Member Info for Guitarsolo

Laughton, many thanks for taking the time to reply!

So, SONG doesn't benefit directly from anything that Blackstone invests in under HSC. It has the right to co-invest (on equal terms?) but it doesn't have the cash to do so and can't raise any because of the NAV discount without diluting existing shareholders? So in reality, it can't benefit.

Sadly it sounds like Blackstone is using its financial muscle to turn MM's head (and the rest of HSM) away from the original investment thesis. I kind of liked the idea of "the people" (private investors!) owning the music we listen to and benefitting from it!

It's like one of those Dragon Den pitches when the Dragons realise that the real value of the company being pitched isn't included in the offer!

I'll keep tabs for now but probably not join the party yet (not that Justin Bieber was the attraction!).

Guitarsolo

Laughton, apologies in advance for asking about a probably done-to-death discussion here, but what is the relationship between the Blackstone-backed Hipgnosis Song Capital and Hipgnosis Songs Fund? Even if there is an overlap, does management have the option to put the more favourable deals in Blackstone's direction rather than SONG?
I've tracked this investment for many years as I am interested in the notion, but I fear being screwed over!
Many thanks,
Guitarsolo

Who is listening to the webinar? Are those who have particular issues about dividend cover and alleged dividend washing (or it's other names) listening and planning to question Mike Kerley about it?

A 12% yield would normally be a prelude to a dividend cut. But I have my fingers crossed it isn't because:
- The dividend was (understandably) cut during Covid. So a good deal of medicine has already been taken.
- The Investor Chronicle article posted you posted on Saturday morning highlights that RGL's dividend is better covered than most REITs.
- The yield might just be so high because the share price is so low! The share price has been brought so low because REITs are very much out of favour. Yes, there are issues regarding occupancy and (long-term) valuations. If the NAV was to drop then it will be bad.....but with a 40% discount to NAV you could argue much is already priced in.

It's a bit of a gamble of course, but if you're buying sub-60p (and I have topped up sub 60) I would say there is quite a lot of downside protection, if you're happy to hold long term.

GS

Hardup,
I've held these for about 5 years so have initial purchases at over 100p (when it was paying 8.2p dividend). Obviously that is before Covid and the changes to working practices, and the divi cut to 6.4p (now 6.6p).
The 40% discount to NAV is too steep to be maintained (imo). There are some who, perhaps with greater knowledge, think the NAV is optimistic. A discount makes sense because the assets (offices) are somewhat illiquid, but not that illiquid to justify a 40% discount.
At these prices it's yielding 12% which is exceptional. If that can be maintained then I rate the shares as a long term hold for income, and I would expect the gap to the NAV to close when this comes back into a bit more favour.
There's about 14% vacancy so that allows for things like the December announcement of new income from a previously unlet property.
If NAV is substantially reduced, or the dividend needs cutting (again) then it will be a bad time to be a shareholder - but the price may have fallen so much it isn't worth selling!
Fingers crossed.
Guitarsolo

I've been chewing this over a bit since the rather shocking news last week. A few points:

- I think DLG might have overreacted a bit. Cancelling the final dividend (c.15p) is a saving of about £200m but the "exceptional" weather claims from the cold snap are more like c.£70m. Inflation and increased claims added more. Is DLG preparing for more problems?
- The wording of the update was vague (which itself is poor management). They "no longer expect to pay a final dividend"......... That could mean anything! Expectations could change and they could pay something, or nothing as a final dividend.
- If there is no final dividend, there is certainly room for a special (depending on results).
- What I am certain about is that the board will use this as a way of rebasing the dividend. It was uncomfortably high and, having taken the pain of last week's announcement, they will want the easier ride of a much better covered dividend. Expect more like 12p a year I fear.
- Plenty of fair comments here about the effects of inflation. Remember though, insurance has a lovely advantage that it gets to reprice its product every year.
- Moreover, many insurances are compulsory and others are necessary for prudence. People/companies do need to buy.
- The downside of personal lines is that there is not much product differentiation in the customer's eyes. Actually, there is but it is hugely competitive market.
- DLG has very strong branding though and, arguably, what the market needs is a hard market to drive out some of the cheap money that has made insurance its home. That will then give DLG back market share and some pricing power. We live in hope.
- DLG is exposed to the vagaries of the personal/commercial lines market in a way the composites are not. It can't fall back on pensions, annuities, wealth management etc. So underwriting performance is key along with cost control.
- I'm annoyed as the divi loss/ future cut will hurt my figures! But no point selling here. DLG needs tightening up and (possibly) better management by the present team or others.
- Whilst down at these prices, DLG is attractive for a potential purchaser (particularly an overseas one if the currency weakens). RSA was purchased by Intact (Canadians) a couple of years ago.

