P2p Global Investments Share Discussion Threads

[aroon001] 09/12/2016 11:05

Sorry I meant RDL was trading at much smaller discount. Not premium.

Yes lots of unknowns! I'm hoping for some punchy 0.5 and 0.6 month on month returns imminently. And better commentary from fund manager.

Re share price volume it's hard to know what to make of it. Normally for price to peak or base there needs to be a surge in volume as buyers or short sellers capitulate.

One good thing U guys have raised is at least they can buy back their own shares at big discount. Helps nav. And takes out some of the sellers.

[anley] 09/12/2016 10:44

Its good you two guys fight it out to find the truth BUT I think that if you look at the daily trades one sees small volumes. That is telling me that either there is a big seller out there dribbling his holding out or the smaller investor is getting out on the basis that he is cutting his losses.

[rl34870] 09/12/2016 09:48

Yes for an investment trust to fall 35% where the net asset value has supposedly not changed, to quote a certain American politicisn't "there are unknown unknowns"!

[aroon001] 08/12/2016 20:55

fair enough I think though that wide discount is effectively the same. investors selling at a wider discount is the same as saying investors demanding a higher yield. whats not clear perhaps is that you feel it might be because of higher expectations for defaults. for me considering RDL is trading at a premium to NAV, the reasons for wide discount for P2P LN are ambiguous and might just be because it is badly run, so instead of returning the 8-12% we spoke about above, it is returning 3-4%. Its hard to know for sure what is causing this discount but may not only be expectations of higher defaults?

[rl34870] 08/12/2016 17:05

I think you are overplaying the yield situation. When this trust was launched P2P was all the rage but now a more critical judgement is taking hold. We are after all talking about unsecured consumer credit. Two investments I like to compare it with are UK Mortgages Trust and Aviva preference shares.UK Mortgages has had a very patchy start also but does not trade on a discount. Why? Because the fund invests in UK mortgages and historically the consuser does not default on its mortgage debt. Similarly Aviva has a very robust capital position and preference share dividends , yielding 6.2%, are covered over 200 times by earnings.Consumer credit is considered much more flaky and repayment doubts have crept in hence the very wide discount.

[aroon001] 08/12/2016 11:29

not sure I would agree with that necessarily. if u assume since inception that's about 50p a year on average in nav increase, then if investors demand 6-7% yield for p2p, 775p share price wud seem about right (22.5% discount). Massive discount will be justified if average monthly returns since inception don't pick up from here.

[rl34870] 08/12/2016 11:00

Cormac Leech at VPC says that some of the early monthly returns at VPC were overstated because of accounting technicalities and have adjusted of late so this is probably the same with P2p.Key figure is Investment To Date increase in NAV excluding issue costs of 13.07% which is very acceptable for where the fund is in its lifetime. So massive discount can only be justified by extremely bearish sentiment looking forward, which if not borne out will lead to gradual rerating.

[rl34870] 08/12/2016 10:48

Yes I was also optimistic at 830 so it is disappointing but on balance I feel that this company is a quality operation. Market sentiment tonwards tis sector is very poor at the moment which is why the share price is where it is. A steady share buy back is all they can really do and you only have to look at the share price swings of oil majors, banks etc to see how short term the market is. Definicely not a good time to sell.

[aroon001] 08/12/2016 09:54

I like your optimism! I thought that last month at 830p share price. I do think the same but the thing that concerns me is that he fund manager has been quite quiet. If this was really the case I don't see why they wouldn't be more vocal about it, saying one off costs have been absorbed and they expect higher monthly returns from now on etc, rather than saying they need to tweak the strategy and include more gbp assets. I thought platform fees were a running cost too not upfront?

[rl34870] 07/12/2016 20:41

Coupon has steadily risen and only now has reached 11.76%.Presumably platform fees have been incurred as gearing has been increased. So in theory we should be getting to the point where a lot of the initial costs have been incurred and returns should start to move forward. All then will depend on the level of defaults and if Lending Club past statistics are continued across the whole portfolio and amongst all lenders then things should start to look up.

[aroon001] 07/12/2016 20:30

true good point. so lets say coupon 11.76%. defaults 3%. management fees 1%. performance fee is 10% of (11.76% -3%). overall about 7% leveraged twice is 14%. less cost of debt 2%. so I get to about 12% return on assets approx.

Month to month return can vary with defaults but not sure why overall return is 4%. even with 20% held in cash for fx hedging return shud still average about 9.5%.

[rl34870] 07/12/2016 19:23

You seem to be forgetting the cost of defaults.

[aroon001] 07/12/2016 19:09

on the monthly newsletter on page 2 it states weighted average coupon = 11.76%. If the trust is leveraged about 1:1 debt to equity then I think you would get close to 22% return. take off fees, cost of debt, admin as you suggested etc would get you to like 18% I suppose?

hxxp://www.p2pgi.com/investorrelations/view/P2PGlobalInvestmentsOctober2016Factsheet

though perhaps that 11.76% coupon number doesn't correlate to yield then. not sure.

[rl34870] 07/12/2016 18:38

Not sure where you get the 20% return figure. If you use Lending Club statistics as a template you will see that the returns are about 6.5 % after defaults. If we assume cost of gearing is about 2% then after 0.5% charge on the geared portion this should add an additional 4% , so 6.5 minus 1% amc is 5.5 then add 4 to get 9.5 and then you have to knock off their performance fee and admin costs. So maybe about 8% on NAV in total( which equates to nearly 11% per annum based on current market cap).

If they dont give an explanation in the December newsletter then we will have to wait for the 2016 annual report so we can work it out for ourselves.

