Secured Income Share Discussion Threads

[makinbuks] 03/12/2018 12:59

Latest factsheet is really disappointing. They have now disclosed cash as "cash including committed cash" And the figure has risen to 33.1% and once again NAV declined by 0.27p illustrating that the payout is not covered. I think they really have to be transparent on how much is committed and within that how much "commitment" is actually collateral held for banks on FX hedges.

On the upside clearly loans are being repaid in full and a discount in excess of 6% is harsh when a third of assets are in cash

[makinbuks] 30/10/2018 11:46

And the September factsheet shows a large increase in committed cash to 23.6% mainly due to repayment from BMS Ireland. That will help the derivative issue but will they really be able to reinvest quickly enough to keep the dividend fully funded? The statements in the annual report regarding cover from July are positive in this regard but we don't see the evidence so far

[makinbuks] 30/10/2018 11:17

Here's something interesting from the annual accounts:

"The foreign exchange exposure on non-Sterling assets (24.62% of NAV) was fully hedged and any liquidity calls arising from the hedging strategy
are considered manageable within the Company’s cash flow."

That will explain part of the reason there is so much cash on the balance sheet. Its sat there as collateral

[makinbuks] 11/10/2018 15:30

Seems to be holding up in the rout and proving to be the diversifier I had hoped

[makinbuks] 25/9/2018 14:13

Surprising little uptick in the share price today. The latest factsheet shows a reduction in the NAV by 0.2p and committed cash rising again to 12.6%. The repaid cash came from the direct loans section going against the trend recently. A further 12% yielding loan representing 2% of the portfolio is repaid this month so these ratios will come under further pressure I assume in the next update
None the less the uptick in the share price is welcome

None

[makinbuks] 30/8/2018 15:18

Factsheet published today. Good to see NAV increased and committed cash fell to 9.9%. Slightly surprised there hasn't been a positive reaction in the market to this, as a yield of 7.8% and discount of 8.1% is a pretty attractive entry point.
I am confused by the Top 10 loans list which includes an offshore loan representing 2% of NAV to be repaid in September. This was not shown in the top 10 list last month so far as I can see.

[makinbuks] 29/8/2018 15:57

I think the newsflow on SQN has just been generally positive and reassuring whilst SSIF has published very little. They are even late this month publishing the factsheet. Someone on holiday?

[spectoacc] 25/8/2018 07:53

Interesting that SQN has been doing reasonably well of late, vs SSIF continuing to tick lower relative to NAV. May be as simple as the buy-back on SQN, vs none on SSIF.

[spectoacc] 22/8/2018 12:53

XD wont have helped SSIF share price.

[makinbuks] 22/8/2018 12:43

Interesting too that the IFRS effect was announced for SSIF in July but only in August for SQN. As the effect was similar it would appear the manager sat on news he knew was negative

[makinbuks] 22/8/2018 12:41

Not sure why the SQN NAV is always announced a few days before SSIF now. We should get the monthly update by the end of the week. Discount has widened for no apparent reason this month

[makinbuks] 30/7/2018 12:57

On a cost/efficiency argument it makes sense. Having been successful with SQN however SSIF was supposed to utilize their expertise but also diversify away from pure asset finance. Or that's my understanding of the strategy. I'm not sure that SQN holders would be too keen to suddenly take on a load of SME loans arranged through platforms (albeit asset backed). On the other hand SQN holders must also think the growth story has rather come to a halt given they had to return part of their latest "C" issue. Maybe it would give them a fillip too?

[spectoacc] 27/7/2018 16:32

What odds of them trying to get a merger with SQN through before then - because as you say, the chances of raising more cash when trading well below NAV & seemingly permanently suffering cash drag seem very slim.

