Gcp Infrastructure Inves... Share Discussion Threads

[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.

[donald pond] 14/3/2023 07:46

Good stuff, I did suggest it to them before the AGM

[rik shaw] 14/3/2023 07:44

Buy back programme announced:

[stewart64] 09/3/2023 10:41

Always some panic on some aspect of the loan book, used to be Biomass. If you priced all these suspect loans at zero ( which is very unlikely) there would still be a discount to NAV.

Meanwhile I added at 92.2p this morning. Looks a bit overdone.

One reason I prefer these to buying an Equity stake in renewables is Starmer is going to increase tax on energy producers post 2024, he can't really extend that to the supplier of credit? Meanwhile, the Renewable producers will still be credit worthy.

[mwj1959] 09/3/2023 09:54

10% social housing exposure weighing on share price currently given HOME's travails?

[spangle93] 08/2/2023 18:32

Thanks donaldpond & speedsgh

Very good article, have added today, based on the high discount compared with usual levels, the 7% yield, and the hope that bank base rates may be close to their peak

[speedsgh] 08/2/2023 12:30

As per Donald's previous post...

GCP Infrastructure: Green is good -

[donald pond] 08/2/2023 08:44

There's a new bit of research from Quoted Data. A good guide to GCP but doesn't tell us much we don't know.

[panshanger1] 01/2/2023 14:32

Pretty unloved but still holding for the dividend and diversification

[chc15] 01/2/2023 12:55

Have followed director buy and added a bit here.

[spangle93] 16/12/2022 18:46

If you've got 50 minutes,
"Phil Kent, Manager of the GCP Infrastructure Investment Trust, puts the case to Jonathan Davis in our latest professional investor Q and A"

[spangle93] 15/12/2022 08:19

Annual results issued this morning.

NAV per share at 30 September 2022 of 112.80 pence (30 September 2021: 103.92 pence)

The Company generated total income of £157.5 million (30 September 2021: £76.9 million) and profit for the period of £140.3 million (30 September 2021: £62.4 million).

In November 2022, the Chancellor confirmed the introduction of a profits levy on electricity generators. Whilst the implementation of this remains uncertain, the Investment Adviser has estimated the downside impact of the levy to be c.1.5 pence per share on the NAV at 30 September 2022. It is expected the impact of the profits levy will be offset by higher long-term electricity prices and inflation.

[panshanger1] 13/12/2022 12:28

Finding some support at this level - at last Or has something leaked !!

[hpcg] 08/12/2022 14:54

They were forced sellers needing margin for LDI. And probably some willing sellers looking at where Truss was going to take interest rates.

[stewart64] 07/12/2022 16:40

These dips in GCP beggar belief they really do. These are very safe loans to renewable energy suppliers that are doing quite nicely off the back of the energy Market. At the same time base rate peak expectations have moderated. Maybe it's hit the bottom again. 7% yield looks a steal.

[stewart64] 10/11/2022 19:59

Badtime, I doubt it, it's like Zebedee lately.