Member Info for tichtich

As I've mentioned before, dividend cover is somewhat misleading as a guide to long term returns, in part because it's only a cash cover, so doesn't take into account depreciation (and therefore doesn't allow for the fact that the wind turbines have a limited life). Allowing for depreciation would reduce the cover. (However, to the extent that the cash cover is calculated after repayments of debt, that partially offsets this ignoring of depreciation.) Dividend cover also doesn't take into account other future changes in cash flows.

Since the NAV is based on a discounted cash flow analysis, it tries to take all these things into account, so it's a much more useful guide to future returns than just looking at current cash cover. Then you just have to judge whether the assumptions made in the DCF model are likely to be realized in practice. If you think they are, then the big discount to NAV shows that the shares are great value. But some of us are less confident about those assumptions, particularly the projected future electricity prices, which are very dependent on future government policies.

By the way, I think there's one way in which the NAV slightly understates expected returns (given its assumptions). The NAV is calculated as GAV minus outstanding debt. So debt is valued at face value, not at net present value of future interest and principal payments. Since the discount rate is higher than the interest rate on debts, the debt would be valued lower on an NPV basis, which means the NAV would be higher on that basis. I'd be interested to hear from our resident actuary what he thinks about that.

That's the Motley Fool free blog, which is not worth the paper it isn't written on. It has nothing to do with the MF paid service, which I subscribed to for a couple of years.

I'd like to know too. I can only guess that Mr Market thinks the acquisition price is reasonable, and that the combined trust will have increased advantages of scale. Plus, I think most REITs are up a bit in recent days because UK long term interest rates are down a bit.

I only bought LMP in October, and it's up 16% already, which is unusual for shares I buy. 😉 I'm tempted to sell and rotate into something cheaper, but most things are up, and it's hard to find good value now. VIP is a possibility.

Hi. I bought in here last week. It's not the sort of company I would usually buy, but it seems too cheap to ignore. I held off from buying for a couple of weeks, as it seemed to have so much downward momentum that I thought I might as well wait for even cheaper. Eventually I bought on a brief uptick at the start of a day, thinking this might be the start of the turnaround. (I missed the bounce on Reach and didn't want to make the same mistake again.) Of course, I was too soon, and it's already down 8% from there. Position is nearly 2% of my pot, and might increase to 3 or 4% if the price goes down a lot further, but that would be my max. I'm not a big risk taker. 😉

And a tichtich purchase yesterday too! I've been averaging up from near the low point. (Funny how you often hear people say they're averaging down, but I've never heard anyone say they're averaging up 😉)

"As for growth - I take my +10% yield and invest elsewhere!"

That's my approach too, though I don't distinguish between dividends and new money. I just invest available cash in whatever seems like best value at the moment. Are you finding anything attractive?

Most things outside the green sector seem to be up about 25% (or more) over the last year. I'm still using the prices of a year ago as my mental benchmark for decent value, so almost everything looks expensive today. I was close to adding some FGEN recently, near the low point, but was waiting for a little lower still, and missed my chance. I've added some SEIT, but have now reached my limit on that. Outside of greens, I've added a big chunk of LGEN. Seriously thinking of adding more CORD. I have my eye on FUTR, but it keeps going down, so I feel I may as well wait. (I won't be too bothered if I miss the boat on that one.) I recently bought a shipping stock, CMBT on the NYSE, that's done well. (There's a guy on Seeking Alpha who gives good tips on shipping, and those have been some of my most successful buys.)

"it’s very hard for an island nation to destroy 30%+ of its energy production."

I don't think there's any danger of that. The danger is that a future government will make wind generation less profitable. The nation would still get the output of existing wind farms, but at a lower price, at our expense.

Interesting point, Jisoo. If CPI turns out to be higher than RPI over the next 4 years, I think I will have a good laugh and celebrate with a bottle of bubbly. 😉

I just received my cash payout. Now I just want them to complete the sell-off process, so I can put the whole sorry saga behind me. 🤔

Thanks for that, Riscoff. Nice to know that LABS got an unexpectedly good price. I'll keep my fingers crossed for RESI. (I owned some LABS, and managed to get out with a modest profit. But maybe I should have held on.)

@Howard

Early repayment charge?!!! The lenders should be delighted at getting out of a loan at such low interest rates! If RESI actually ends up paying such a charge, I will be absolutely outraged at the managers (and the institutional shareholders who voted for winding up).

Is the govt going to make the same change (RPI to CPI before 2030) for holders of index-linked gilts? I doubt it. They must see renewable energy investors as an easy touch.

"Just to say Nat Gas prices up 28% today!"

I think you're looking at the US (Henry Hub) price, which can be very different from the UK price (as gas is difficult to transport). You can see the UK gas spot price here:

https://tradingeconomics.com/commodity/uk-natural-gas

Or look directly at the UK electricity spot price:

https://tradingeconomics.com/united-kingdom/electricity-price

I could be wrong, but I think they just look at what similar properties have been selling for. Interest rates have a significant effect on property prices, but there are other factors too. I don't think REITs are like infrastructure funds, where they value assets by means of a discounted cash flow calculation.

The NAV is based on estimated property prices. When they talk about an outward yield shift, I think (but I'm not sure) they mean that the rent yield on properties generally has risen. In other words, property prices have fallen relative to rents.

I don't expect an accurate dividend yield figure from DividendMax. For that I either calculate it myself or use DivvyDiary. DivvyDiary also had the advantage that it can show whole year dividends and % change from one year to the next (although it occasionally screws up by putting 5 quarterly dividends in one year and 3 in the next). But DividendMax is still useful, and I use both.

From the annual report: "Pricing indications for both portfolios align more closely with prevailing market sentiment than with historical valuations, reflecting the cautious investment climate rather than the operational performance of the assets. "

Then why are you bloody selling them, instead of operating them!! 🤔

Very annoyed that they're winding this up, just when the dividend is becoming so well covered. I voted against, but of course it's the institutional shareholders who decide. It seems that they invest for dividends, and then change their minds when the shares are selling at a discount to NAV.

I can't help thinking that SEIT has made a rod for its own back by giving its debt as a % of NAV, instead of the more usual % of GAV (Gross Asset Value). Debt of 71.9% of NAV sounds very high, but it doesn't seem so bad when you realise that this is equivalent to 42% of GAV. It's not unusual for infrastructure funds to have debt around 40% of GAV.

Personally, I would probably be buying shares at this price if I didn't already have as much exposure to UKW (and other renewables) as I feel comfortable with. In fact, I reduced my exposure to UKW (which was very high) a while back, and it's tempting to buy some of those shares again now at a lower price.

My concern is that any long-term shortfall in wind speeds and electricity prices (below those in the NAV model) could have a big effect on profits. If (in a hypothetical example), you have a profit margin of 20%, it only takes a fall in revenue of 10% to halve your profits (other things being equal). Yes, only half of UKW's future revenues (by NPV) are exposed to market prices. But it seems quite possible that future regulatory changes could have a large adverse effect on those prices.