Real Estate Credit Inves... Share Discussion Threads

[kenny] 29/1/2013 17:28

Hold on tight to your shares for the IMS due some time in February. I suspect the market does not fully appreciate the massive earnings that are likely to accrue for the year to 31.03.13 and the IMS may highlight that. Then shortly thereafter we have the next dividend which will, presumably, be paid on or about 31 March.

On the other hand, it may take until the annual results announcement - due in June – for people to realise the high level of earnings. Sometimes people need to see the full accounts to appreciate the position. In particular, the accounts should confirm that the new level of dividend is twice covered; from income alone!!! That income cover continues going forward! Just highlighting all of this in advance – make of it what you will.

[gary1966] 29/1/2013 10:51

Kenny - looks like someone took that opportunity with the 100K buy. Trades at 123p and above are buys not sells as showing on advfn.

[kenny] 25/1/2013 12:19

Gary – it is difficult to understand share price moves and RECI is probably as difficult as any other because I think it is "matched bargain" trading.

Main issue is that RECI is still very cheap, see for example my post 495, so it just gives one an opportunity to add. We need to be patient, as you know, shares do not go up in a straight line. In the interim, there are the nice dividends to collect.

[gary1966] 25/1/2013 10:47

Given the way the share price moved yesterday with every trade, I am somewhat surprised by today's action given the number of buys.

[badtime] 24/1/2013 12:17

Cheers Gary ..I'm sure I'm not on my own re the paper gain indeed there's probably peeps on here who hav an even greater gain..I guess I was just highlighting the issue re investment objectives and how they hav to b reaccesed

[gary1966] 24/1/2013 12:00

badtime,

Well done on the 30%+ gain but remember that whilst you have been getting that gain the NAV has grown further and by virtue of the dividend policy so should the dividend at some point as I outlined in post #507. Maybe use a rising stop loss to ride the uptrend and closing of that NAV discount.

[badtime] 24/1/2013 11:29

Bought this for income and a 'little' capital growth....this surge is forcing me to rethink with a 30% plus gain on paper and tht excludes div...hmmm

[gary1966] 24/1/2013 11:25

There is a case to argue that these should/could trade at a premium to NAV due to the consistent strong growth in NAV and yield. Nice to see it over 120p as that seemed to be a bit of a resistance point.

[gary1966] 22/1/2013 18:30

I wonder how often they will review the dividend payments as strictly with the NAV at 140p we should now be receiving 8.40p pa or 2.10p per quarter. If they increase it to that then these are yielding 7% at the current levels. Not bad for a growth company.

[wirralowl] 22/1/2013 09:52

Thanks for the update db

[davebowler] 22/1/2013 09:24

Liberum View:

n NAV +2.2% in first half of January: RECI's latest factsheet revealed a 2.2% NAV uplift in the period to 15 January 2013. Mark-to-market gains in the bond portfolio (+1.8%) have driven NAV growth in the period.

n Bond portfolio delivering consistent growth: The 1.8% gain in the bond portfolio follows a period of strong performance in 2012. The total return on the portfolio over the past 13 months is +32.9%. We note the manager's comments that UK CMBS in particular has performed well.
n Positive outlook: The portfolio is currently valued at 71% of par and the manager is anticipating further portfolio growth as high yielding assets remain in demand. The company is also seeing a strong pipeline of new issue bonds and loans with yields of 10%+.


n RECI remains one of our top picks in the specialist finance space. Strong credit markets have resulted in a tightening of credit spreads (particularly for Class A bonds). The portfolio is well positioned to deliver further growth as RECI crystallised gains in many of the lower yielding bonds and recycled the capital into higher yielding assets which haven't re-rated to the same extent. The bond portfolio has delivered +32.9% since the beginning of 2012 which compares to +23.4% for the iTraxx Crossover total return index (which is composed of 40 sub-investment grade credits) over the same period.

n RECI shares have re-rated considerably since the removal of an overhang on the shares in Q4 2012 and now trade at 118.9p which equates to a 15% discount to NAV. The pro-forma dividend yield is 7.1%. We expect the re-rating to continue given the NAV growth prospects of the bond and loan portfolio (loan portfolio is generating a 13.5% yield on good quality assets in London).

n The NAV uplift is also positive for ERII shareholders as we estimate the preference share cover ratio has risen to 2.84x (previously 2.82x). This is despite an 8.9% reduction in ERII's portfolio value at the December quarter end. Dividends can only be paid to ERII shareholders once a minimum preference share asset cover ratio of 2.39x has been met. If all of the available cash in ERII was distributed the cover would be 2.51x.

[davebowler] 21/1/2013 16:21

I've already got too many of these, so I've bought some more today! Couldn't resist it.

[gary1966] 21/1/2013 16:10

Mozy,

2017 is a long way away and RECI are regularly buying and selling bonds. I don't think they will have a set of bonds specifically earmarked to repay the prefs. They will probably start building up cash balances in 2016 in preparation for repaying the prefs. At the moment they have better things to do with the money raised from any liquidations.

