Volta Finance Share Discussion Threads

[davebowler] 28/9/2023 09:19

Liberum on FAIR -

Analyst: Joachim Klement

Mkt Cap £176m | Share price $0.53 | Prem/(disc) -9.2% | Div yield 15.2%

Event Half-year report confirms quality of investment portfolio

Fair Oaks Income released its interim report for the six months ended 30 June 2023. For the reporting period, the NAV total return was 9.0% compared to -5.3% in the same period 2022. The NAV total return for the realisation shares was 9.7% (vs. -5.0% in the same period 2022). The increase in Nav has continued in the months since June. The August NAV was $0.581 for the 2021 shares for an additional 3% appreciation in NAV in the last two months.

Over the period, the Master Fund received total distributions of $33.2m (H1 22: $45.0m). Distributions in January were negatively impacted by large movements in Libor and Euribor which affected the CLO assets and liabilities differently due to timing issues. Distributions recovered in April. The focus on originating and controlling CLO subordinated notes has resulted in fundamental performance above the market average. Origination and control allowed the Master Funds to veto specific loans when the transactions were launched and to monitor and influence the CLOs over time. Lower fees in primary investments also allowed CLO managers to construct more conservative portfolios with no need to reach for yield. As a result, the Master Funds have benefitted from underexposure to sectors such as retail or energy.


Liberum view

In our in-depth note in August (Fair Oaks Income (BUY, TP $0.7) - Attractive CLO equity return outlook (43 pgs)) we emphasised the opportunity in CLO markets at the moment. As FAIR is marking its CLOs to market rather than mark-to-model, the downside is already reflected in the price and the ongoing recovery in loan markets leads to a significant pull on NAV higher. Add tot hat the sector-leading dividend yield of 15.4% and we recommend BUYing the fund with a TP of $0.66.

[bluemango] 20/9/2023 07:56

Q3 dividend maintained at €0.13, payment 12th Oct.

[davebowler] 16/8/2023 08:57

Liberum commentary on FAIR -
Strong distribution momentum from second highest yielding AIC fund at NAV
Analyst: Shonil Chande

Mkt Cap £170m | Share price $0.53 | Prem/(disc) -11.4% | Div yield 15.0%

Event

Fair Oaks Income’s NAV per share increased by 2.5%, to $0.598, in July 2023. This represented a 2.5% increase in the month (+11.8% YTD). Quarterly distributions received by the Master Fund in July totalled $21.1m, reflecting a 21.6% annualised yield on NAV and a 24.4% yield on yesterday’s closing price. Distributions have been increasing over recent months, with the portfolio benefitting from an increasing arbitrage spread of the underlying loan pool over the cost of CLO financing.

Based on July 2023 distributions, we calculate that the CLO equity portfolio was valued at a 4.0x multiple to cash flows, with the USD CLO equity portfolio valued at 2.9x and the EUR CLO equity valued at 4.9x.





Default rates in the US increased by 0.4ppts to 1.75% and by 0.53ppts to 1.51% in Europe. The European increase was due to Casino defaulting on a €1.4bn of senior debt.

The forward-looking distressed rate declined from 8.47% to 7.55% in the US and increased from 4.13% to 4.17% in Europe. This measures the proportion of loans trading below 80c, and a decline is a forward-looking indicator that suggests improving sentiment towards leveraged loans. FAIR’s July factsheet notes the potential impact on European and US leveraged loan indices from issues at Altice Group.

Significant overcollateralisation headroom

The overcollateralisation tests continue to leave significant headroom before a breach would kick in and divert cash flows away from CLO Equity tranches. As an approximation and assuming a 70% recovery rate in the event of default, we estimate that a c.13% cumulative default rate would be required before the 4.0% overcollateralisation threshold was breached. This is an indicative calculation based on the most recent weighted-average overcollateralisation cushion of 4% divided by the 30% loss from each default.

