Volta Finance Share Discussion Threads

[skyship] 13/11/2020 13:14

After reading that I certainly look forward to Liberum's next update on VTA!

"We believe the current market offers compelling long-term value for CLO investors with the expertise and flexibility to invest across credit opportunities. We also note the recent strength of the loan market which bodes well for near term NAV growth. The price reaction of CLO tranches is closely correlated with the movement in loan market prices with typical betas of between 2 and 3."

[davebowler] 13/11/2020 13:11

Liberum on FAIR_
Fair Oaks Income Fund

Strong cash receipts from October quarterly payments

Mkt Cap £188m | Prem/(disc) -7.7% | Div yield 16.6%

Event

Fair Oaks Income Fund's NAV per share at 31 October 2020 was $0.572, representing a 4.7% uplift in the month. The company's NAV total return since 31 March is now +61.6%. NAV performance in October was driven by strong cash distributions and revaluation uplifts on three positions (supported by BWIC auction prices).

Loan markets were broadly positive in October, with returns of +0.2% +0.3% for the US and European loan indices. Pfizer's vaccine announcement earlier this week has resulted in further gains for loan markets in November, particularly for Covid-affected sectors. 12-month trailing loan market default rates have fallen marginally in the US to 4.1% (September: 4.2%). Distressed ratios (loans trading below 80% of par) have also shown incremental improvement in Europe and the US.


All of Master Fund II's CLO equity investments made their scheduled distributions in October. On a like-for-like basis, CLO equity distributions were 9.1% ahead of the prior year ($12.9m vs $11.8m). The improvement in cash flows over the year is a result of an increase in the average spread on the underlying loan portfolio and the benefit of Libor floors (35-45% of US loan portfolios in Master Fund II have Libor floors of 0.25% or higher). The distributions were significantly higher than July 2020 (+83%). Distributions in July were reduced by the timing of the 3-month Libor resetting of CLO liabilities in April just prior to the significant drop in Libor, as well as a flattening in the Libor curve (many issuers had switched to 1m Libor to take advantage of the steep curve).

Liberum view

Cash flow receipts for the October quarterly payments should provide reassurance on the sustainability of the quarterly dividend (recently increased to 2.2 cents). We also note the improvement in the overcollateralisation test cushion across the US CLO equity investments from 2.8% to 3.0% in the month. Overcollateralisation tests compare the par value of the CLO portfolio (adjusted for defaults and imminent defaults) with the par value of the CLO liabilities. A breach of the test results in diversion of payments away from the CLO equity holders. The Master Funds have received distributions on all of the CLO equity and debt positions on the quarterly payment dates in 2020. The portfolio also has a meaningful level of exposure to CLO debt tranches (31% of portfolio), increasing the predictability of cash flows.

The shares trade on a 7.7% discount to the October NAV. We believe the current market offers compelling long-term value for CLO investors with the expertise and flexibility to invest across credit opportunities. We also note the recent strength of the loan market which bodes well for near term NAV growth. The price reaction of CLO tranches is closely correlated with the movement in loan market prices with typical betas of between 2 and 3.

[cwa1] 11/11/2020 13:48

Many thanks for that wolstencroft, much appreciated. Wish I had known that earlier!

[wolstencroft] 11/11/2020 13:35

by way of example:
Direction Buy
Trade Date 11 Nov 2020 13:34:01
Settlement Date 13 Nov 2020
Order Type Limit
Consideration GBP1504.21 (EUR1684)
Commission GBP0 (EUR0)
Converted At 1 EUR = 0.893238054607935 GBP
Total Cost / Proceeds GBP1504.21
Market Volta Finance Ltd (NL)
Size Buy 400 Shares

[wolstencroft] 11/11/2020 13:21

You can buy VTA on IG share dealing or ii on the Netherlands Exchange - put your own bid in and it will often be filled in the middle of the bid/offer spread. Charges are about 0.5% for EUR GBP conversion on IG and much wider on ii.

The UK quote is wide and illiquid and not tradeable at all IMHO.

[skyship] 11/11/2020 11:36

CWA1 - I didn't get the message with VTA. Perhaps because I'm already a holder.

[cwa1] 11/11/2020 11:04

Hope you don't mind me asking, but how did you get past that message to get dummy quotes? I can't seem to get past it!

[skyship] 11/11/2020 10:12

Yes, really annoying to see that false message. Got the same with JPEL on Monday - still not fixed.

[cwa1] 11/11/2020 09:58

Bitten the bullet and took a few at ii with the buying price of 4.25 as the spread has started to narrow just a little bit(still nausea inducing tho!)

As a matter of interest I tried thro' Youinvest(in my SIPP account) but just got this message: This security is restricted from dealing in spite of ticking the confirm you have read the KID, etc box :-(

[skyship] 11/11/2020 08:58

Dummy quotes with YouInvest:

# GBP: 3.65 - 3.90

# EUR: 4.10 - 4.39

So, finally starting to move better...

