Uil Share Discussion Threads

[ceaserxzy] 27/7/2019 11:49

If the insider/management are confident of the valuation, a very easy way for them to increase their ownership of the company (assuming they are already approaching owning more than 75% therefore the need to change the company segment to allow them to do more buybacks), they could pay out the accrued income of almost 20p a share and then buy more shares from the market using this income paid to them, which will increase their shareholdings by almost another 5% assuming the share price don't appreciate significantly from its current price, essentially all paid by the company.

[ceaserxzy] 27/7/2019 11:32

Agree that buy back is not making profit for the company in the sense of company accounting but for an investment trust it enhances NAV significantly when bought at a huge discount and the NAV is more relevant for an investment trust than the reported profit. The change of the company segment obviously helps facilitate the future buy back.

The buy back will have the double effect of increasing NAV on one hand and hopefully narrow the discount meaningfully on the other hand.

The key question is how realizable the NAV is. If it is easily realizable, it makes great sense for the management to take it private through continuous buy back and director buys and then a compulsory offer to the small number of shares held by external shareholders.

[morton2011] 27/7/2019 09:12

Right segment for UIL.

Share buybacks do not make any profit for UIL for @ceasar info. They get cancelled at the price paid in the market. Its the shareholders who can profit as less shares owning the same assets should lift the share price. Challenge here is the assets are difficult to value.

It will only help the share price as well if those holding shares know the company will buy if the discount is over a %. The moment they stop offering to buy the discount will reapply as its all the same assets, the debt will have gone up (or the gearing if they use cash in the bank which reduces the assets) and ICM will own well over 75% of the shares. So why would an investor want to hold the shares once the buyback completes? UIL will be in a poorer governance and value position than it is today from the point of view of a small shareholder.

[russman] 27/7/2019 08:08

It is a positive statement.
The BoD recognise the discount is too large (after all these years).
Small changes in company policy but a start.

[vacendak] 26/7/2019 22:54

About share buybacks:


Note that Tim Bennett makes no mention of investment trusts and the notion of discounts. So yes, buying at a discount sounds like always being a win, as the buyback cannot possibly happen on expensive shares (they are always cheaper than their worth with a 40% discount by definition).

In UIL Ltd case, the caveats mentioned in the video do not really apply, the share options would be self defeating for ICM et al as they own close to 75% of the company anyway.

Back to the subject at hand, the less confusing option would be for Duncan Saville and chums, to take UIL Ltd private and offer to buy our shares. Considering the percentages, they could soon get them from us through compulsory sale (90% of the shares from memory) at fair value (NAV or more).

[topvest] 26/7/2019 17:44

Not sure that moving to the Specialist Fund Market is ideal as it’s not going to improve liquidity. ICM don’t seem to worry unduly about such things though with their various Bermudan listings etc. Buy backs are a good way forward though. Overall, I think that they have a reasonably decent record so I will continue to hold.

[ceaserxzy] 26/7/2019 17:34

It makes perfect sense to buy back your own shares when you can pay 50p to but £1 of your own NAV, which means an instant profit of 100%. Where else can you invest to get such a return. So the company should trim its investments in other listed companies and buy back its own share as most other listed companies are most unlikely to get the company a better return than the buyback, although there are occasional exceptions like apt which returned multifold in the past year.

[vacendak] 26/7/2019 16:41

Drastic decision:


In a way, they accept the reality: Not enough shares moving around, very low level of free float.


To me this "Specialist Fund Segment" means even less liquidity for the shares.


I have held UIL Ltd in one form or another since 1997, so I am sentimentally attached to the company. I know, this is a horrible reason to hold, confirmation bias and all...
Maybe it is time to exit? Then again, this sounds to be a positive move from the 9p jump in response to the RNS.
.

[russman] 26/7/2019 08:31

The valuation of investments would be more conservative if they were unlisted.
Illiquid shares are more open to manipulation.
UTL could be more transparent and a lower discount would be appropriate.

[morton2011] 24/7/2019 18:09

ZETA asx link worth a read. Funny to think that Aussie disclosure rules make things clearer than UK ones.

A lot of shuffling going in with Duncan Savilles affairs.

