Secured Income Share Discussion Threads

[andy246] 26/8/2022 17:48

The only disclosed cash collections in H1 2022 are £1.0m from borrowers #1 & #2. In addition, the company has confirmed that borrowers #3 & #7 have continued to make payments on time.

Since Dec-21, the NAV per share has increased by £1.82p (net of the dividend payment in the period), which can be broken down as follows:
a) -0.89p from the confirmed impairment increase of the Film loans (disclosed in the HY report)
b) +1.33p from interest income less opex (this is my estimate based on H2 2021 actuals and the reducing size of the loan portfolio)
c) +1.38p (i.e. the remaining amount) from impairment releases due to either:

c1) Change in impairment methodology - none have been disclosed to date, other than the Film impairment change listed above (changes in impairment policy are generally disclosed in the monthly NAV updates)
c2) Releases from cash collections, whilst keeping the impairment rate unchanged - this is what I believe is driving the NAV increase (mostly borrowers #1 & #3)

In H2 2021, the Medical loan repaid £520k, and the impairment was reduced by £260k, to keep the impairment rate constant between Jun-21 and Dec-21 at 50% of outstanding loan amount. This is what is driving item c) above

Would be good to get your view of the 3 items below, and their drivers (if different from mine).
I can send you my excel model with all historical data and my projections if you send me your email by private message

[makinbuks] 26/8/2022 13:08

Thanks, I'm aware of the post period end comments in the half year report but do ou refer to something else when you say "the company has announced significant cash collections on certain loans since Dec-21"?

I agree the IFRS9 provisioning for the two lending loans and the medical one are probably conservative. I also think in the fully written off portfolio there is what is described as an "offshore loan" which I think might have a guarantee from the Gibraltar government

[andy246] 26/8/2022 08:29

Mak,

I tracked the semi-annual repayments and provision movements of all SSIF loans over the last 12-18 months, and I am focussed in particular on the Lending and Medical loans, which are marked as of Dec-21 at 70% and 50% of the gross loan amount (included in the NAV figure)
If these loans are repaid, their provision will be released and booked as profit in the P&L.
Each time cash is collected on these 2 loans, an amount of provision is released so as to maintain the same loan marking level. This is what is driving the consistent monthly NAV increases since Jan-2022 (which also reflects interest income net of opex, and FX impact). Note that the company has announced significant cash collections on certain loans since Dec-21.
It might be helpful for me to share my research.

[makinbuks] 26/8/2022 07:53

Andy, how do you know the company is releasing provisions? Around 50% of the NAV at 31/12/21 was due for repayment in 2022 so for sure some movement is likely but no actual news that I can see

[andy246] 25/8/2022 12:25

Good time to buy some more SSIF below 15p before the expected H2 loan repayments and capital return announcement. The shares are quite illiquid, but I can see a few brokers have >200'000 shares available for sale
The NAV has increased every month since January 2022, which means that cash repayments are ongoing, and the company is releasing provisions (for example on the Medical and Film loans).

[makinbuks] 09/6/2022 10:16

OK, must admit you had me worried there for a minute but I never found time to come back and figure out what you were taking about

[markth] 08/6/2022 12:43

AH my bad - the B shares redeem at £1, not 6p, duh.

[markth] 06/6/2022 09:20

You get one b share per 16.66 shares owned

[makinbuks] 01/6/2022 13:38

The B share return of cash is 6p, where do you get 0.36p from?

[markth] 31/5/2022 10:23

Not surprised the share price has risen from 15p to 21.5p given the latest published NAV of 26p last week. I am however surprised by the latest capital return, which amounts to about 0.36p of NAV. Such a small amount can't be worth the administrative cost of returning it?

[makinbuks] 20/8/2021 16:03

Its all relative , apollo, have a look at the KKVL board and their announcement! Could the directors of these two trusts get together and cut costs? Do we need two boards for example?

