Sqn Asset Finance Income Share Discussion Threads

[cc2014] 08/7/2020 09:18

Just finished reading the update. Not sure what I think other than I'm impressed with the work the new manager has done.

What a mess. Much of the mess goes back way before Covid and the previous manager it appears was trying to prop up the NAV by drip feeding information. The market got wind of it but the mess is far greater than I imagined or they alluded to in any way.

This made my laugh (my apologies if you're a shareholder) as what sort of business decides it would rather not pay it's loan obligations but instead spend it on more capital.
"The credit outlook for this asset remains uncertain as the business has not been paying for an extended period. The portfolio of assets is a sub scale portfolio (under 100 masts) and the borrower has been reinvesting in new masts at expense of debt servicing with the view that a larger basket of assets is easier to sell. We have requested a revaluation of the whole portfolio and are considering an exit strategy."

As to whether 25p is a decent entry for the ords or not I can't get a grip on that with any confidence. I would guess KKV have tried to kitchen sink the problems but the update gives the impression although they have achieved lots in the last month things are still unraveling, which is interesting as the staff TUPEd. The US office sound like it's almost gone rogue.

Ords seem like a gamble to me. C's carrying far less risk

[george stobbart] 08/7/2020 08:57

why is this ponzi scheme still trading?

[spectoacc] 08/7/2020 07:26

Time to find out how much is in the price - a lot to read this morning, looks predictably shocking for the Ords IMO.

[2wild] 02/7/2020 21:32

Does anyone know if the circular mentioned any dividend payment resumption.

[gopher] 25/6/2020 19:25

From the thread I am reading that NAV has increased through FE gains and income accrued.

I would have like them to included some information on amount of monies been collected as per property companies. i.e. Impossible to give a true market value but as we are collecting x percent of expected revenue so draw your own conclusion.

[chucko1] 24/6/2020 23:18

Although it may look as thought the Ords are to a large extent a play upon the ADs becoming operational (or increasingly so) together with a final resolution to the solar headache, in comparison to the Cs, many of the other assets appear to be riskier on account of potential distancing regulations and exposure to the oil industry.

This suggests investing largely in the Cs. But as stated in my previous message, the Cs are illiquid and risky to have too many of, and so the more liquid Ords get some investment too.

These are still disliked, which is why I rather like them - on top of the more fundamental reasons!

[wilwak] 24/6/2020 22:03

I really see value here. Both with the Ords and the C’s.

It’s great to see that the ‘new’ manager is happy to publish the May NAV’s consistent with the previous month with no evidence over Covid write down concerns.

The C’s are probably safer and steadier but the Ords are for the more adventurous. If the AD plants can be brought online then their NAV valuation and yield could prove very positive over the next couple of years.

I still feel from my workings that 50p share price and a 4p annual dividend could be a fair position in the near term.

I’d rather be buying these at 50% discount to assets that the overhyped general stock market as a whole which is being propped up by central bank stimulus.

I see very little value in the markets at present and am struggling to find anything to buy besides both classes of SQN.

[chucko1] 24/6/2020 18:40

So an uplift of 1.30% on the ords and 1.48% on the Cs. They may not be paying a dividend for the moment, but they appear to be keeping it in their bank for you. Safely, I hope.

But this is how I see it. 25.4% of the portfolio of the Ords (21.5% for the Cs) are USD and for EUR, the numbers are 11.5% and 9.7% respectively. From April 30th to May 29th, the USD rallied by 2.03% against the GBP and the EUR rallied by 3.38%. This would have the effect of adding 0.90% NAV to the Ords and 0.76% for the Cs. So, the accrual from net income would appear to be 0.40% for the Ords and 0.72% for the Cs. This strikes me as being pretty consistent with the rate of accrual in each case given what we know about the composition and update on the respective portfolios. What is more, these accrual rates are for May 2020 which was not the best of times!

So, for the Ords, 0.40% x 12 = 4.80% and so this implies a running rate of about 15% on the current price. For the Cs, the same calculation gives 15.4%. Well, I know which one I would like to be earning 15% on! (both, actually, but the Cs appear really cheap here).