Same old problem in that Zeta is illiquid as I see it. ICM/Saville own well over 90% of it and UTL lends it all the debt. They have share 'buybacks' which seem to only prop up the price as no one else wants to but in when it is a plaything of ICM. It seems that they want it to be 'trading' so they can include it as a trading entity.
The underlying assets are interesting however and seem well managed, Resolute is one of them.

[vacendak] 24/7/2019 12:12

NAV at 397.66p, a 5.9% jump within a week.
I know gold is pretty hot right now, but Resolute is not everything.
It could also be that Sterling has taken a dive recently.

The huge gap between cum- and ex-income picked up by Morton is now in its fifth NAV update and running.

Although the share price is going up, the discount remains stuck at around 40%. This is despite the momentum in both NAV and share price over the past couple of months. UTL seems to have slightly more trades per day than it used to as well.

[morton2011] 19/7/2019 08:47

Resolute climbing fast (AUS $1 on June 11 AUS $ 1.74 over night), positive as its liquid investment... Mostly down to the gold price rise but LSE listing may be helping.
Missed the party here but have rolled out of some of the ZDP and back into the shares in last week. So expect the share price to reduce fast!

[vacendak] 17/7/2019 22:24

@Morton
Alright, viewed from this angle, I see your point on ICM telling JPMEL what things are worth.

I own a bit of AVG and follow closely their activism. Joe Bauernfreund likes to send letters to attempt to change things and close the big discounts they have on the companies they hold.

I do not see him taking on UIL Ltd though, at more then 60% control direct and indirect for the ICM/usual suspects, he would not be able to influence the board that much.

[morton2011] 17/7/2019 21:20

@v JPMEL simply add up the valuations they can find. When its unlisted they will rely on ICM. KPMG will audit that at least once a year and in all the years UIL have traded there has never been an issue. Simply pointing out how it works.

Your PSH link was interesting. I liked this bit:

" A near 30% discount is usually only found on investment companies where the assets are distressed or highly illiquid, where there is some doubt as to the credibility of the valuation, or where the company’s structure or constitution gives rise to a mis-alignment of incentives and conflicts of interest. "

I don't see any distress in any significant parts of UIL assets but the other factors apply in explaining the discount along with the gearing.

[vacendak] 17/7/2019 19:21

After reading the latest RNS on the change of registered office, I tried to check if UIL Ltd owns Conyers.



They do not, the only link is that Conyers already works for Somers:

From the latest Somers Annual Report, page 80:

"LEGAL ADVISER TO THE COMPANY
(as to English law)
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
United Kingdom

LEGAL ADVISER TO THE COMPANY
(as to Bermuda law)
Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda"

Nothing wrong with that, UIL Ltd does have a significant footprint in Bermuda (15.4% as of the latest factsheet).

[vacendak] 17/7/2019 15:09

Something about big discounts and big gearing:


Note that AVI Global (ex- British Empire) only owns 3% of PSH, but they make a lot of noise.

UIL Ltd may have an even bigger discount than PSH, likely also due to the gearing (65.8% at the last update) but the gearing is down from well over 100% geared not so long ago (152.9% in January 2016).

Gearing YTD:

June: 65.8%
May 68.9%
April 69.8%
March 69.1%
February 73.0%
January 74.8%
December (2018) 77.5%
November 83.0%
October 78.0%
September 75.2%
August 80.4%
July 80.7%
June 87.1%

[vacendak] 15/7/2019 22:51

Nope, I was pretty sure that the NAV estimate was not in house by ICM. One of the few things that are really above board and not handled incesteously through a financial company held in Somers.

Page 38 of the latest AR (up to June 2018, we should have one soon for 2019):

"The Company has also appointed JPMEL as its depositary services provider, with effect from 13 April 2015. JPMEL’s responsibilities, which are set out in the IDD on the Company’s website at www.uil.limited, include general oversight
over the issue and cancellation of the Company’s shares, the calculation of the NAV, cash monitoring and asset verification and record keeping. JPMEL receives a fee of 2.2bps on UIL’s NAV for its services, subject to a minimum fee
of £25,000 per annum, payable monthly in arrears."

JPMEL stands for "J.P. Morgan Europe Limited"

From memory, it used to be F&C Management doing the weekly NAV estimate, but they switched to JPMEL when BMO switched the F&C Management name to BMO Management. To be fair they had owned F&C fully for quite a while. It could have been just a coincidence by the way.

