Volta Finance Share Discussion Threads

[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 07:02

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 06:32

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 21:57

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 14:08

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

Any views?

[hpcg] 13/10/2020 11:27

Yieldsearch - well yes, you named some. Non-retail property debt, funds of CLOs, home mortgages, funds of consumer debt even. The fiscal response is materially beneficial to any lender, and low interest rates also as they increase the pool of new money to support prices and businesses. I am also in RECI and haven't owned UEX as I did not get timing right.

Mallinkrodt bankruptcy over the weekend pushed leverage loan default rate up to just over 4% from just below, and expectations now are for that to top out at 6.6%.



VTA is 47% CLO equity, which gets impaired much before CLO debt. If we model that half the CLO equity ended up being worth nothing, and 10% of the debt*, then that would make a 35% loss of capital. Income would fall by lets say 50% as the equity will be the lions share. That would mean for a VTA holder a dividend of half as much (5% at purchase), still twice covered. The share price would of course drop in those circumstances, indeed the discount would likely widen, but that is immaterial to the long term return of the circumstances I outlined.

As it is the NAV of our underlying already to an extent discounts anticipated losses. My understanding is that there is effectively no bid for impaired instruments that fall below 80% until investors in distress get interested at 60% so there are potentially step function changes, but otherwise the NAV of the collateralised unit incorporates loss expectations. Actually what the month to month NAV changes show is that overall loss expectations are actually retreating.

*From what I can see in the asset list our CLO debt is quite a long way down the stack too, so perhaps 10% is optimistic if equity took such a big haircut. It is step functions all the way down.

[yieldsearch] 13/10/2020 08:40

hpcg: re pools of debts could you elaborate? I am in ukml and reci. sold uex i think fully priced. bought vta at 3.93 recently

[hpcg] 13/10/2020 08:11

Skyship - I think there are pools of debt that are materially underpriced. We can see this exhibited in several investment trusts listed in London. I have seen some fund manager commentary saying the same. It is fear of the unknown, and I think flows to big tech equity that are providing this opportunity. The good thing about it from our point of view is that we are paid handsomely to wait. Indeed we are paid handsomely even if the market is correct about NAV.

[skyship] 13/10/2020 06:58

So at E4.13 the discount is now 32%! Allied to the 10.65% yield, surely some institution or other will recognise the value here and buy a few.

Not holding my breath; but certainly holding my stock.

[yieldsearch] 12/10/2020 20:29

Sept. monthly perf: +4.8%

[hpcg] 07/10/2020 15:27

The discount certainly covers a multitude of bad outcomes. Worse than any seen in the CLO space after the GFC.

[skyship] 07/10/2020 15:09

hpcg - XD now. I've made a small top-up today @ 413c (377p), available due to that 30k sale at 400c.

At that price the discount is 28.8% and the yield a remarkable 10.65%

The only problem is the immediate markdown in the portfolio due to the wide spread; but that's a bit of a short-term irrelevance.

[hpcg] 30/9/2020 16:09

I bought some this afternoon and will look to add more in October assuming the price comes down by the dividend. My hypothesis is that the dividend will increase for the next quarter's payment. I was tempted to get the Dutch shares where the spread is more transparent but they have seemingly dozens of initiatives around withholding taxes at the moment.

[cerrito] 30/9/2020 15:31

Interested in his comment that if VTA had a mark to modal at the moment their NAV would be 10/15pc higher.

[rambutan2] 22/9/2020 01:44

SKY, likewise I don't hold many as wary of the economic outlook, the leverage and the mkts distrust of CLO vehicles. Would be happy to add if became really oversold though ie was able to pick up a few FAIR in march when it looked too cheap and now up over 50% with chunky div.

[skyship] 21/9/2020 07:56

RAM - I remain very much on the fence with this one. In spite of the 25% discount and fantastic 10% yield I still hold only a 3.8% allocation.

I'll seek to add on a dull day......but with the Market down 2.5%, VTA, as ever, unchanged!

[rambutan2] 20/9/2020 19:15

But remember, BGLF nav is mark to model, not mark to mkt, so deserves a bigger discount. imho

[stemis] 20/9/2020 11:28

Interesting that it highlights BGLF on a larger discount to NAV and yet the BGLF board on Advfn has only 4 posts on the last 6 years...

[rambutan2] 15/9/2020 20:19

Update from Hardman: