Member Info for Guitarsolo

Shanny, beware a very large spread on these shares. It makes it definitely a buy-and-hold investment in my eyes. As for timing an entry, I'll leave that to you but I would check-in on any day when the market has a general panic over something (e.g. Evergrande or something unrelated) as it might be a chance to pick some up at a good price.

Morning LSEers.......Is anyone out there invested in YEW? Clearly a boring as hell REIT, but does anyone have a finger on how much they can grow the dividend by in years to come? Is it rent inflation, or is there more to be had? It might be one to consider during a market correction perhaps? Just starting some research so want to check whether there is anyone out there and whether this is a board worth visiting to find out more!
Cheers
Guitarsolo

Please tell me the reply was addressed to "Dear Mr Bonkers....."

Guitarsolo - diamond hands on this one......what else is there to do?

Hi Devon,

Well, having had a brief read-through (anything more is beyond my knowledge level here!) it doesn't read too well. However, the lack of share price movement perhaps suggest the institutional investors think it is par for the course.

But EPS came in at 4.18p down from 4.59p the year before. That leaves the dividend uncovered (at 4.47p) and means that they had to dip into the reserve account for 0.29pps. Fortunately, that reserve account built up since 2007 was very healthy at 4.15pps (so is 3.86pps afterwards - still 86% of a full year dividend). Thank goodness it was there is all I can think! But it is still healthy at 86% of a full year dividend, better that HFEL for example which has a reserve fund of about 55%. What's a reserve fund for if not times like these?

The drop in EPS is being blamed on a couple of missed coupons/dividends. This from the report:

"The decrease in earnings happened as a result of a few missed coupons/dividends such as Matalan Finance and Rea Holdings (which may be recouped later) and because the environment for refinancing at cheaper levels was favourable which meant the number of bonds that were redeemed early ('called') was greater than we anticipated and finding replacement bonds with the same level of payouts is getting harder."

I guess if they are recouped then we'll see a bumper year in the future. However, I suspect they won't so it is probably best to expect that to be a permanent hit.

So much depends really on whether in the long term they can replace the called bonds with something that pays the same. It might be a busy year on that front if companies do try and refinance now ahead of presumed inflation/ higher rates. It's hard for Franco et al because you can't really have your money sat there not invested/ earning something because you think higher rates/inflation are coming....but when?! I guess that's why they're keeping durations short where possible.

I'll probably continue to hold on the basis that the reserve fund can prop up the dividend for quite a while until the world rights itself (we hope!). Certainly there is still no money in gilts so on the debt front it's got to be corporate bonds.

Anyone else have any views?

Guitarsolo - ("Why worry?" by Dire Straits comes on as I finish this note!)

Evening LSEers......
VTA is a company on my radar due to certain similarities to another investment (VSL) and also I believe some overlap with directors to PEY (a very successful investment for me).
But it's early days in the research and I'm just wondering if there is anybody out there?!
Guitarsolo

"Regardless Pension Fund"......did you used to inhabit GFM on the iii board before it went rogue?!

We have the half-year results at the end of this week. Recent OEM contract announcements are way too soon to be appearing in the financials (obviously!).

However, it gets me thinking......what's the 10-year horizon here? That's my investment timeline.

We all know (and believe I guess) in the company and the product. Technological advantage, barriers to entry, trickle-down from high-performance to mid-performance etc.

But from a financial perspective, what could/should be their position in 10 years? Turnover of £50m+ and net profits of £15-20m? Or am I assuming too much loss of margin as competition increases? That's around 10pps earnings which isn't shooting the lights out on a multiplier basis assuming the share price has increased. Should ST be aiming for considerably more than that? Double it?

I'm slowly building an initial position as I like so much about this company. But once all the starry-eyed mist has cleared about a British company with a techno-advantage in good old-fashioned engineering (with a big green credentials tick!), the financials can't be ignored.

I would appreciate any thoughts of long term holders here who perhaps see the wider picture.

Guitarsolo

Just catching up on yesterday's news. Seems like a decent acquisition with a mixture of new shares (equivalent to about 16% of already issued shares) at a decent price, a bit of debt and a bit of cash. All in all, it seems to be more of what they already have/ already know.

