Real Estate Credit Inves... Share Discussion Threads

[gary1966] 08/2/2013 08:10

Unfortunately no e-mail addresses on the company website as I wouldn't mind asking the co how often they intend to re-base the divi. At current NAV it should be 2.175p a quarter.

[eeza] 08/2/2013 08:07

Hardly any point in declaring Div is 6% of NAV & them making it at Manager's discretion.
Misleading.

[kenny] 08/2/2013 08:04

Excellent IMS – really worth reading the statement in its entirety as it highlights their current strategy and outlook going forward (the historic details of some bond purchase "coups" is also informative).

Onwards and upwards!

[gary1966] 08/2/2013 08:04

eeza, it is but as I posted the other day I am not sure how often they are going to re-base it.

[eeza] 08/2/2013 07:50

I thought the Div was supposed to be 6% of NAV.

[skinny] 08/2/2013 07:06

RECI1 Highlights

· RECI made a profit of £4.1 million in the quarter ended 31 December 2012, compared with £8.7 million in the previous quarter.

· From 30 September 2012 to 31 January 2013, RECI NAV increased 11.5% from £1.30 per share to £1.45 per share2

· In the quarter ending 31 December 2012, RECI made £28.1 million of new investments at an average yield of 12.6%

· RECI's loan portfolio accounted for 20% of the investment portfolio as at 31 December 2012 following £15.7 million of investment during the quarter

· The bond portfolio had nominal value of £107.4 million and a market value of £75.5 million as at 31 December 2012

· The Board has declared a dividend of 2.0p per share in respect of RECI Ordinary Shares for the quarter ended 31 December 2012

[1] Real Estate Credit Investment PCC Limited is a protected cell company, consisting of a Core and a Cell. RECI refers to the

Company's Core segment. Figures for quarter ended 31 December 2012 are pro forma, as the Company will next produce financial statements for year ended 31 March 2013.
2 Based on 31 December pro forma figures




Ordinary Dividend for RECI LN (the Core shares)

Real Estate Credit Investments PCC Limited announces today that it declares an ordinary dividend for the period 1 October 2012 to 31 December 2012 of GBP 0.02 (a total amount of GBP 799,340). The dividend is to be paid on 29 March 2013 to ordinary shareholders on the register at the close of business on 8 March 2013. The ex dividend date is 6 March 2013.

Preference Dividend

Real Estate Credit Investments PCC Limited announces today that it was resolved to pay a preference dividend of GBP 0.02 per preference share (a total amount of GBP 899,257) for the period 01 January 2013 to 31 March 2013. The dividend is to be paid on 29 March 2013 to preference shareholders on the register at the close of business on 08 March 2013. The ex dividend date is 06 March 2013.

[skinny] 07/2/2013 20:23

Hmmmm! :-)

[kenny] 07/2/2013 19:15

The previous hedges were not so big but then the portfolio's value was smaller at that time. Cheyne do now manage about $6.3B in total, so I am sure they are modest people, just like all other hedge fund managers!

[jonwig] 07/2/2013 17:36

Kenny - were they so large?

And ... I hope they know their Greek Tragedies - Hubris.

[kenny] 07/2/2013 17:17

Jonwig,

I think the reason that no one has commented is because the company has put on hedges before and then cashed them in when they think it appropriate. From memory, I think the last hedge was cashed in mid/late last year when they took the view prices were only going one way, namely up.

The hedge is not there for ever and a day - likely only a few weeks or months - and they will cash it in when they believe appropriate. I think these managers know what they are doing to maximise returns - last year their credit fund topped the performance tables!!

[skyship] 07/2/2013 17:12

DB - yes, but trades at c5% premium to NAV!

[davebowler] 07/2/2013 16:50

HDIV a rival Trust with a good proportion of its assets in Secured loans;

[jonwig] 07/2/2013 16:49

I am surprised this hasn't drawn comment:

The Company will look to protect its NAV gains with a €40 million short position on the Itraxx Main and will look to add further hedges in the near term

A position of this size (over half of ord shares' NAV) will cost money and might be a mtm instrument which will erode NAV if the index rises. In that case, future NAV might be protected on the downside, but gains eroded on the upside.

[kenny] 07/2/2013 16:05

I think we deserve a favourable mention in the Press. Maybe even be tipped somewhere!!

[davebowler] 06/2/2013 09:34

Liberum;
Real Estate Credit Investments (RECI / BUY / 124p) – January NAV +5.6%

n 3.3% NAV increase in second half of January to 145p: RECI's NAV per share increased by 5.6% in January and 3.3% over the second half of the month to 145p. A mark-to-market gain of 3.4% in the bond portfolio was the key driver of NAV growth in the month.

n Bond portfolio +3.4% in January: The bond portfolio performance was broadly evenly split over the month (+1.77% in first half of Jan and 1.63% in the second half of Jan). The main drivers of growth were further gains in the Annington Finance bond (purchased in November) and repayments in the period, including the NEMUS 2006-1 bond which was repaid at par (vs. an initial purchase price of 0.45).

n Portfolio activity: £4.35m of acquisitions were completed in the second half of the month at an average purchase price of 0.97 and a weighted average effective yield of 8.54%. Total sales in the period were £4.78m at an average sale price of 0.94 (vs. an average purchase price of 0.91). The total number of bonds in the portfolio has fallen to 92 (15 January: 102).

n Hedging: RECI is expecting to take out a €40m short position on the iTraxx Main and will look to add further hedges in the near term.

