Real Estate Credit Inves... Share Discussion Threads

[cc2014] 10/1/2023 11:26

Sort of gut feeling. Whole market looks overbought to me so I've taken some money off the table. FTSE shouldn't be this high and if it falls I can't see RECI withstanding the pressure any better than any other stock.

[renewed1] 10/1/2023 11:14

Any reason???

[cc2014] 10/1/2023 08:06

Sold mine late on Friday.

[badtime] 20/12/2022 16:12

Ah ..but my reply only referred to Monday ...from now ..maybe lol

[spoole5] 20/12/2022 15:19

.......maybe!

[cwa1] 17/12/2022 08:22

Probably quadruple witching day that was responsible. A few strange trades and price movements about. Suspect it will be back to normal on Monday

[my retirement fund] 16/12/2022 22:35

Yea strange I'd have some more at 1.25 for sure. All after hours, too.

[renewed1] 16/12/2022 19:49

Wow!! what happened there!!

[my retirement fund] 14/12/2022 10:08

Bit surprised to see this has not moved up to say 1.40's

[spoole5] 13/12/2022 23:52

NAV as at 30 November 2022 was GBP1.502 per share, representing an increase of 1.2p per share from the 31 October 2022 NAV of 1.490 per share. -- The 3.0p quarterly dividend went ex on 1 December 2022 and will be reflected in the NAV update for 31 December 2022. -- The change in NAV per share was due to:- Ø 1.1p of interest income; and Ø 0.1p of positive mark-to-market ('MTM') adjustments across the bond portfolio. -- During the month of November 2022, RECI released its interim report for the half year ended September 2022. -- The Company expects to deploy its currently available cash resources in near term commitments and continues to see a growing pipeline of senior loans at attractive floating rates.

[my retirement fund] 07/12/2022 14:10

This was what I concluded

[cc2014] 07/12/2022 13:08

I took another look today. The long term 10 year chart suggests this should in time trend back to NAV. Run at a premium even.

All looks good to me

[ga_dti] 01/12/2022 07:33

Hardman & Co interview discussing their recent report on RECI 'Positioned for the current crisis’

[my retirement fund] 25/11/2022 23:41

Very pleased with the performance here since my recent purchases

[encoma16] 09/11/2022 11:54

Hi Skyship. Just bought 30000 of these here recently. Wondered what you think of them at the moment. The dividend looks very tempting.

[davebowler] 09/11/2022 09:12

On questioning the dividend cover after the presentation management said it would be 100% covered, from memory, by next year.

[davebowler] 09/11/2022 09:10

Liberum;
Recycling capital into attractive opportunities

Mkt Cap £296m | Share price 129.0p | Prem/(disc) -13.4% | Div yield 9.3%

Event

Real Estate Credit Investment’s NAV per share at 31 October 2022 was 149.0p, representing a 0.5% NAV total return for the month (6.2% over the last 12 months). NAV performance was driven by net interest income of 1.0p (in line with expectations), slightly offset by -0.2p negative mark-to-market adjustments across the bond portfolio and -0.1p of operating costs.

In October, RECI made a £45.2m commitment to a senior development loan to support the development of a student accommodation facility in London. The loan is floating rate, has an expected yield of 10.6%, an entry LTV of 55% and an expected exit date of December 2025. The portfolio now comprises 63 positions, with an aggregate value of £466.9m. The weighted average LTV remains relatively low at 58.8%. At the end of October, RECI had cash of £22m and the gross and net leverage ratios were 39.3% and 32.8% respectively. The company expects to deploy its current available cash resources in near term commitments and continues to see growth in its pipeline of senior loans at attractive floating rates.

Liberum view

October’s performance is in line with expectations. The loan commitment made in the month continues RECI’s focus on floating, senior secured debt. The floating rate element, as well as the low LTV of 55%, should protect its value in a rising rate environment. The weighted portfolio LTV of 58.8% is at the lower end of RECI’s historic range and will provide further protection against potential falls in the values of the underlying properties. The short duration portfolio generates a high level of cash repayments, providing scope to reinvest capital at higher rates (current unlevered yields for the portfolio are 8.8% for loans and 8.7% for bonds). The opportunity set for new investments is very strong in this environment and the current 9.3% dividend yield and 13% discount represents attractive relative value, particularly given the focus on senior loans at low LTVs.

[mwj1959] 01/11/2022 09:26

Here's what they say about dividend sustainability.

Dividend sustainability will derive from net distributable income and cash coverage
• Net distributable income derives from net regular income (coupon yield from the underlying loans and bonds) and any profits earned above that regular income. To maintain and improve the Company’s regular income, the Company has successfully deployed some of the substantial cash reserves (built through the COVID crisis) into
attractive high yielding loans and will continue to do so to improve its net income
• Our granular cash forecasting and stress scenarios give us the confidence that the Company can maintain its ample dividend cash coverage for the long term.

From this my understanding is that any dividend shortfall from net distributable income is met by drawing down on their cash balances, which for now are substantial and are always likely to be as they target them to be 5 - 10% of NAV. And given the pick-up in re-investment yields that we've seen I presume that any shortfall will likely be less than in the last financial year.

Given this the main risk to the sustainability of the dividend is a significant number of loan / bond defaults (on the back of a serious RE recession), which overwhelms any cash reserves that they have.

If that scenario unfolded the dividend would likely be cut, but even if it wasn't there would be a serious hit to the NAV. This sort of scenario is what is implied in the share price collapse that we've seen in recent weeks.

I may have got all this wrong, so happy to be corrected!

[cerrito] 01/11/2022 00:24

I also went through the annual report to see how big the revenue reserves were but could not find that info.
Anyone know??

[cerrito] 31/10/2022 23:50

I have just gone through the presentation. It is too bad that they discontinued the custom in the QWIL days of having live investor presentations with a good Q&A. I take the point that Liberum are generous with their research and at the last count 40% of the shares were held by instis with 3% plus but my feeling is that they do have a large UK shareholder retail base.
The following on page 30 of the presentation caught my eye
Quote
Net Profit of £10.3m, being 0.74x covered against annual dividends paid of £14.0m in this 6 month period (on a 12 month period, the dividend cover was 0.74x)
Unquote
This is in some ways no surprise as over the last two years the dividend has only been covered by fair value gains on the portfolio, some of which was reversals of the FY19/20 provisions. For example last year 21/22 interest income was £27m approx. the same as dividends paid out. Opex and finance costs were £8m compared to fair value gains of £5m(including £2m of FX gains) ie an uncovered dividend.
In 20/21 interest income and dividends paid were broadly the same at £27m. That year Fair value gains-bolstered by previous years provisions but more important £7m of FX gains-were £18m considerably in excess of opex and finance costs totalling £8m.
When the interims come out in a few weeks I will be interested to see how the fair value loss of £1.8m is made up.
Anyway I will stay with what I have.
Incidentally if anyone thinks I have got my maths wrong let me know.

[kinbasket] 31/10/2022 18:57

The next continuation vote is 2025. Avg discount in the year to March 21 was 14.1% and the continuation vote was in Sept 21 so clearly no issue at that time.

[mwj1959] 31/10/2022 18:47

I don't see any likelihood of liquidation as I expect discount to continue to narrow from here, albeit I think it unlikely that it will trade back to or even to a premium to NAV anytime soon. A RE recession discount will continue to be applied to the stock for the foreseeable future, despite the underlying robustness of the portfolio. Happy to continue to clip the coupon and add on any material weakness, such as we saw recently.