Member Info for tichtich

"Aviva racing ahead and LGEN bumbling along behind as usual."

It seems I misjudged the general insurance companies. I avoided them because I thought they would suffer from more expensive claims. But they've been able to get away with huge premium hikes, to cover their higher costs and more.

Slight improvement in global economic sentiment --> small increase in metal prices --> small increase in CAML share price. Could easily reverse again, but let's hope for the best. Still holding for the medium to long term, so don't care much about the share price, except in so far as it reflects metal prices and profits.

P.S. I suppose I should admit that their advertising strategy worked on me, as I subscribed after reading their free blog for a while. At that time I knew too little to realize how useless the blog was!

I wouldn't even call the Motley Fool blog "editorial". It's just superficial click-bait advertising for their paid service, which I subscribed to for a couple of years. Seems strange to advertise your service by showing people something of vastly lower quality.

Could the mostly sensible posters please stop joining in the flame wars. It would be a shame to have to filter you out and miss your sensible posts as well as your flames.

There's really no need to call people liars, etc. If you find their posts so objectionable, just filter them out.

Correction: I should probably have deducted 1 percentage point from my return estimates, to allow for the 1% management fee.

Well, I think they decided to increase the 2024 dividend by more than RPI, and then for some reason decided to give shareholders an extra bonus and make up the 2023 dividend to the same amount as 2024, by having an extra large 2023 final dividend. Now they don't want people interpreting this as meaning that they've failed in their policy of increasing their dividend by RPI every year, when in reality they've increased it by more than RPI over this period. Personally, I think they should have just stuck with the existing policy.

I doubt that they will increase the dividend any more in 2024, given the big fall in power prices that's been happening.

P.S. The interim report claims that "ample transactional evidence adds further weight to the credibility of the Company's valuation". Perhaps that's a sign that buyers and sellers of these assets are all doing similar DCF calculations, and pricing assets on that basis.

I'm aware that the NAVs for such companies are based on a DCF calculation. I prefer that to an estimated market value. I don't care that much about the market value, unless the company is going to wind itself up. I'm more interested in the long-term fundamentals, and what better way is there to assess those than a DCF calculation? Of course, a DCF is only as good as its assumptions. So I do look at those. I've looked more closely at UKW, which I have a much bigger position in, and I think its assumptions are pretty conservative. I haven't looked so carefully at BSIF, and I don't think its assumptions are quite as clearly stated, but as far as I can tell they seem reasonable. Maybe they're a bit less conservative than UKW's, but arguably that's balanced by BSIF's bigger discount to NAV.

If the assumptions are correct and the shares are bought at NAV, their long term rate of return should equal the discount rate. That's 8% for BSIF, but I think that's an "unlevered" rate and the levered rate (taking leverage into account) is probably more like 10%. The DCF assumes long-term inflation of 2.25%, but let's say 2.5% inflation to allow for the higher short-term inflation that's assumed. That makes a real return of 7.5% if bought at NAV, or about 9% at current price, which is a little more than the current yield. I take that as confirmation that the current yield is sustainable (rising with inflation) for the long term, if the DCF assumptions turn out about right. That said, I'd be perfectly happy with a 7% real return, and satisfied with 5%, so there's a decent margin of safety as far as I'm concerned.

Well, that's how I look at, rightly or wrongly.

Thanks for your replies, NSC and Jatw. Jatw, that sensitivities table was helpful. I was glad to see that exposure to equity risk is low.

Thanks, SB. I was wondering about that too. In fact I was struggling to understand most of the items in the NAV bridge. I thought "Date Change" might refer to a change in the life expectancy of the panels. You'd think that, if they'd re-assessed the efficiency/longevity of the panels, they'd mention it in the text.

The chairman's statement mentioned the drop in the NAV, but didn't say anything about what had caused it. Since the drop seems a little at odds with his positivity about the period, I think it's reasonable to expect an explanation.

I tend to focus on the NAV and the underlying earnings per share (pre- and post-amortization).

I'm having difficulty squaring the latter figure, 3.57p, with the chairman's statement: "I reiterate our full year guidance of dividend distributions for the financial year of not less than 8.8pps (2022/23: 8.6pps), which we expect to be covered approximately two times by earnings, net of debt amortisation and the EGL." I assume that "net of debt amortization" means post-amortization. Extrapolating 3.57p to a full year gives 7.14p, a long way short of the 17.6p needed for 2x cover. As far as I can see, the EPS (post-amortization) for the second half of the FY would have to be more than 3 times as much as the first half to make the chairman's statement true. The more likely explanation, I think, is that the chairman made a mistake and the 2x cover is actually pre-amortization (which is what I would have expected).

Thanks for replying, NSC. Could you please explain what you mean by "having the next 6 years of profits already banked".

The only concern I have about LGEN is how it would be affected by a crash in asset prices. To be honest, I don't know how exposed it is to equities, real estate, etc. In terms of its annuity obligations, would a crash matter much, as long as the income from those assets continues? Or would it have to stop paying dividends until its solvency ratio is restored?

I can't help thinking that considerations like these might explain the low share price.

Scott22: 'Recovery difficult with the headwinds of Sagan- like share count. ("Billions and billions of stars" - you provide the accent.)'

Sorry for going off-topic, but that brought a smile to my face as it reminded me of this video:

https://m.youtube.com/watch?v=u_aLESDql1U&pp=ygUOVHJ1bXAgYmlsbGlvbnM%3D

I would agree that it matters much less if you're drip feeding, but I still wouldn't say it's "irrelevant" if stocks that you buy are overpriced. Anyway, good luck with your strategy. I hope it pays off for you.

"I ask myself is there any reason to suppose a continued double digit average annualised growth rate is unlikely to occur over the next 10 years?"

That fund appears to be heavily concentrated in US growth stocks (even more so than a regular global tracker), those stocks are (many would say) very overpriced, and you might be buying near the top of a bubble.

It seems that part of the reason for the current low gas prices is strong wind generation. So for UKW that should partly offset the pain of lower electricity prices, especially given that only about half of UKW's generation is subject to market prices.

From today's Telegraph:

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Gas prices muted as wind power whirls

Wholesale gas prices have remained subdued amid unusually mild weather and strong wind power generation.

Europe’s benchmark contract was last up 1pc but remains below €24 per megawatt hour after nearing an eight-month low on Monday.

Dutch front-month futures have fallen 40pc since October amid robust wind generation and warm temperatures keeping a lid on demand.

In Britain, wind turbines accounted for more than 45pc of the nation’s energy needs, above 24pc for gas. The UK equivalent gas contract was last up 0.9pc but trading below 59p per therm.

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Surely that should be "45pc of the nation's electric power needs", shouldn't it?

I only bought SMDS last year, but I aim to buy for the long term, so the question for me is whether the merged company (if it happens) has as good prospects as SMDS has on its own.

I don't feel like doing any research into Mondi, so I'm tempted to just take a profit and run. On the other hand, I've been trying to follow a policy of not making a change to my portfolio unless I have a high conviction that I'm doing the right thing. (In the past I've made too many changes.) The trouble with a merger is that it forces a change on me, one way or another!

I bought a significant amount today at just below 128p. I like the protection from inflation, so I sold something which was more vulnerable to inflation to buy these.

All renewable energy stocks are down, because the price of gas (and therefore electricity) has plumetted back to pre-covid levels. But I reckon UKW will do OK even if we don't see any more windfall profits.