LONDON (Alliance News) - Terra Capital PLC Wednesday said its net assets increased by 8.5% to USD66.6 million in 2013, translating into a 9.1% rise in net asset value per share due to share buybacks being made on the increase in net assets.
In a statement, Terra Capital said NAV per share increased to 96 cents a share from 88 cents over the course of 2013. According to investment manager Terra Partners Asset Management Ltd, the fund's NAV performance for the first four months of 2014 has been strong, registering gains every month, while generating a net 6.71% increase year-to-date.
Chairman Dirk van den Broeck said the performance was encouraging, noting that it was achieved while the investment manager was still in the process of investing a cash portfolio. With 2013 being Terra Capital's first full year of operation, the company's portfolio was only 20% invested on January 31, 2013. By the end of 2013, that figure had increased to 61.5%, meaning the rise in NAV per share was achieved on an average investment level of under 40%.
"The investment manager's policy of seeking out undervalued stocks, and its undertaking through due diligence and often visiting the proposed investments prior to investing does take time, but it has been rewarded with a portfolio of well-performing positions," the chairman said in a statement.
"Due to the liquidity, or lack thereof, in the local stock markets and the stock itself, it often takes time to achieve the targeted allocation in the undervalued and out-of-favour stocks targeted by the investment manager, but the judicious approach has been effective," Van den Broeck added. "This slow, yet steady, investing process has resulted in the portfolio acquiring two positions where a majority shareholder made a buyout offer, Egis Pharmaceutical in Hungary and Ciment Francais in early 2014. A third buyout was recently offered in 2014 for Tour Eiffel," he said.
However, the company's share price has lagged its NAV growth, with the discount at which the shares trade to NAV per share widening to 14.25% from 8.52% over the course of 2013. Terra Capital has made dividend payments a focus area as it attempts to drive up interest in the company, advising that it will pay a 3.35 cents dividend for fiscal 2013.
"For the coming year we have our discount control program in place and have experienced substantial interest in our company as our performance attracts attention from both the institutional investment community and those seeking income due to our dividend policy," the Chairman added.
In its report, Terra Partners Asset Management, which went into 2013 still working on opening accounts in emerging and frontier markets, said Europe remained its largest regional allocation throughout the year, at 23.54% of the fund, or 38.26% excluding cash, but noted that 'Europe' is a broad definition.
"There is a big difference between a country's physical location and where it is economically. Its geographic grouping may not accurately reflect economic reality on the ground. Croatia, Hungary, Serbia and Poland are all in Europe but each has a very different credit and fiscal rating. The fund owns one stock listed on the Hungarian stock exchange and that is a Hungarian company," the investment manager said.
"On the other hand, the only stock on the Polish exchange the fund owns is a Ukrainian firm with its seat and business activities in Ukraine, a Frontier Market. Many other European noted stocks are considered either Emerging or Frontier countries for investing purposes. Of this 23.5% European exposure, 9.6% was invested in such diverse and non-mainstream European countries as Serbia, Croatia, Ukraine, Montenegro and Belarus," Terra Partners Asset Management added.
Exposure to Asia also increased from one lone stock in Bangladesh to a portfolio of 12 positions, representing 16.8% of the fund, or 27.30% excluding cash, mainly through the acquisition of Korean preferred shares, investments in Vietnam, a Georgian bank and a Chinese company listed in Hong Kong.
In addition, the fund's allocation to the Middle East rose to 10.2%, or 16.6% excluding cash, on new positions in companies based in Qatar, Lebanon and Bahrain. The allocation to Africa rose to 6.06%, as the fund bought additional shares in Housing Finance Kenya and Burkina Faso's Onatel, while the allocation to the Americas increased to almost 5% on the purchase of Argentine real estate investment trust IRSA and the acquisition of shares in the National Commercial Bank of Jamaica.
Terra Capital shares were traded Wednesday. They were last quoted at USD0.83.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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