The portfolio relating to the Cs has always seemingly been in good shape, but the significant unlocking that is occurring will further help up to 25% of its assets whose cashflows were being impeded (and stopped in a few cases). But the accrual calculation does appear to support the notion that the portfolio is paying its way well, despite present uncertainty.

On the Ords, where the portfolio is clearly of greater concern (though overdone in the long run), a further NAV uplift such as this will start tongues wagging. It might indicate the cashflows being received were still significant and with a greater understanding of the extent of Covid-19, could lead to a resumption of dividends. This likely puts 8-10p on the current price, or 30%. And even then, a halving of the dividend leads to a 9% yield.

The problem with SQN is that the Ords have had a tough (really tough) last 2 years, but are liquid. The Cs are fine, but the liquidity is pretty poor. Makes it all pretty messy to play around in which helps explain the lack of correlation with the larger market.

I think this is a stock (both of them) that will pay well to really understand. Each and every line item in the portfolio. Both in absolute and relative terms.

Thoughts??

[neilyb675] 24/6/2020 07:51

As at 31 May 2020, the unaudited estimated NAV per Ordinary Share was 69.99 pence.

[wilwak] 22/6/2020 18:28

I bought these at 90p, 19p and today quite a lot more at 34p.

Hoping that the 31st March NAV of 69p that was audited thoroughLy by KPMG and already during the Covid crisis won’t have fallen too much.

Even at 60p NAV the shares look a great buy at 34p.

The new manager will be keen to get a dividend going again even if only 3-4p pa to start.

I think 50p share price with a 6-8% dividend on that would be the target.

The AD assets could prove to be the basis of a NAV uplift going forward once they’re operational.

[caternia] 02/6/2020 08:26

Appreciate the reply. Will hold on for 12 months. I bought as an income share so if no dividends by then I will sell.

[gopher] 01/6/2020 22:25

As indicated by SpectoAcc the continuation vote this month should go through but there is another 12 months down the road.

Definitely hold for now and await news ahead of that vote as there is a better chance of upside than further loss.

[richyggg] 29/5/2020 12:01

Continuation vote in June , I believe.

[caternia] 29/5/2020 11:56

Thanks for the reply. Not one of my better buys. Fooled by a good dividend which was not sustainable. Have a loss of 65% and undecided whether to cash out or hold short term to see if it recovers.

[cc2014] 29/5/2020 11:34

Hi Caternia,

I don't own SQN so may be out of date with my information.

Long story short but SQN spent cash on margin calls on their FX hedge until such point as they decided the hedge was costing too much so they binned it. After that in order to preserve cash they binned the dividend. I don't think there will be a dividend on SQN for some time.


The C's I believe is different.

[caternia] 28/5/2020 21:46

When can I except a monthly dividend, this is an income trust?

[gopher] 28/5/2020 21:24

The discounts on ordinary and C now much more in line but the C have not experienced the write downs to date so a better portfolio quality seems a reasonable assumption.

The board seems to have made the right choice, as detailed knowledge of the portfolio is needed at present. My thoughts are that shareholders could hope for an end to the dividend lock down in which case trustnet's calculated 13% yield (pre-suspension) on the C looks attractive but there must some attrition due to Cofid-19.

[spectoacc] 22/5/2020 07:29

5 years? Average duration over 9 years last I looked ;)

C's where it's at IMO, but I would say that. No AD, no Suniva (included, I believe, in the Ords NAV as if getting recovery).

Has been a good bounce from the ords tho.

[djderry] 22/5/2020 07:15

I detect a pulse,quite happy to give them five years to get to NAV.

[spectoacc] 15/5/2020 08:48

Some twitching.

Edit - now almost sitting up :)

[neilyb675] 12/5/2020 22:45

A return of the dividend will imo rerate these to 45-50p range.

[neilyb675] 12/5/2020 22:44

Moving up nicely and closing gap to NAV.

[gopher] 01/5/2020 11:17

Good points SpectoAcc, I would still like to see payments on leased equipment being distributed to shareholders, it all a little opaque otherwise and the yield would support a higher share price.