Liberum View:

n RECI's strong NAV performance in the month is further evidence the company's active management capabilities to identify and capitalise on attractive opportunities. We estimate the Annington Finance bond has a current mid price of 116.25 (+16.25% since acquisition at the end of November) as the bond yield has been driven down from 13% to c9.8%.

n The bond portfolio has delivered a total return of +35% since the beginning of 2012. This compares to +22% for the iTraxx Crossover Total return Index (composed of 40 sub investment grade credits), +16% for the Credit Suisse High Yield Index and +11% for the European Leveraged Loan Index over the same period (see Figure 2).

Figure 2: RECI's bond portfolio return – Dec 2011 to January 2013

Source: Bloomberg

n RECI now trades on a 14.5% discount to NAV and the prospective dividend yield is 7.0%. RECI remains our top pick in the sector as we believe there is considerable upside potential in the portfolio (priced at 71.7% of par) and the shares should continue to re-rate closer to par in line with other listed credit funds.

[kenny] 05/2/2013 20:13

Today's fact sheet from the company mentions one bond that was originally purchased at 45% of par which had repaid at par during January. This highlights the value that is not apparent in the current NAV of 145p. This "hidden" value is the difference between the face value of the bonds, being £108m, less the current fair value of the bonds of £77.4m - so a figure of £30.6m.

Let's be conservative and allow for some defaults. With 92 different bonds and allowing for the company's superior record in assessing mortgage bonds prior to investing, as well as the fact that the bonds represent only about 60.2% of the value of the underlying properties, let's assume this comes to a low provision of, say, £3.8m giving a potential hidden redemption value at £26.8m or about 67p per share.

Add that 67p to current market NAV of 145p and one comes to a potential value (on a liquidation in 2017, should that occur) of 212p (the provision for defaults amounts to a further potential 9.5p per share).

This estimated value of 212p allows for future uplift coming from the bond portfolio alone and nothing from the loan portfolio. Most of the loan portfolio is, I assume, not marketable so I do not factor in any value on account of potential sales of loans prior to their respective redemptions. However, in reality I think the income from a) the loans plus, b) income from the bonds, less c) the company's expenses, d) interest on the preference shares and, e) dividends will add to NAV. This is not really quantifiable – but I might make an attempt to quantify this once the accounts to 31.03.13 are released in June.

I think this will be an interesting exercise because I suspect there is quite a lot of value likely to accrue just from surplus income – perhaps something like 8p per annum, as best as I can currently estimate. The compounding effect of the surplus income does in itself become material if the company is investing in bonds/loans yielding, say, 10%, between now and late 2017.

I hope the above explains why I keep harping on that RECI is cheap!

[kenny] 05/2/2013 15:47

At the risk of sounding like a broken record - they are still very cheap.

They are especially cheap if, like me, you plan to hold until at least 2017 when RECI may be wound up.

[pyemckay] 05/2/2013 14:03

managed 2000 for sipp and 5000 for isa. this is like shelling peas.

[skyship] 05/2/2013 13:26

Had to top-up with a few; and surprised to do so at just 122.5p - that's for a prospective yield of 7.1% and an NAV discount of 15.52%. Still far too cheap!

[skyship] 05/2/2013 13:14

WOW!!! - A 3.6% rise over the past 2weeks - mainly down to those Annington bonds.

[gary1966] 05/2/2013 12:58

145p NAV - go baby go!!

Pro Forma Monthly RECI Core NAV1 (in £ million) 15/01/20138 31/01/20138
Investment Portfolio2 97.04 97.06
Cash and Cash Equivalents 3.73 6.18
Derivative Assets 1.08 0.62
Other Assets 3,4 - -
101.85 103.86

Other Liabilities5 (0.63) (0.63)
Preference Dividend6 (0.15) (0.30)
Ordinary Dividend7 - -
Preference Share Liability (44.96) (44.96)
(45.74) (45.89)

Net Assets (estimate) 56.11 57.97
Shares outstanding 39,966,985 39,966,985
Net Assets per Ordinary Share (estimate) 1.40 1.45

[kenny] 05/2/2013 11:10

Apparently Cheyne Capital's credit fund topped the 2012 industry chart. It is certainly reassuring that we have excellent managers making the investment decisions.

[skyship] 04/2/2013 15:29

ANNINGTON FINANCE NO.5 13% BOND - 115.800 (1/02/2013)

In Oct, Nov & Dec the end month factsheet was issued on the 5th of the following month, so could be an RNS tomorrow...

[skyship] 31/1/2013 15:51

WOW!!! - ANNINGTON FINANCE NO.5 13% BOND NOW UP TO 115.200 (30/01/2013)