[morton2011] 15/7/2019 22:30

@V
See post 928 for who values their investments , its from the May factsheet and written by Charles Jillings and quoting it again
'NAV was increased by 16.3% to reflect our
expectations at the month end that a bid for
Ascendant was likely, although this did not
capture the full value of the proposed bid'

So its UIL doing the valuations..KPMG are independent but they only come along once a year which is now as its year end. Doubt they will find anything wrong as they have been the auditors for years and there is nothing new here, its how ICM always do it.

BFIC was 6.4% in May
They split out the minor part of BFIC (one communications) and value it at 4.2% of UIL NAV in June
Ascendant was the other holding in BFIC when I last looked. BFIC now 4.4% of UIL NAV as of June which is presumably the Ascendant investment.
So effectively BFIC now worth 8.6% of UIL, up from 4.8% in January.

I did try a vegan sausage the other day but it was not as tasty so still follow UIL.

[vacendak] 15/7/2019 10:20

If one likes sausages, they should not ask how they are made. :)

The NAV is shooting up, the share price has jumped up accordingly and they do pay an independent third party to estimate their NAV... and it is not Grant Thornton.

[russman] 13/7/2019 06:46

Not very transparent that is why there is a large discount.

[vacendak] 12/7/2019 09:25

Trying to find info about what they would do with the proceeds of the Ascendant sale is not easy.

I thought Bermuda First Invstment Company (BFIC) had a website.
It did in the past:


but this URL no longer works:
www.bfic.bm

BFIC delisted in 2017, I vaguely remember reading about this in a UIL Ltd annual report. BFIC is indeed reported as unlisted in the latest AR, but with its components being listed on the BSX. So they do not seem to have to report much indeed.

[morton2011] 12/7/2019 08:38

@v
I would have thought if you sell something then that becomes cash which is an asset not income. Its the 'revenue' vs 'capital' account as detailed in their accounts. Income is from dividends or some special distribution paid to a shareholder. BFIC could account for some of it somehow as they did mention the Ascendant sale in last factsheet which is a part of the NAV rise and to be fair to ICM another good investment they have made.

UIL and ICM along with all the Malaysian and Bermudan registrations seems structured primarily for tax reasons for Duncan Saville. Something is clearly going on but being Bermuda based the transparency rules weaker so as you say we all get to learn after the event. It would all suggest a special dividend and then the share price in theory will reduce. All the income nice for ICM as a fat 'performance' fee will be due on it soon (15% of gain 'capped at 2.5% of equity funds'). Also on skimming the last accounts realised the year end was June 2019 so very convenient timing to have this all happen at year end, performance fee works year end.

It could all get a mention in the next factsheet due next week as those do refer to after month end events as Ascendant got mentioned last month:

"Ascendant, the largest holding in BFIC,
confirmed shortly after the month end
that it had received a bid from Algonquin
Power for USD 36.00 per share. BFIC’s
NAV was increased by 16.3% to reflect our
expectations at the month end that a bid for
Ascendant was likely, although this did not
capture the full value of the proposed bid."

[vacendak] 11/7/2019 20:39

@Morton
I have been looking at my Excel graphs lately and now I get what you mean by the gap widening sharply between cum- and ex-income for the NAV.
Have they sold something big and sitting on a lot of cash or something?
Special dividend coming?

It happened late June, so we may have to wait until mid to late August to get the corresponding factsheet.

I have had a quick look on the ICM website, but no specific announcement about UIL Ltd of late.

[vacendak] 10/7/2019 12:53

NAV still climbing: 377.39p.
Another 1.6% from last week.

UEM (15.9%, second entry of the portfolio) has been doing well too, with around 8% gain in NAV on a month to date basis, the UEM share price has appreciated by roughly 7% overt the same period.

Resolute has also performed well over a month, close to 40% up by eyeballing the graphs, likely leveraged by the current momentum for gold. I have checked the ASX listing, as there is not enough data points on the LSE listing yet.

And these two things are pretty liquid, so no risk of a Neil Woodford here. :)

@Morton
Thanks for the update on the state of the stake in AfterPay. The name is still not well known, unlike PayPal, so it may indeed be a good idea to sell on the way up if the exclusivity of the product on offer becomes less exclusive.