FAIR’s ‘GFC scenario’ models a gross return of 6% based on NAV and 11% based on the share price, as at 31 July 2023.

FAIR’s CLO equity assets have consistently demonstrated stronger credit performance than the broader CLO market, which in turn has significantly outperformed other corporate debt categories on returns and default rates. There is additional de-risking via a shareholder-friendly structure.

Liberum view

Distribution momentum is strong and leveraged loan indices have performed well over the past several weeks. Given that the US CLO equity portfolio’s mark-to-market valuation stands at a median 34%, de-risking is built into the valuation and there is potential for valuations to improve.



FAIR’s shares have been amongst the best performers over the past year with the 27% share price TR ranking third amongst alternative funds (ex-3i). We believe the shares continue to present attractive value given the underlying strong distributions, and the potential for higher US CLO equity valuations.



FAIR’s share repurchase programme, in place since last October, has driven a significant reduction in its bid-ask spread in absolute terms and relative to peers. We believe it is attractively positioned compared to most peers and that the relative discount is not justified, in most cases.

[cwa1] 20/7/2023 07:24

XD today, pay day 3/8

[cerrito] 05/7/2023 09:30

The FT report that fund manager CVC setting up new US800m fund which as per my reading of the article will be solely invested in the equity tranche of CLO's.
The funds will be deployed in the primary rather than secondary markets and will be used to fund CVC managed CLO 's.

[cerrito] 13/6/2023 17:40

Given the May turbulence, a creditable performance in May with the NAV getting to an 11 month high.
In the management report they refer to a positive YTD performance of 11pc whereas the share price YTD is down 0.42pc.
The current share price of e4. 76/e5.2 shows a good discount to the end May NAV of e6. 34.
I see today and yesterday in London just 2600 shares combined in sterling and euro for traded it for presumably more in Amsterdam.

[davebowler] 17/5/2023 09:05

Liberum on FAIR-

Default rates remain below expectations
Analyst: Shonil Chande

Mkt Cap £156m | Share price $0.48 | Prem/(disc) -17.9% | Div yield 16.7%

Event

Fair Oaks Income's NAV per share at 30 April 2023 was $0.5847, representing a total return of 1.1% in the month (+5.7% YTD). Default rates continue to be significantly lower than the forecasts for 2023 issued at the end of 2022. The default rate in the US remained stable at 1.3% while in Europe it rose from 0.4% to 0.6% in April. The distressed ratio in the US remained at 8.7% and in Europe it dropped from 6.4% to 6.1%. CLO valuations continue to lag other assets, potentially as a result of investors modelling unduly negative market scenarios.



Liberum view

The resilience in default rates is notable and challenges the assumptions made in company models to calculate the NAV. The company points out that in early 2020, the median price of the Master Fund's US CLO equity investments fell from 67 cents to 30 cents based on predictions of increasing loan defaults due to the pandemic. However, the median price recovered to 63 cents by spring 2021 when it became clear that default rates would not increase as expected. Today, the median price of the same investments is 32 cents, indicating once again a substantial recovery potential in the NAV if default rates continue to remain below projections.

We continue to be Buyers of the fund with a target price of $0.60 (+25% upside from current share price)

[cerrito] 12/5/2023 16:34

I wonder if the good result6s for April just announced will reverse the weakening in the share price we have seen in last week or so.
The use of the word may in the following quote seemed rather vague and made me uncomfortable.
Did it make you folks uncomfortable??
quote
We still consider that the most likely scenario for 2023 is to close the year with higher but manageable default rates: from current 0.6% in Europe and 1.3% in the US at the end of April toward something in the 1/1.5% context for European loans and 2/2.5% for US loans. The levels, even modestly higher levels, may not cause any issue for CLO Equity quarterly payments (no interruption/diversion of payments in 2023 and most probably in 2024 as well).
unquote

[cerrito] 17/4/2023 10:15

Just read the Chairman 's and Investment Manager' s statements in the interims and I hope their optimism is justified. A good point about the double discount, but that said I will not be buying more.
Part a reflection as they pointed out in their last two monthly newsletters they expect CLO prices to drift down in the immediate future. We are in stormy seas and I have no real feel as to the Managers and what makes them tick as their IR strategy is not orientated towards UK private investors like me. I was interested to read the following comment on simplification which is something I had forgotten about and I suspect they are right that shareholders have not grasped the new situation, which perhaps  says something about their  IR. 