I guess we all make our own decisions whether to stick or twist here. I'm hoping this is the medicine and the sugar comes next.

Guitarsolo

Thank you Ragged.
So I contacted Hargreaves Lansdown and took their "test" to see whether I would qualify as a sophisticated investor, which I would! It was laughable really.....what's the point?!
Anyway, I presume I can now buy on that platform even if HSBC Direct don't allow me. So I am continuing my study of VTA(S), starting with Hardman's notes and Volta's monthly statements. Can you recommend any other particularly good sources of info/analysis?
I will likely have funds coming out of VSL, if they vote to proceed with the wind-down, which I would like to invest in part in a debt high-yielder. Shame about VSL in my opinion, a good little trust that someone wants to disrupt for a short term gain because of its NAV discount. Oh well.
Guitarsolo

Hi Rivaldo,
Agreed, the market is thinking very short term! I've searched down the back of the sofa for any spare cash and done a very small top up. I might have missed the best prices early on as I was too busy finishing a bed-n-ISAing of some Aviva shares!
I think Kevin puts it well that manufacturing hiccups are to be expected with a very technical product and new furnaces etc but SCE's problem is that they are at maximum capacity and so have no headroom when hiccups do occur. For long-termers, today is a good opportunity.
Guitarsolo

ade2a,
Personally, I hold HFEL for income rather than capital growth. Therefore, a total returns basis isn't so important for me as I don't intend to sell. I would prefer to see a (covered) dividend gently growing. If the share price/NAV stays flat or slighly increases, I'm happy with a 9% yield. No one wants to see a share price fall but if you're not selling there is no capital loss.
So I guess the upcoming webinar should present you the opportunity to ask Mike Kerley how HFEL covers its dividend if the underlying payouts fall short, and does he ever buy shares cum-dividend and sell ex-dividend in order to have the cash to cover HFEL's own payouts?
It would be a shame to miss this opportunity if you feel strongly about it.
Guitarsolo

Hardup, really? That's the level of your knowledge?
The FTSE 100 is largely made up on international oilers, miners, tabacco and banks. Most earn a lot of their money in dollars from around the world. It is therefore a poor correlation to the UK's economic health.
The FTSE 250 would be a better bet as it includes more UK-centric companies. But that has fallen from 23,353 to 19,463 over the last year. It is also down over a 5 year period.
The FTSE 350 includes even more, smaller, UK-based companies. That is basically flat over the last year and down a bit over a 5 year period.
Perhaps these "remoaners" have a point.

Thanks for the link Nrtoftheriver.
Looks like a perfect opportunity for any doubters to ask Mike himself about dividend washing. Get it straight from him. Why not?
Guitarsolo

Hi Ricardo,
Thanks for posting that. As you say, the planned infrastructure/ maintenance spending is huge. Your list is £307 billion and doesn't include all of it, I'm sure!
I do worry though whether this is truly affordable by UK Plc. We saw what happened after the Truss/Kwarteng budget! That told me that the markets don't think the UK has that much room to borrow more (for lots of reasons). Even when money is budgeted, we all know it can be delayed or changed. Many of the pledges of investment were made in the ULIR environment and might need to be revisited as things change.
Of course, even a fraction of it would be nice for RNWH. Furthermore, I feel RNWH is more at the "can't do without" end of the spectrum for these projects. So if corners are cut, it might be elsewhere.
Overall, I remain bullish about RNWH's prospects and the way the company is run.
Guitarsolo

Thank you raggedtp.
I meant low cost for holding, as I don't really trade.
I've tried repeatedly to buy VTA and TORO (you also mention), but no luck so far. I am wondering if it is because you need to be a certified sophisticated investor? I appreciate both have debt instruments that are complicated but are they really more complicated than say a financial on the FTSE 100?!
If you hold through Charles Stanley, may I ask if you're a sophisticated investor?
Guitarsolo

Asperger, please put me down for 47p.
Going nowhere.
Guitarsolo

Agree Silverknight, an extra £840,000 for a previously un-let property is good news. The c.85% occupancy rate is a negative in one sense, but is a positive in another as if if can be filled there is hope for improving finances. The yield is 11% (and that's after it was reduced during Covid) which I am happy to take whilst we see if the NAV discount narrows.