I see the MM have dropped the bid price. Delayed sell or looking for some stock.

[mozy123] 21/1/2013 14:53

Gary, cheers, but some of the portfolio must be in order to pay out the 45mil in pref shares?

[gary1966] 21/1/2013 14:50

Prefs repay in 2017 Mozy but no indication from the company that they will wind things up then and so no reason for bond portfolio to be geared to this date.

[mozy123] 21/1/2013 13:50

Number of bonds
102

Dirty Fair Value of Bond Portfolio as at 15 January
77,578,218

Nominal Face Value of Bond Portfolio as at 15 January
108,769,711

Anyone know the average maturity of the bond portfolio? Is this average being matched to 2017 and a return of capital in any potential fund closure?

[skyship] 21/1/2013 13:02

Should certainly keep Bearbull happy - as well as all of us of course!

[skyship] 21/1/2013 13:00

Manager Commentary
• Strong MTM gains in the bond portfolio and in particular in UK CMBS
• Further gains expected as markets continue to be buoyed by search for yield
• Strong pipeline of new issue bonds and loans with yields in excess of 10%

Pro Forma Monthly: RECI Core NAV (£M)...31/12/2012......15/01/2013
Investment Portfolio............ 94.84... 97.04
Cash and Cash Equivalents....... 3.84.... 3.73
Derivative Assets............... 1.83.... 1.08
Other Assets.................... -....... -
................................ 100.50.. 101.85

Other Liabilities............... (0.63).. (0.63)
Preference Dividend............. -....... (0.15)
Ordinary Dividend............... -....... -
Preference Share Liability...... (44.96). (44.96)
................................ (45.59). (45.74)

Net Assets (estimate)........... 54.91... 56.11
Shares outstanding.............. 39,966,985 39,966,985
Net Assets per Ordinary Share (est.) 1.37.... 1.40

[gary1966] 21/1/2013 12:43

Nice update out. NAV now 140p with lots of opportunities around for 10%+ yields still.


Fact sheet 15 January 2013
Download in PDF

Manager Commentary
• Strong MTM gains in the bond portfolio and in particular in UK CMBS
• Further gains expected as markets continue to be buoyed by search for yield
• Strong pipeline of new issue bonds and loans with yields in excess of 10%

Figures for RECI Core stated in GBP for 31 December 2012 & 15 January 2013

Pro Forma Monthly RECI Core NAV1 (in £ million) 31/12/20128 15/01/20138
Investment Portfolio2 94.84 97.04
Cash and Cash Equivalents 3.84 3.73
Derivative Assets 1.83 1.08
Other Assets 3,4 - -
100.50 101.85

Other Liabilities5 (0.63) (0.63)
Preference Dividend6 - (0.15)
Ordinary Dividend7 - -
Preference Share Liability (44.96) (44.96)
(45.59) (45.74)

Net Assets (estimate) 54.91 56.11
Shares outstanding 39,966,985 39,966,985
Net Assets per Ordinary Share (estimate) 1.37 1.40

[hieronymous1] 21/1/2013 12:40

Kenny

I forgot to add the :-)

Profits will be harder to come by on new investments due to the increased competition, but that is a long way off as you say.

[kenny] 21/1/2013 12:08

Hieronymous1,

Reference your post 493, I thought I was ultra-cautious but I think you have now taken that crown!

I believe there are three factors that clearly indicate that we are a very long way from a bubble in RECI or the investments it makes. These are (and point one is an overlap of two):

1.The bond portfolio is trading at 70% of face value at 31.12.12 – that is 80p per share on top of the current NAV of 137p. Perhaps if the bonds were trading at more than par value we might start thinking that we are approaching a bubble.

2. We do not know the average yield on the entire bond portfolio but the company does state the effective yield on its top 10 holdings (which represents 68% of its whole bond portfolio) as 12.4%. Perhaps if the bond portfolio were trading at a yield of 5% or less, one would start to get concerned about a bubble.

3. The loan portfolio has a weighted average yield of 13.5%. Therefore, as with the bond portfolio, this is much closer to a yield that represents extreme depression rather than bubble valuations of the loan portfolio.

I can certainly sleep easy about my investment in RECI – most likely until at least late 2017 when the company should announce whether it intends to wind up RECI.

[gary1966] 21/1/2013 09:33

Bit of interest this morning, probably on the back of the IC article.

[hieronymous1] 20/1/2013 12:50

Good and bad. It will drive up the price of existing holdings but make new purchases more expensive. There are quite a few other companies being set up for the same purpose. How soon will this market reach bubble territory? Will we time our exits correctly?

There are worse dilemmas to ponder :-)

[davebowler] 20/1/2013 11:44

More interest in the sector can't be bad.

[holts] 18/1/2013 15:34

I hope that's not the usual ic
kiss of death!