[cwa1] 11/11/2020 08:19

BUY at 4.2585 SELL at 3.96 on ii first thing this morning(actual quote). Anyone getting much better offers from their broker? Cheers

[cerrito] 10/11/2020 18:45

Good monthly report and was good to see that the cash collections at E8.1m were higher than those of E7.8m in April. not sure how much of this increase from April to October was due to fact that in the interim percentage of portfolio in CLO equity went up from 45% to 48%.

[cwa1] 10/11/2020 11:28

I'm afraid the best I've been actually offered is 4.25(approx) this morning :-(

[skyship] 10/11/2020 11:23

CWA1 - yes to that visible quote; but when I topped up this morning the actual offer was 4.12 for a 32.2% discount & a 10.7% yield...

[stemis] 10/11/2020 11:22

EQI quoting 385/350. Really not interested in losing 9% straight off...

[cwa1] 10/11/2020 10:59

Not sure what venue. Was ii the broker. IIRC something like 3.95-4.25 at the time of asking.

[yieldsearch] 10/11/2020 10:41

CWA1 is that on euronext? current market is 4.18 /4.27 3 x 12 ??

[cwa1] 10/11/2020 10:16

Interesting, thanks. You can sense the frustration there.

I could easily be tempted but on a dummy trade I returned an eye watering spread of over 7% using ii. Gulp. Anyone's broker quoting much inside that?

[skyship] 10/11/2020 09:49

Well worth ploughing through the VTA annual Report.

I love this avowedly positive opening piece by the Investment Manager:


KEY MESSAGES FROM THE INVESTMENT MANAGER:

The NAV performance of Volta over the last financial year as a result has been far weaker than the current and expected performance of the underlying investments would justify. There is now a significant gap between the level of defaults being priced into the structured debt market and those being experienced and projected to occur. That suggests a structural inefficiency that can be exploited by experienced investors who are able to keep their heads when those less familiar with the asset class are acting irrationally. In our report we seek to explain why we believe the medium to long term outlook for Volta is positive and to identify where we believe those opportunities lie.

At the time of writing, the COVID-19 crisis continues to have an impact on Volta’s current and projected cash flows. However we believe that the current NAV and the wide discount at which Volta shares are trading are both underestimating the long-term value of Volta’s positions as well as the attractive reinvestment opportunities.

Given that the current very low, even negative yield environment may prevail for some years to come, our view is that the type of assets held by Volta might see increased demand, potentially leading to stronger prices in the medium term.

[skyship] 30/10/2020 13:45

28th Oct'20 - big trade of 98535 @ 410.7c may have taken out the seller and prepared this for a recovery.

At 415c the discount is 31.74% and the Yield = 10.6%

[cerrito] 24/10/2020 08:02

Thanks hpcg for that good link you gave us in your 414.
Just caught up with the September report and I was struck by the upbeat tone in the Manager's commentary and that full cash payments to the CLO equity positions is expected to remain the norm. This has yet to be reflected in the share price.
Will read the October report with interest to see if October cash collection has in fact been as good as expected.

[skyship] 23/10/2020 07:32

See below the Hardman report posted by RAM on 15th September. Seems to me that the best DCM is just to keep raising the dividend. The Market won't ignore the yield forever!

Dividend:

In early April, Volta cancelled the dividend payment due on 28 April until there was more visibility on likely cash receipts. On 11 May, a reduced dividend was declared (€0.1 vs. €0.155), to be paid in June. On 30 June, a dividend of €0.11, to be paid at end-July, was also declared. Looking forward, the intention is to pay a dividend equivalent to 8% of NAV, which, with the group at a 25% discount, implies a 2021E dividend yield to shareholders of 12.1%.

If sentiment does improve, investors will benefit not only from the capital
appreciation in the NAV, but also from a reduced discount to NAV, and also a higher
dividend.

The value investors will give to the dividend will also reflect its cover. In the six months to July, Volta received €17.7m of coupons/interest from its investments.
The annualised equivalent is a 17% annualised yield on the end-July NAV. This cash
receipt is after €1m of technical effects, which are known to reverse in October, and €1m of effects, which will reverse at some stage, when interest rates normalise.

Adjusting just for the former implies €37.4m of annualised cash receipts, which takes the yield up to 18%. While we cannot be certain of future cashflows (see Risks section below), it does suggest 2x or more coverage of the currently planned
dividend level of 8% NAV.

[yieldsearch] 22/10/2020 22:57

I think Fair recently gave more support/visibility to their dividend? But yes shouldn't explain the large difference in discount, but could explain recent trend

It seems that some stocks are permanently at a discount or other at premium. I guess due to structural lack of demand. If i remember well, volta did a listing in UK to reduce that discount. Then you have some others example where the trust was providing poor yield, not achieving it, but still trading at a premium until recently (eg MGCI).

Dont really see a catalyst to have discount reduction, but would be glad to be wrong

[skyship] 22/10/2020 15:08

I see FAIR trading higher, yet VTA still marooned in the depths on a 35% NAV discount.

Any views?