Quote
Considering all that, the Company continues to pivot towards pure CLO investments benefiting from the high cash flows associated with a larger CLO equity bucket. We view this strategy as offering transparency and simplicity to our shareholders relative to an allocation mixing different and sometimes less transparent asset classes.  We are not certain yet if our shareholders have grasped the new level of simplicity although Volta shares outperformed the NAV performance by 1.6% exhibiting some discount compression.
 unquote

[hpcg] 20/3/2023 11:52

Cerrito - I did sell. Easy for me though, had just dipped my toe in so a small loss with some to come back from the dividend.

[cerrito] 17/3/2023 10:29

You can sign up for free and get a daily email

[bluemango] 17/3/2023 09:23

Cerrito, could you possibly post the main point of his argument please, if you had a moment? Appears to be subscription only.

[cerrito] 17/3/2023 08:07

As a holder of both VTA and Fair, I read this morning's John Authers Points of Return with much interest. I suggest all VTA and Fair holders read it.
I am not quite sure what the implifications for both will be but I am having difficulty finding anything positive.
Logically I should sell but am put off by the wide bid/offer spread.
Be interesting to see what we are told in the April monthly report when things will be a bit clearer.

[yieldsearch] 15/3/2023 13:51

Volta Finance (listed in Amsterdam) not allowed anymore with interactive investors as it is classified as "a packaged retail and insurance-based investment product" and they are only allowing trade in the UK listed version (less liquid and bigger bid ask)
told them to read the kid because it is not really insurance based product.

any reco of sipp provider providing multi currency account?

[bluemango] 15/3/2023 09:17

Annual yield now 9.45% at current offer price.

[bluemango] 15/3/2023 08:03

Excellent. Dividend increase to .13 Eur

[cwa1] 15/3/2023 07:01

Guernsey, 15 March 2023

Volta Finance Limited ("the Company") hereby announces a first interim dividend for the financial year commencing 1 August 2022.

The Company announces that it has declared a quarterly interim dividend of EUR0.13 per share payable on 27 April 2023 amounting to approximately EUR4.76 million, equating approximately to an annualised 8% of net asset value. The ex-dividend date is 23 March 2023 with a record date of 24 March 2023.

[cerrito] 14/3/2023 15:10

Yes all good and liked their commentary

[cwa1] 14/3/2023 11:33

PERFORMANCE and PORTFOLIO ACTIVITY

Volta Finance is pleased to report another positive performance in February at +1.7% after a strong January performance of +5.5% and thus a good start for 2023...

[skyship] 14/2/2023 08:34

As at the end of January 2023, Volta's NAV was EUR225.2m or EUR6.16 per share.

[cerrito] 13/2/2023 11:30

Yes good news and good way to start the week

[cwa1] 13/2/2023 10:32

PERFORMANCE and PORTFOLIO ACTIVITY

Volta Finance is pleased report a strong performance of +5.5%, for the first month of 2023.

Although the CLO market is accustomed to a "January rally" the moves recorded in January 2023 were well above what might have been expected. Indeed, many investors were hesitant to invest in either CLO Debt or Equity tranches towards the end of 2022 but with the start of a new calendar year, the risk/reward perception shifted and translated into significant buying interest across the board. The demand for assets that were considered as cheap at the start of 2023 (CLO spread compression was lagging the spread compression observed on most of the broader credit markets in Q4 2022) was strong and led the way to a solid January performance, after a disappointing December...