[makinbuks] 27/7/2018 15:50

Ah yes I had completely forgotten that. Absolutely no chance of of achieving that in 16 months. We may see a narrowing of the discount in advance of that although its a completely wooly commitment. Made a nice return on ACD in similar circumstances. Might be a nice solution

[spectoacc] 27/7/2018 15:25

@Makinbuks - finally found it, from Feb 17 (the Secondary Placing of course being the sale of the GLIF shares, which passed off successfully):

"General

The Directors recognise the importance to investors of increasing the Company's size to increase the liquidity in its shares in the secondary market. The Directors believe that the Company's prospects for issuing further shares in due course will be enhanced significantly if the Secondary Placing is completed and the other proposals referred to in this announcement are implemented. However, the Directors recognise that there are no guarantees that the Company can increase its size substantially. Accordingly, if the Secondary Placing is completed, the Directors will seek shareholder approval to amend the Company's articles of association so that they will be required to convene a general meeting of the Company to consider a continuation resolution (an ordinary resolution) if the Company's net assets at 31 December 2019 are less than GBP250 million."

[spectoacc] 27/7/2018 06:42

Merger with SQN certainly crossed my mind - and don't SSIF have to wind up after a certain time if they've not managed to raise cash? Or get to £250m mkt cap? I'll have to look it up, but am sure that was the deal.

[makinbuks] 26/7/2018 17:11

Yes the discount at today's buying price of c. 6% is surely adequate cover for default risk while the dividend at 6.8% remains attractive although you have to ask yourself what will it be in future (can it be covered by fundamentals) and how will it look as interest rates rise (compared to a cash ISA for example).

I wonder what SQN are thinking about taking the fund on a year and a bit after they did so? Its clear they thought they could dramatically increase the fund size and thereby their AUM and fees. That seems a distant prospect and extracating themselves from the Platform business and the old manager seems to have been prolonged and more complex than they thought. Might they have a plan B? Wind up for example? Merger with SQN? Bit of both?

[spectoacc] 25/7/2018 17:44

Thanks @Makinbuks, valid points all. The discount still keeps me in, & the comments on Sept 18 divi.

[makinbuks] 25/7/2018 16:03

Well, firstly they have changed "cash" to "committed cash" and it has risen marginally to 13.4% "Cash" is now zero. That is a step forward in disclosure but still a worry from a dividend cover point of view and the long term viability of the fund at its current size. I wonder if there are commitment fees for these undrawn amounts or what the expected drawdown schedule looks like. 2% repayments due in July. This point is further illustrated by the reduction in loans outstanding to 101. Basically there's more flowing in than flowing out.

Secondly the IFRS 9 adjustment is partial recognition of the impairment issue we have long highlighted here. Shame on them for not adopting early. The real question however is not what level of impairment provision does an accounting standard require, but what level is realistic. The way they try to dress it up as non cash and historic doesn't inspire confidence which is why the price dropped today. I note that the provision is set to halve by the time the platforms reach 20% of the portfolio. According to the graph that is in 2026!!!!

I also think the IFRS 9 issue is a worry for GLIF shareholders which I am not.

I liked the greater transparency on SQN as well so although I don't think Suniva is out of the woods yet by a long way I appreciate that the manager is at least on the right page and making an effort to improve. Its in his interest to do so because its only trust and confidence that will get us back to NAV or a premium and allow future growth in the funds size

[spectoacc] 25/7/2018 07:42

Any thoughts @Makinbuks? June newsletter out.

[makinbuks] 27/6/2018 18:32

Just to add to that there's another 3% scheduled for repayment in June. Tongue in cheek shouldn't they buy shares in SQN instead of holding cash?

[makinbuks] 27/6/2018 18:30

...And so in May cash increases to 13.2%, the NAV drops again but by less than a tenth of a penny and the discount widens to 6.55%. 103 loans outstanding, 5 down from 108. So the tidy up continues and in a way its good to see loans being repaid without default but where's the promised reinvestment? We will not get that dividend fully covered with 13% in cash

[makinbuks] 04/6/2018 16:18

April Newsletter update, cash still 10.8% with a further 3% to be repaid in May and June

[makinbuks] 25/4/2018 13:52

Quiet March, NAV stabilized cash still 10%. a new graph has appeared showing the build up of direct loans from the current 31.7% to 60% in the next year or so. I guess the point of that is that margins will improve. Personally I'd rather see the old style commentary and in particular detail on when the cash will be invested and how they are progressing with collections

[spectoacc] 21/3/2018 07:28

@Makinbuks - or timing of interest payments? Agreed re impairments/provisions - all very SQN-esque, no surprise there! But I guess yes, the answer to it must be "they've stopped paying but we get the asset so net effect is no write-down".