[aroon001] 07/12/2016 14:22

1) I don't think anyone of any importance follows this blog (however great that would be!
2) I don't think investors are exiting with great haste - to me the fair value of this stock given it shud be about 6-7% yield is probably in the 600-700 pence area. If anything buyers are being overly optimistic at these levels if one continues to expect 35-40 pence dividends a year.
3) The discount to NAV is a bit of a distraction. Even if the assets were bought at 100 yielding 10% ish, (and could be sold for that price approx), if you are only returning 3% to your investors, the share price should halve regardless of nav. 30% discount may sound ridiculous, but I cant see why it wudnt go to 40% or 50% if the fund manager is doing such a poor job.
4) reasons to be optimistic due to a tweak in strategy? not really, stating that they will increase proportion of gbp assets not sure why that would change anything. USD assets infact yield more so I cant see what this would achieve.
5) Rising bonds yields - seems like the duration of the portfolio is 2 years according to the factsheet. Since inception I don't think bond yields have moved so much in 2 year maturities, if anything they have gone lower so this should have been an overall plus.
6) open ended may make more sense for this given how relatively new P2P securities are, but with such poor performance, rather than a large discount, there would be queues of investors trying to exit.

Ultimately for me the bottom line is that the fact sheet states the underlying loans have an 11% coupon. Leveraged up this is about a 20% return. If the final investor only gets 3% there is a serious issue and the resultant discount is just a manifestation of this, rather than something to be that surprised about in terms of magnitude. Worryingly none of us really know why the returns are so low. Reasons given have been fx hedging and the securitisation of the Zopa portfolio but the given the low cash balances now, and the one off nature of the latter, I'm not sure why returns are still low.

[rl34870] 06/12/2016 21:54

If you add debt of £766m to net assets of £853m to make total amount invested of £1.619 billion and assume a net return after fees, interest and defaults of 5% per annum (lending club statistics show their loan categories have always achieved this since their inception) then you get net revenue generated per annum of £81m which is 13% of the current market cap of £619m.

Even if the whole lot was invested in category A loans where the default rates are about 1% and your net return was 4.5% you would still generate about £72m which is a 11.8% return of the current market cap.

Anyone interested?

[argoal] 05/12/2016 17:11

I'd be shocked if anyone was influenced by what I think or say.

I'm just scratching my head out loud rather than anything else.

Having said that I do have a soft spot for ITs at a discount.

[anley] 05/12/2016 16:45

I think you will be right as I have bought again on the basis of Assets at a Discount.

However, I feel that Mr Champ should come clean and give us his version of events. He does not know who we are and it may be there are other people watching what we think and they may be fund managers or private investors watching and waiting.

[argoal] 05/12/2016 14:50

This is really very interesting....

We know:

1. The returns have been positive month on month but below expectations.
2. Investors are exiting with unseemly haste creating a very large discount in their wake.

We don't know:
3. Exactly why returns have been disappointing.
4. Whether returns will continue at 0.25%-0.3% per month, get better or get worse.
5. When interest rates will start to climb and how they will impact returns.

If we had a better handle on 3. then we could make a better assessment of 4. and 5.

I think we will look back on this point as a real opportunity as things normalise. There may be an army of buyers just waiting for a technical signal to buy here. Who knows?
OTOH I could be wrong.

[rl34870] 05/12/2016 12:11

Yes, if income generated is going down at the same time that bond yields are moving up sharply then you have a double whammy effect.

[danieldruff2] 05/12/2016 12:01

I think P2P and VSL will ultimately be ok. They're both looking at tweaking strategy and if it pays off they won't be seeing these silly NAV discounts, which I think are largely down to income funds/investors having to sell out of investments which are not generating the required yield (plus a dollop of human disappointment at performance). No need to invoke conspiracies, the above is enough to do damage.

[rl34870] 05/12/2016 11:53

Assuming there is nothing to come clean about.... surely the elephant in the room here is the closed end permanent nature of investment trusts. How else can Linsell Train investment trust trade on a 68.8% premium to net asset value today? The market looks way into the future and whereas the sun is premanently shining with Lindsell it looks like it is anticipating a permafreeze with P2P. VPC have addressed the same issues with a very informative investor presentation detailing their change in strategy following higher than expected defaults.

Clearly P2P need to do the same to regain investor confidence rather than the occasional press comment such as the most recent where they indicated they would be switching to more UK loans. To their credit they have had 29 consecutive positive monthly net asset value returns. Simon Champ has said that the fund is low risk and would stand up well in a recession. We need an investor presentation to give us more confidence in sharing the boards expectation expressed at the most recent AGM that the company would achieve an increase in the net asset value of at least its target return over the next 12 months.

[anley] 05/12/2016 11:00

The management really needs to get a grip and come clean with the Y/E figures OR make a statement now as to just why the price trickles down allmost every working week.

Another fine mess one of the City's big hedge funds has got itself into bringing into focus how useless an investment is with these sort of people.

[aroon001] 30/11/2016 13:20

the best low risk investment he could make is buying back the shares. 33% instantaneous profit. They should run a tender offer for all shares at say 5% discount to NAV. and anyone who wants to exit can. Really need shareholders to vote for this somehow.

He could also introduce a hurdle rate for performance fee. getting paid performance for returning 3% a year is grating.

To be honest, I wouldn't mind so much about the performance if there was a clear explanation/commentary and breakdown of returns and so on each month. At least we could make an informed decision as investors on what to do. But this returning 0.23% and then 0.27% and watching as the share price tanks beggars belief.

[anley] 30/11/2016 10:56

Thank you for your post ......most helful and if we take the boss of P2P remark "now be a low risk investment" which I have then wearing my Assets at a Discount fund managers hat I have bought in again at 747p.

I still think that the fund managers of P2P should run off the assets but would you if you had their jucy fee income stream??????