Real Estate Credit Inves... Share Discussion Threads

[badtime] 06/7/2020 21:09

....and holding

[badtime] 06/7/2020 21:09

Still holing from low 100's

[my retirement fund] 06/7/2020 17:20

Well thats me back in today

[skyship] 04/7/2020 08:44

Agreed. Went XD on Thursday of course; but now on a 10% yield and again looking good value.

[my retirement fund] 02/7/2020 21:30

Coming back into my cross hairs again

[wllmherk] 25/6/2020 15:38

Thanks Dave, adds a nice bit of ballast to my portfolio,

wllm

[cwa1] 25/6/2020 11:04

Thanks as ever db, much appreciated.

[davebowler] 25/6/2020 10:52

Liberum-
Defensively positioned

Mkt Cap £296m | Prem/(disc) -13.5% | Div yield 9.3%

Event

RECI's NAV per share at 31 March 2020 was 147.0p (previously published), reflecting a NAV total return of -3.7% for the year. NAV rose by 1.4% in the two-month period to May 2020.

They key driver of NAV decline was a significant mark-to-market valuation impact during March (10.1% NAV decline during March). This was mainly due to unrealised mark-to-market movements on the bond portfolio (10.1p). The manager has undertaken an evaluation of the portfolio with an assessment of the impact of the crisis on the recovery of each position. Two mezzanine loan positions were also written down in March as a result of this (7.1p NAV reduction).

The portfolio comprises 48 positions across loans and bonds. The weighted average LTV across the portfolio is currently 63%. The majority of the portfolio is in bilateral loans and bonds (80% of total). In the majority of cases, RECI is the only lender in the structure, providing greater control in challenging situations. The public market bonds now account for 20% of the portfolio value and mainly comprises senior secured investments (56% weighted average LTV). The expected yield to worst on the bond portfolio is 8.2% after adjusting for expected extensions to the bond maturity dates




Gearing has reduced considerably in 2020 as the manager has sought to de-risk the liquidity profile. Gearing has declined from £97m to £53m in the three months since the end of February. This was funded by disposals of liquid bonds and the use of existing cash resources. The net gearing ratio was 7.2% of NAV at 31 May 2020.

Liberum view

The company’s recent portfolio update has provided further evidence of the strength of the loan book and its ability to withstand the current downturn. All of the cash paying loans are up to date with interest payments. We believe the shares still offer upside from current levels given the defensive positioning in senior loans. The average LTV across the portfolio offers substantial downside protection against weakness in valuations. The portfolio is now concentrated on senior loan and bond investments (76% of the portfolio) as the manager has adopted a cautious position over recent years.

RECI has reiterated its intention to maintain an unchanged dividend policy for the next 12 months, suggesting considerable confidence in the quality of the underlying loan collateral and borrowers. The underlying borrowers are typically well-capitalised institutions with significant operational and financial resource.

[davebowler] 10/6/2020 08:37

Liberum;
Note: Attractive risk/reward characteristics

Mkt Cap £303m | Prem/(disc) -11.5% | Div yield 9.1%

Event

RECI’s recent portfolio update illustrated the manager’s conservative underwriting approach and the robust nature of the portfolio. The weighted average LTV of 63% offers considerable protection against weakness in capital values. RECI typically partners with well-capitalised and experienced borrowers, providing an additional layer of protection. The unchanged dividend guidance for FY 2021 demonstrates a confident outlook. BUY

[davebowler] 05/6/2020 08:54

Liberum;
Event

Real Estate Credit Investments' NAV per share at 31 May 2020 was 149.1p, reflecting a NAV total return of 1.0% in the month. NAV performance benefited from mark-to-market gains on the bond portfolio (0.9p) in addition to interest income (0.6p).

Investment activity was limited during the month with £0.7m of drawdowns to fund existing loan commitments. Gross leverage has remained broadly unchanged at £53.1m (15.5% of NAV). Cash on the balance sheet at the end of the month was £28.5m, resulting in a net debt to equity ratio of 7.2%.

RECI’s £359m portfolio has been assembled with a focus on capital preservation and is diversified across 48 positions. The portfolio now has a weighted average LTV of 63% and the weighted average unlevered yield is 9.2% (10.2% levered).


Liberum view

RECI's share price has recovered strongly since the company presentation in mid-May. We believe the shares still offer upside from current levels given the defensive positioning in senior loans. The average LTV across the portfolio offers substantial downside protection against weakness in valuations. The company's intention to maintain the dividend payout at the current level for the next 12 months is reassuring and indicates the manager has considerable confidence in the quality of the underlying loan collateral and borrowers.

The uplift in the bond portfolio represents a small recovery against the 8.9p of mark-to-market losses in March and April. At 30 April, the bonds were valued at a 17.3% discount to par. The bonds are primarily senior secured with relatively conservative LTVs (56.2% LTV). The underlying collateral largely comprises income-producing core assets owned by large institutional borrowers.

[hpcg] 01/6/2020 15:35

Should get to 144 just on not trading at a discount. Income is still tremendously attractive and so it could even go to something of a premium. I'm not selling what is circa 10% of my portfolio at 0% discount as the income north of 8% is not replaceable.

[badtime] 01/6/2020 12:37

Good to see continued progress on the sp

[johnroger] 30/5/2020 12:50

Thanks for posting robow

[badtime] 29/5/2020 11:21

Good point

[hpcg] 29/5/2020 10:57

Chart is not behind the paywall though is it!! The URL tells you the contents, and the rest you know already what with being quicker off the mark than a daily newspaper and its readers.

[skinny] 29/5/2020 10:55

Thanks for the link.

[badtime] 29/5/2020 10:35

Unfortunately that's behind a pay wall

[pejaten] 29/5/2020 03:21

Tipped today in the Telegraph

[my retirement fund] 22/5/2020 16:18

10K Director purchase

[davebowler] 22/5/2020 08:54

Stifel-
RECI – Transparency and update helpful
Last week RECI released a thorough review of the portfolio in light of the coronavirus
pandemic and the historically wide discount at which the fund had been trading. The
additional transparency is helpful as that does help lift some of the cloud surrounding
the sector.
Leverage. While the episode could have been handled better, we think the fund is moving
in the right direction. Out of the four repo lines in use one is likely to be extended from three
months to six months. In addition, the leverage structure will be amended to a balance
between repo and individual facilities on bilateral loans. In practice this means that a bilateral loan may be leveraged on a discrete basis without recourse to the remaining fund.
While this is marginally more expensive it is more conservative than a fund wide facility
and we think it’s the right thing to do going forward.

Portfolio. The update is largely positive, with loan to values on the remaining portfolio outside of the two writedowns
being low. Some of the development loans are also partially de-risked due to being pre-let or sold. Roughly 50% of
the portfolio is repaying capital and interest so this should continue to de-risk the fund.
Excess cash. The fund has a number of prepayments due in the coming months. There is a question over whether
this should be used to help narrow the discount (buyback or capital return) or continue to re-invest. The current
environment should provide plentiful opportunities to re-deploy capital at attractive rates of return and as long as this
persists we would prefer a manager that can actively invest. For medium- to long-term shareholders this should lead
to an overall better return as it is counterintuitive to reduce deployment at the exact moment when investments are
potentially the most attractive. A balance between the two objectives may be the best path forward if the discount to
NAV remains wide relative to peers. (Analyst: Sachin Saggar).

[skyship] 22/5/2020 08:45

Indeed. I thought the target looked like 120p as per the previous spike; but these days I'm inclined, as ever, to bank turns and move on.

Where to is the problem all of us are having it would seem.