Merchants Share Discussion Threads

[speedsgh] 30/1/2020 08:59

Correct, uapatel. It was predominantly the costly debt that was previously holding them back. Averge cost of borrowing has reduced substantially in the past couple of years. From the last Interims...

"The company's weighted average interest rate on all borrowings has fallen from 8.5% in January 2018 to 6.0% at the half year end and following this latest refinancing exercise it is 3.5%. This has enhanced the company's earnings potential and your board believes it will improve the long-term capital returns for shareholders. The refinancing has also provided more flexibility in the company's borrowings by introducing an element of shorter term debt."

[uapatel] 30/1/2020 07:19

As I understand it, the main reason for the previous low growth in the dividend was due to outstanding high rate loans. These have mainly been cleared, so hopefully allowing a better rate of dividend growth going forward.

See also Edison report (Oct 19)




... Gergel explains that the trust’s dividend growth in recent quarters has been helped by reasonable income growth from portfolio companies, sterling weakness and refinancing its debt at more favourable rates. Over the last two to three years, the manager has diversified MRCH’s income stream: the portfolio now has less exposure to high-yielding, low-growth companies (such as in the oil & gas sector) and more to firms with higher rates of dividend growth.....


Happy for any other views on this.

[redponza] 30/1/2020 04:24

Hi, I saw that their past div increase rate is quite low as compared to other ITs.
Any particular reason behind or the trust is just poorly run?

[tim 3] 29/1/2020 15:23

Thanks for that.Have to say of all my holdings these are the ones I feel most comfortable with.Can easily see another leg up coming but in no rush happy for it to tick along.My second largest holding.

[speedsgh] 29/1/2020 08:22

Further debt reduction announced this morning...

Debt repayment and lower gearing level -

The board is pleased to announce that today the company is repaying £16m of debt under its revolving credit facility. This will take the company's total debt to £93m, and gearing to around 15%*. The board and manager decided to reduce gearing after a period of strong equity market and portfolio returns. The board's formal policy is unchanged and is to maintain gearing in the range of 10%-25% (measured at the time that any increase in total borrowing facilities is agreed).

*Unaudited

[contango1] 19/12/2019 19:13

With the yield now a smidgeon under 5% I've sold half.

[tim 3] 19/12/2019 15:23

Not for me it doesn't I see it as more to do with an improved outlook for the UK economy following the election.

[contango1] 19/12/2019 14:51

MRCH at a premium! Should I interpret that as a sell signal?

[tim 3] 17/12/2019 17:42

Thanks thats a very interesting article.

One look at the chart of most American index says buying it here would be wrong and goes against all my instincts.

[tim 3] 17/12/2019 14:39

Woodford lost the plot in the end but thats for another thread.

I miss the sharp falls/crashes as history shows they are nearly always a great time to buy quality.

I still have 40% of my funds in cash some of it waiting for an opportunity to buy am happy to leave it there as its part of my long term investing plan having funds available to buy in a crash/correction and keeping some funds as cash.

I don't like the US at the moment as it has gone to high to quick for my liking and many of their shares are not supported by dividends.

[tim 3] 17/12/2019 13:45

Really are some very high quality posts on here thanks for sharing.

On timing I totally agree its hard to hit the button when everything is falling as chances are they will be cheaper at at some point but you really have to move away from trying to buy the absolute bottom, set what you think is a fair price to pay and when it hits buy.

Investment trusts really are one of the citys best kept secrets with your risk spread across many different shares and not suffering the redemption problems highlighted recently with Woodford, of unit trusts.

I have gone from having a high risk strategy to a much more conservative one over the years as you realise that with high potential gain comes with high potential to be wiped out at some point as happens to so many who play the market.

One of the most succesful market strategies as has been shown again and again is to reinvest dividends and watch your investment grow.

For mrch I think they could be entering a period of steady growth as the outlook for the UK is a lot better than it was a week ago whatever your views on Brexit the fact that the majority the Torys got now means they can make decisions and move on and most seem to think it will be positive for UK stocks most of which have not seen anything like the growth seen in the US and other markets.

[goldpiguk] 16/12/2019 14:49

Hi Panshanger1,

DIG is an excellent share to pair with MRCH in any portfolio. DIG's change in strategy compliments Merchants Trust as they are clearly differentiated; one of the reasons I chose it.

It was widely felt in the market that DIG had something to prove; which explained its big discount to NAV. I would expect that discount to continue to narrow over the next few years, with dividend growth to surprise on the upside.

MRCH and DIG are core investments in my ISA which I expect to hold for many years.

As chart trader2000 points out finding Investment Trusts that tick all the boxes is getting harder, a reason I am looking to buy two new Investment Trust holdings next year. At the moment there are no really stand out candidates on my shortlist.

Goldpig