Member Info for CaneToad

Yes, FOR ME both the divi and potential capital gain are attractive on a modest position within a well-diviersified portfolio. I'm just highlighting what Mr Market is thinking...

FYI: I can only see the selloff getting worse; with NS&I now offering 6.2% for a 1y bond, equity funds offering less than that are toast and even funds paying 8-10% become less attractive. Why take a risk to your capital just for another couple of percent, which an equity can lose in a single day!

@Punter: "Selling off properties?! No wonder Blackrock have started to bail."

We're seeing people bailing on all equities; for open-ended funds, especially UK ones, this means that the individual holdings also need to be sold down. I think the sale should give some confidence in the NAV if nothing else. On the other hand, it's clearly going to reduce their income and make the divi coverage worse. If the NAV gap doesn't close, I'd be in favour of winding up the fund by gradually liquidating everything.

@Trotsky: I broadly agree with you, but it depends on how Valuers adjust prices in response to higher interest rates (keep an eye on the UK 10y, which has exploded since May). I don't think it's in the realm of science fiction that prices have dropped (been dropped by Valuers) by say 5% or 7.5% over that time. If/when that drop occurs, it is out of the hands of RGL - they will need to reduce LTV and it will likely be by selling properties, but it could be through a capital raise.

That is my main fear and I maintain an underweight position until it becomes clearer.

IMHO, this reit has excellent diversification, yadda, yadda yadda, but the climbing LTV is certainly a problem. At least, there is a market perception that it is a problem...

I suspect the cut (if any) would correspond to a reduction of earnings, so there would be no reit rule problems... it would correspond to having a smaller portfolio, after being forced to sell due to loan covenants, which are just 15% away. 15% sounds like a 'big' drop, but it's not; it's small compared to the drops already and I suspect they would have to consider selling well before the drop approached 15%. We can argue all day about whether or not the valuers are doing the job properly and whether or not the valuations reflect reality but it's irrelevant, because those are the people the banks will listen to...

I tried to get some info on the nature of the asset backing via IR, but they did not respond... I don't mind getting a polite response that it's not available, but am not happy with no response at all and will not be extending my investment as a result - and they wonder why PIs are not investing here!

I don't think it's in a 'death spiral', but the narrative that it's 'safe', because of income rising with inflation yadda yadda yadda is very misleading. The divi growth puts me to sleep.

It's failed to attract me in the past, but with the yield now approaching 7% it starts to look like an attractive (small) addition to a conservative portfolio.

Personally, I see Gilt yields going higher and staying their for a very long time, so I doubt that this will see any rapid rise in the near future, but at least the divis look relatively safe? That said, the cover is not very good.

@MrG123: "Unless the management sells us out for a giveaway price."

Unless I'm misunderstanding what he said, Stephen Inglis says in that interview (at around 42:35), his family / friends own 12% of the RGL shares. For this reason I doubt management will sell at a bargain basement price.

I think the following comment (made in the interview from 19 April 2023) is relevant:

"We can afford the market to fall again by 15% before we come under any real pressure" (19 April 2023).

It's going to be interesting to see how much office valuations have changed by over the past 4m...

Https://www.youtube.com/watch?v=cU1VLBCPlSU

I think this is an excellent interview with very useful slides. It shows how diverse the income is. I have no concern about their interest rate exposure. My only bear points are:

*) The refi of the retail bond

*) Becoming a forced seller of offices if the LTV was to exceed covenants

I'm not sure that this or anything else is at 'rock-bottom', but I'm not overly concerned about that.

I like the excellent diversification of income streams here (over 1,000) and the fact that the divi was covered as of the latest update. My concern (maybe unfounded) is that they become a forced seller or office assets due to exceeding loan covenants. I'd like to see how the LTV has moved in the next update which should be soon?

Now yielding over 10% along with a lot of other stuff, but this still look attractive within a well-diversified portfolio. I'm expecting rates to continue marching upwards and if so, this is likely to continue falling, giving the opportunity to achieve an even higher yield.

As ridiculous as it seems, this dropped to 22.9p back in March 2020 so it's anybody's guess how low it could go this time...

Anybody able to shed some light on the yield of these relative to Natwest's NWBD?

It seems to me that Natwest's pref is significantly more attractive, in that they need to pay the divi in shares if not paid in cash. From what I can tell, Lloyds is able to skip the divi on their prefs at their sole discretion, i.e. if they report a loss or if they think it's prudent to.

Similar story for Standard Chartered's pref offering (to Lloyds) but with the China real-estate risk, which means there's a significant risk of having the divi missed in the next couple of years.

Regarding the yield here. It's not that generous...

There are lots of investment-grade companies with track records of paying consistent 8-10% dividends and bid/offer spreads in the 10bp range. Why is BISI going to attract people? The divi is completely pointless when the spread is this wide.

"Ultimately, if this was a tech company, those numbers would be worth hundreds of millions of pounds."

I doubt it. Anything this illiquid is also shunned in the US. This is one of the least liquid stocks in the UK. It's very rare that anything in the US is this illiquid except on the pink sheets.

@Edward, there needs to be more transparency in precisely what equities they own. We have no idea where they've invested the money. The vast majority of investments in small/AIM stocks lose money, so the market is never going to give much value to such investments. There also needs to be some attempt at improving the liquidity - a 10% yield is completely unattractive when the spread is this large (often beyond 10% !). And the managemnet needs to stop operating entirely for their own benefit as they do.

The above are what I refer to by 'terrible' management.

Thanks; looks like STAC would currently yield 7.83% (Buy @ 105.4p).

It's tempting, but I'm thinking it's not enough compared to GACA, NWBD, RSAB, ELLA considering the China risk. From what I can tell, STAN has significant China exposure, which could concievable tip it to a loss which would immediately result in the divi being suspended (lost).

Bull:

- 10% divi

- Potential for significant capital gain?

Bear:

- 4 May: Bid 180/Ask 200. 15 Aug: Bid 130/Ask 150 after bumper results...

- Terrible management who seemingly want to take this private in the 50-100p range

- One of the widest spreads on AIM, wiping out the divi for a year or more

Bull: Now yielding 7.56% (Buy @ 97.54p)

Bear: China risk, non-cumulative

Unless Stockopedia and InteractiveInvestor are reportomg complete tosh OR the NAV itself is suspect, this seems to offer a good margin of safety with a 65% discount to NAV? And the divi is attractive - ****IF**** it can be maintained, but I don't yet see anything glaringly obviously bad here. Happy to hear otherwise.