Q2 dividend of 1.6pps declared as well. It turns my mind to wondering what the full year dividend might now be? Sure Q3 will be another 1.6p but then what about the last quarter? Overall, the rent collection doesn't seem to have been quite as bad as probably everyone feared a year ago+ when the dividend was cut. And pre-pandemic we were looking at 8.2p for the full year. So does anyone have any insight/guess for the full year now? 7p (so Q4 of 2.2p)? Or is that optimistic?

As Gerry says, the LTV is nearly 44% which is OK but they want it to begin reducing. I don't know where the bank covenants kick in, but best never to even flirt with them!

Guitarsolo

There used to be (https://www.savannahresources.com/cms/wp-content/uploads/2017/01/Finland-Lithium-update-22.12.16.pdf)......!!!
Must have come to nothing as the current website only mentions MdB and Moz.

Yes they could update about Moz of course. But to say what? We await the expert report about how to extract value from it but I think Moz is being suppressed because of that country's macro situation. No point saying "yey we have a super heavy sands project" in a country that could fall into civil war! It's a matter of timing.....(and it may never all come together in the right way I fear).

Is there still exploration in Finland?! That would be handy for Northvolt.......

Without trying to be provocative about Hodgy's post, I can't help but comment!

- That holiday entitlement is a statutory minimum. It's not being generous!
- A workplace pension (company and employee contributions) is a legal requirement!
- Bonus scheme will be at company's discretion and not for all areas.
- Life and medical insurance sounds like it is only for senior employees.
- Loyalty rewards, I should hope so!

The rest are basically discounts on Card Factory products, which there can only be so much of!

I firmly believe in looking after employees so support all of the above and more. I just wouldn't say providing the legal minimum is brilliant.

Guitarsolo

Gerry,
I am not sure I have helped ade2a! But I hope he/she does well.
I can be helpful about the dividend payments though! HFEL pays its dividend quarterly as you know. Any dividend uplift comes in for the Q3 payment. So we had 5.8p for Q3 and Q4 of 2020 and then again for Q1 and Q2 of 2021. Then it increases for Q3 etc.
Dividend increases have slowed during the pandemic to just +0.1p per quarter and I don't expect anything much to change until things have settled down. So there will be three more payments of 5.9p for Q4, Q1 and Q2 (2022) and then I predict it will increase to 6.0p per quarter for next August (not exactly Mystic Meg stuff - remember her!). The question then will be if the dividend increases can return to +0.2p each time.......It's boring and predictable but nice to have a few investments like that.
Guitarsolo

I am not sure SAV is in a position to provide any substantive updates. It is a delicate position at the moment with the EIA decision awaited and I would imagine any "loose talk" could be detrimental.
I have lost track of when the EIA decision is due (Q4?) but once it has been delivered, and is hopefully favorable, then things will be more in SAV's hands and I think we can expect more news flow. Until then, I expect SAV to be tight-lipped.
It's frustrating I know, but I'm hanging in there!

ade2a, you are right that it is a question worth asking and I am sorry if I was curt in any of my responses. As private investors we should work together to share information and inform.

I think the thread has highlighted that there are other ways in which HFEL enhances its earnings (options, trading in and out, altering weightings etc). As to why HFEL yields higher than AAI or Schroders, I would put that down to the portfolio mix.

If you watch the HFEL videos with Mike Kerley, he explains why some investments are used to generate cash and the others are for the future. I would simply suggest that HFEL has more of the former and less of the latter compared to other funds. That might be because they know the payout is large and to keep that going they need to sacrifice growth shares for income. In China for example, they have eschewed the Alibabas and Lyfts of this world which meant they missed out on that story, but they own banks and manufacturers who have kept paying out the dividend.

The only other thing I would add is that HFEL has traditionally traded at a small premium to NAV and issues equity now and again at a premium. That gives me some comfort as well.

