Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
Quite a large one at that (39% of issued shares). 13% discount to the closing price which is not too bad. I thought that they would do this in conjunction with news of an order but I guess that purchasers want to see the company on sound financial footings first.
There is a retail offer of £0.5M which is good - too many companies just seem to ignore our interests .
In all I think it will be well received and with any short term concerns on funding behind them I can see the share price quickly rising above the placing price.
Their argument is that as they generate 2x divi cover the excess after the divi allows the company to grow even without any placing.
However, I am sure that if the price went above nav then they would do a placing to reduce debt and then be in a position using the rcf to finance a further, more rapid, expansion of the portfolio. They prefer to do a placing above nav as they can then argue it is non -dilutive to existing share holders. I think that they still have an eye on moving up to the FTSE 100 which would also be facilitated by a £500M placing.
The Italian Government has announced it is proposing a windfall tax on Bank profits. Bips holds bonds of Unicredit and IntesaSanpaolo, Whilst the companies share prices have, understandably, fallen it is still not clear whether this will impact bond prices. Arguably, if the companies are profiting enough to be subjected to a windfall tax then the risk for the bonds is already considered very low so it should have limited impact.
Spain has also gone down this route and looks like other countries are following. it may turn out that the perp bonds are a better investment than holding the equity in a high interest environment as less scope for governments to skim off the payments (with the exception of the Swiss with its handling of Credit Swiss...)
For a while the nav has been steadily increasing by around 0.3p per week. After the latest interest hikes by the BOE and ECB the purchase yield must now be around 12% with a MtM of near 15%. Clearly there will be no problem covering the 2p per quarter divi, but I wonder if they will increase this (again) to avoid there being a very large final one next year, otherwise it could potentially be >6p .
Some/most? of todays rise will be traders buying to arbitrage against the share buybacks so it remains to be seen how large an impact it has longer term on the share price. I agree though that it is a positive start.
I thought that these looked quite promising. They curtailed still wine sales last year because of the poor 2021 harvest and they have only just started to sell the 2022 vintage for the still wines so there should be scope for plenty of growth in this segment.
Whilst some of the share purchasers of late look like RI's (2000 blocks to qualify for the discounts) the steady buying this week looks like there may be broader interest.
They really do need to provide some clarity around funding for the new winery though as I believe this is main drag on the share price.
Merchant is the non forward, fixed price sales - so the auction price - (obviously been quite profitable over the past year).
For your second question this may help-
https://www.sciencedirect.com/science/article/abs/pii/S0140988320300402#:~:text=The%20penalty%20from%20each%20supplier,ROC%20presented%20by%20a%20supplier.
Bloomberg-
Mortgage approvals picked up in June to the fastest pace since October, data from the central bank showed. That aligns with what we heard last week from Lloyds CEO Charlie Nunn, who noted the resilience of the bank’s mortgage customers despite higher rates.
The cost of the director wage reductions is a potential further future 25% dilution with their share option if they hit their targets.
What is not clear is the situation in the event of a takeover where these options would vest - does the take over price have to be at the vesting prices or any price ? The rns is not clear on this point and it is not an unrealistic scenario-
('All in the money share options would vest in the event that the Company is acquired').
Why Bips?
I purchased most in the dip last summer/Autumn using funds from selling out of NCYF, so for me I did capture some of the discount to nav at the time. The rational was it is more diversified both in holdings and countries, I felt NCYF was a bit higher risk going into a potential recession especially with some of their property company exposure, it also was trading on quite a high premium when I sold.
The divi is currently around 7% , they had enough cover to also put money into the shareholder reserves in the last financial year. MtM is around 9% without gearing.
The divi from Bips combined with 9%+ from TFIF gives a 8% return on this part of my portfolio which I am happy enough with. I rebalance between them as and when the situation demands/opportunity arises.
A very bullish stance by the managers in the conference call. As usual they provided a good explanation to the details of the business.
They clearly feel that the inflation/discount rate/interest rate has been misunderstood in relation to their business model.
They wanted to get across that they are looking to total forward returns of 10%, around 5% on the divi and the other half from an increase in nav - funded from the £200m income in excess of the divi.
A few points -
The divi cover last half would have been 3x (rather than 2x) if there had been 'normal wind'.
The forward price curve now (£78mwh this year) means the energy windfall tax will now cost £50m over 2 years rather than £200m over three.
The rcf is currently zero but will be drawn down to fund the investment in the London Array (completion is after H1). Their discount rate is already ahead of their peers who they believe will need to increase theirs. Interest rates- even if all floating (which they are not) it would cost £20m per 1% increase in rate, this is equivalent to only 0.1% of divi cover .
Longer term they are looking to around 35% gearing with an all in cost of debt of 5%.