Hello Damien,
I decided to sell all my holdings (taking advantage of the intra-day 7% rise a couple of days ago). I got all tranches out for over Euros 9 which is a profit but down from where it was obviously.
Ultimately, I considered it unacceptable that the company takes currency risks which can cost more than the entire annual dividend (5% of NAV). Of course, it can gain by an equal measure but if I wanted to play the currency markets I would choose something different to a PE company investing in a broad range of private companies.
In addition, your comments about the lack of contrition during that presentation were accurate. They didn't really apologise and, if they think it is part of the risk, then there is a large currency gamble. A minor amount of hedging to flatten the curve I could live with. Positions that could lead to losses (or gains) greater than an entire year's dividend in a high-yield share, I can't.
Good luck to those who continue to hold. I hope there are no more forex hiccups for you.
Guitarsolo

Damien, I wouldn't bother engaging with LTI if I were you. Everything with him is "I'm right, you're wrong". He'll eventually start ranting and mocking that you're wrong about, well everything! Judging by the sea of green on my screen, that's what he is doing (again). It's a shame as I suspect he might have some good investing points to make, but he just can't get over being an angry old man and having to endlessly argue with people who don't agree with him.

Re HFEL, the figures do suggest there is an element of "dividend washing" (or any of its other names) but how much is unknown without the data (and that data may be an absolute pain to sift through).It could be equivalent to negligible couple of pence per share, or something more significant. Have you put the point to Investor Relations? Or even during an update presentation (see our PEY issue)? It would be interesting to see their response.

Good luck
Guitarsolo

Thanks Damien, I agree with much of your sentiment that it is unacceptable that these forex losses are somehow unexpected or that the risk was necessary given the natural diversification.
I will possibly see if we have a Santa rally or an improved Nov. NAV.
Re investing for in-laws, ha! yes I know. But they know I do it for my mother and know nothing about investing themselves. It adds to life's stress you might say!

I have received a reply from PEY Investor Relations to questions I submitted during the online presentation which I am happy to share. (Note, these weren't pre-prepared and were submitted quicly off the cuff!)
1) Given the geographical diversification of the portfolio, why the need to hedge at all?
Answer: "PG's Portfolio Management and Corporate Development team are scrutinising several options and in the meantime also gauging investor views on this topic. If you have a preference, please let us know."
2) How much of the F/X losses are factored into the Sept/Oct NAV figures?
Answer: "We have provided the October NAV of EUR 973.77M which includes the full amount of the fx loss."

I am pleased to see they are "reviewing their options" on forex, but given their attitiude during the presentation seemed to be that this was part and parcel of the private equity model, I doubt they will completely strip out hedging. Personally, I find this unappealing because what they seem to have done is put the whole success or failure down to currency hedging which is not why I would invest in private equity.

I am pleased to see that the entire forex loss is included within the Oct NAV of EUR 14.08. However, as the EUR 60m forex disaster is equivalent to about 80c per share, it shows that NAV would have been more or less static but for the hedging!

I've sold out of one position in my in-laws' account (!), at a loss, because I need stability there. That's been mostly reinvested in LGEN and a high-yielding REIT to cover the same dividend lost to PEY. I still hold larger holdings elsewhere and am undecided on the future. My trust in management has taken a dent and it is a question whether this is the sort of fund I want to be invested in.

The EUR continues to mildly strengthen against the USD so could those forex losses be reversing? Will November see a large rise in NAV?

Guitarsolo

My favourite line: "It bodes extremely well for the next 20 years of this group for sure.”

This is a very well run company in a growing sector of the economy backed by massive government infrastructure spending. Gotta love it!