ask for a pay rise? Unless we have high unemployment raising rates will just prolong inflation imo

[spectoacc] 30/5/2023 11:05

Lynne Truss, @stewart64? Eats, Shoots and Leaves? ;)

But yes, "transitory" was notable b*llocks as said by many at the time. Sure, cost-push is difficult to counter, but the BoE have done themselves no favours whatsoever. Plenty of us, from Private Eye downwards, predicted "Ollie" Bailey would be naff.

Two even went for Unchanged last time.

I don't see 6% - or even 5.5% per the market - but possibly worse is how long we'll be stuck at eg 5%, thanks to the BoE's loss of credibility. It was cost-push, now it's something nearer wage-price.

[donald pond] 30/5/2023 11:03

I agree hindsight but GCP does have good protection against credit risk. The investments are generally loans secured against cash flows that are partially government backed and often have inflation protection. Some of the counterparties, such as NHS trusts in the original PFI assets, have government guarantees. It's hard to imagine wind farms or solar providers going bust and loan repayments have priority. It's not as if GCP is lending to companies: it lends to individual ring fenced projects and generally has a right to step in if needed. The sister fund GABI is more exposed to counterparty risk in the normal sense

[stewart64] 30/5/2023 10:56

I've really had to recalibrate my opinion of where GCP and other Bond proxies should be in the last few days following on from the realisation that Core inflation has become dangerously entrenched. It hasn't helped that I have lost complete faith in the MPC. Had the Governor behaved and not continued his super optimistic dovish commentary over the last Winter, Markets might have some belief in where we are headed. But we will now have to pay a premium for his folly, maybe rates will need to hit 6% to restore confidence. If only they had all been like Catherine Mann who ploughed a lonely furrow, to deaf ears from the rest.

Meanwhile the discount on GCP is narrowing rapidly even as it falls. Investec offers 5.45% fully FSA guaranteed against 8.45% here. Yes 3% is a generous uplift for assets that are probably safe, but we are going much higher niw we have to pay for the Governor's folly.Not that the leftist media ( the BBC in particular) will blame him, Lynne Truss' fault innit, even if she only did 1% of the damage.

[hindsight] 30/5/2023 09:07

"In general however it is difficult to dig that deep into the underlying assets"

Exactly donanld pond, why wearing my income pot glasses think these need to be at a decent discount now the outlook for credit risk is negative rather than positive
The managers say lot is senior debt but without knowing cover its a bit meaningless

[donald pond] 29/5/2023 16:50

Tbh hindsight you don't learn that much from those. They are intermediary accounts from a company that lends on behalf of GCP but it's only one of a few intermediaries. Also, the biomass projects in default may turn out to be the ones recently refinanced at a profit. In general however it is difficult to dig that deep into the underlying assets

[hindsight] 29/5/2023 14:52

Done bit more digging, seems maybe some loan issues even back in 2022

Page 2 section 2.3 Going Concern



Clearly this deserves a discount, but cant decide what

[hindsight] 26/5/2023 18:33

Followed for a while here but no position, was always concerned when tide turns offshores get hit the most. Seems thats priced in now
Using 81.2p redemption 112.24 yield 7% 10 years, get YTM of 11.7% ?

[spectoacc] 26/5/2023 17:13

Ha ha RNS'd the same time I posted - good.

Averaged a few today, seller still very much in evidence tho. GCP not alone with that.

[spoole5] 26/5/2023 16:46

GCP Infra today announces that pursuant to the general authority granted by shareholders of the Company at the annual general meeting on 15 February 2023 to make market purchases of its own ordinary shares, it repurchased 250,000 ordinary shares at a weighted average price of 82.20 pence per share, to be held in treasury, on 26 May 2023

[spectoacc] 26/5/2023 16:28

Nowhere near having used the £15m - by my calc? First day without one yesterday.

[spoole5] 26/5/2023 16:25

Wonder why they've stopped buying back

[donald pond] 26/5/2023 09:33

I know Phil Kent well and he is very conscientious. The recent news on refinancing and locking in power prices was very positive. Part of the problem may be that many of the institutions invested here are income funds and so they are getting redemptions due to the risk free return elsewhere. But there is clear value here for the patient

[stewart64] 26/5/2023 09:18

I don't think you can lay any of this apparent undervaluation at the door of current management. They are the victims of outside forces (an inflation shock), you can safely lock cash at 5% now with an FSA guarantee and base rates look headed for 5.5%. I'm sure it's overdone, I did sell out prior to ex dividend as my faith in Cenral Bankers plummeted to an all time low. Now it's dawned on most investors that the BOE has been run by a bunch of imbeciles these last three years.

[donald pond] 26/5/2023 08:56

The yield is now 8.5%, discount over 25%, and there is no reason to think there is any problem at underlying asset level. Gravis seem to have problems with GABI and with Phil Kent running both I think he is spread too thin. Orix took a sizeable stake in Gravis a couple of years ago and are sending in support but it can't come soon enough.

[stewart64] 25/5/2023 16:43

This is the Market reaction I expected following the BOE inflation report that came out on ex dividend day ( the price then was 90p) I mistakenly ascribed the small drop to that report. The amazing thing is Bond proxies were unmoved even though the writing was on the wall and I said as much on that day. Thw report was sugared coated by BOE as always and misled the Market, nobody in their wildest dreams could have guessed then that Core inflation was going to come in at a 6.8% shocker a week later. Paraphrasing the Ripper regarding wall writings....Bailey is the man that will not be blamed for nothing

[spoole5] 25/5/2023 15:40

No point lending anymore with the shares on a 25% discount, may as well use the capital to buy back.

[williamcooper104] 25/5/2023 09:52

Yep; high end resi can be done by smaller house builders/and individuals but increasingly no one can compete with the volume house builders - they can build c£20 cheaper than anyone else - which on a £300 psf end value is massive Of course the cost of that is identikit housing estates across the country

[spectoacc] 25/5/2023 09:41

Guess it certainly is for RPI, but not for recent/current inflation. Also interesting inflation generally low when house prices are rampant, and housing lower when inflation rampant. But that's interest rates of course.

On a side note, it's very difficult to build cheaply now, irrespective of land cost - probably why only the volume housebuilders are able to do it successfully. Materials/skilled labour costs are through the roof (no pun intended).