[apollocreed1] 20/8/2021 14:20

They charge a lot for very little work! "Management fees payable by the Company to KKVIM of £20,500 per month from 1 August 2021 to 31 December 2021;

· A payment of £20,000 in total payable by the Company to KKVIM, but conditional on a senior employee providing continued services to the Company to 31 December 2021; ”

[makinbuks] 01/6/2021 09:06

Disappointing revelation today though not completely out the blue. Is this the cause of Dawn's sabbatical?

[makinbuks] 25/3/2021 17:12

Still no factsheet on the website two days after the RNS

[makinbuks] 11/3/2021 10:52

12.5p to be returned, 16% of NAV. Pleased with that and the B share issue is a sensible construct. Wonder if we'll see a narrowing of the discount

[makinbuks] 24/2/2021 18:43

Might they buy back shares with the spare cash in the market? That would seem a sensible move when we trade at a significant discount

[makinbuks] 24/2/2021 18:42

December factsheet reveals cash of 4.7p, scheduled maturing debt to June of 8.9p and income for six months to June around 3p net of fees. Wonder when we'll get another slice repaid?

[makinbuks] 07/1/2021 17:13

Fair enough Spec, shame to see you go but encouraging that there appears to be a buyer in the background. With cash plus repayments <6months at 23% I think you're premature but your points about comparative value elsewhere and lockdown risk are well made

[spectoacc] 07/1/2021 15:41

I've sold almost all this week, in trades mostly not reported, and at nearer mid than bid, so there must have been a decent buyer.

Don't dislike the return profile for SSIF - income coming in, returning chunks, winding up, discount. But I've been in them for yonks, and the last few capital returns have been chunky, eg the recent 5p divi paid out and still been able to sell at the same price if not higher. Has been enough to tempt me - once size finally available.

Good luck holders. I'd be slightly wary of the few p of NAV left over from original incarnation (I think it'll be at risk), & the last NAV of 83p is really 78p. There's bull cases on possible write-backs and ongoing income, but not the margin for me atm. Much better than Dawn Kendall's others - eg KKVX - with "..All borrowers...meeting their debt obligations..", but lockdown is back, and risk is on.

[spectoacc] 26/11/2020 14:45

Not with the chunks they're returning to us.

But I guess it'll get increasingly concentrated to the more dross-y end over time - and can never rule out mark-downs, even at this late stage of Covid.

[makinbuks] 26/11/2020 14:39

Is a 20% discount to NAV justified here? Assuming theyve done their bad debt provisioning correctly I'd have thought not

[makinbuks] 20/8/2020 10:08

Yes, the incentive fees are interesting too. Look pretty balanced to me. Interesting that they get 10% of anything in excess of NAV. That gives incentive to keep pursuing loans that have had a provision applied to them, ie a lot of the platform stuff.

A key theme seems to be simplicity and avoidance of cost. I'm delighted with that and the simplicity of repayment via dividend. Your 3rd point is correct but doesn't affect me personally

[spectoacc] 20/8/2020 06:14

Reduction in fees is a positive, no obvious bad news, but a few things stuck out from a quick read:

1. Moving to qtrly divis (fine)
2. Avg duration is short, under 3 years, but longest loan is over 5 years and an obvious possibility of extensions due to Covid
3. They plan to return cash via more dividends, which isn't going to be particularly tax-efficient for those holding outside ISA/SIPPs

[spectoacc] 30/7/2020 06:43

Some write-backs to offset a loss it seems - good job.

Sounds generally positive, as per usual.

[spectoacc] 15/7/2020 12:32

Agreed - something close to NAV (c.87p), and the divi along the way, with hopefully some decent capital returns sooner rather than later.

Good point about platform loans, and of course Covid.

Pretty sure the SQN RNS the other day will have opened the SSIF Board's eyes to Dawn Kendall & co. They had enough of that from the GLIF days.

Could perhaps have given an option to roll into SQNX rather than SQN, but SSIF does have one of the shorter durations & aren't alone in winding up. The whole sector's been a palava, with just one or two notable exceptions (eg read GABI RNS today), & others gone into wind-down (eg HWSL).

"Secured" is a misnomer.