GAV, I believe you're partly correct but remember the fund has around 50 holdings and they are not equal. That means the dividend or NAV can be skewed by those with proportionally larger holdings in the portfolio. For example, 4.2% of HFEL is in BHP which currently yields over 10%. I imagine this has been held for quite some time.
Other stocks are in non-publicly traded companies and others are in funds (e.g. VNH). All in all, that obscures a straightforward relationship of NAV to yield - although there is a relationship.
The bottom line is that HFEL operates by receiving cash dividends from its investments equal to 23.74pps in 2020.

ade2a, I don't know you on this forum and so I don't want to come across as condescending - we should help less knowledgeable investors rather than the opposite. But do you understand the principles of yield, P/E ratios etc? You seem to confuse what you refer to as "current yield" and "yield on cost".

If someone wants to buy my CLIG shares they will have to pay me 520p per share. Then they will receive the 33p dividend per share. Everyone gets the same dividend whether you buy today at 520p or seven years ago at 240p.

But you started this thread by casting aspersions on the HFEL yield claiming it is not covered because the (current) yield on the investments HFEL holds are lower than what HFEL pays out. The current yield on any of the investments is irrelevant as all that matters is the cash payout HFEL receives. That is equivalent to 23.74pps in 2020. If you don't believe Janus Henderson's figures (a trillion dollar investment manager) then I suggest you look elsewhere.

The reason HFEL's yield is so good is because the NAV of the investments is relatively low. And that is because for the last 5 years or more the world has been obsessed with tech growth and not your cyclical income stocks (which HFEL in particular owns). HFEL's management think that will change at some point and I hope they are right. If so, the share price will rise, the yield will drop but the dividend will stay the same (or marginally increase). That's what you get with HFEL; solid income, gently rising, possible asset growth (depending when you invested).

I hope we've helped you.

Guitarsolo

WW, not if the P/E is well below 10 which it is with IMB.
If you had a P/E of 6.6 and a 10% yield the dividend would still be covered x1.5 which is fine for a high-yield, defensive stock.
After cutting its dividend from around 205p to around 137p it is now pretty affordable and covered by earnings. I would be very disappointed if it were cut further.
IMB's problem is debt which was allowed to expand to something like £14bn. It's now around £12bn and I would like to see them get it down to single-digit billions (did I really just write a sentence like that!). Once debt is lower the re-based dividend can grow again, albeit not by 10% a year as it did under Alison Cooper who I think acted irresponsibly around the dividend.
IMB's other issues; regulatory, declining cig numbers, uncertainty of NGPs etc are also a threat. But purely on the maths of income v dividend, I don't fear another cut in the near future. Just hope that I am right!
Guitarsolo - not a puffer myself

ade2a - I'll give you a simple example that isn't affected by new equity issues.

CLIG.
Purchased October 2013 when around 240p. Dividend was 24p (i.e. 10% yield)
Dividend now 33p so yield on my purchase now 13.8%
But share price has risen to 520p so 33p dividend is a 6.3% yield for new purchases.

I'm getting the same 33p dividend as new purchasers (obviously) but the yield on my entry point is much better.

That's why HFEL is paying a dividend of 7.5% even though the CURRENT yield on many of its holdings is around 5%. They got into the shares long ago, as I did with CLIG.

ade2a, the EPS IS based on the yield of the underlying stocks! But just because HFEL's investment in say an Australian bank is currently yielding 5% doesn't mean that the yield on HFEL's investment when it was made isn't 7.5%.
I have investments made 7 years ago that are yielding 6% at current prices, but are 15% on the price I invested at. I'm getting that real cash, it doesn't drop just because the yield for new investors is lower.
It's very simple; look at the reported EPS by HFEL. The last reported (for 2020) was 23.74p. Of that they paid out 23.00p. They have always paid out just below the income which has allowed them to build up a small cushion. I want to say this is equivalent to around 10pps but stand to be corrected.
During the pandemic they said they were prepared to dip into the reserve fund, but in the end they didn't need to.
Guitarsolo

Because that is pointless! You don't know what price HFEL invested at. The current yield doesn't tell you what they are earning in dividends from their holdings.
Reported EPS are very tightly regulated. If they report 23.74pps as EPS and pay out 23.00pps then that is pretty simple to understand. If you don't trust the reported EPS for a fund that is part of Janus Henderson ($1 trillion FUM) then I suggest you just go elsewhere.