Last checked at 21 Dec 2022 07:00
London, UK, 21 December 2022
Edison issues review on The Merchants Trust (MRCH)
The Merchants Trust (MRCH) is managed by Simon Gergel, chief investment officer of UK equities at Allianz Global Investors (AllianzGI). He highlights that the remaining £16m of the trust's £42m credit facility has recently been drawn down, taking gearing from c 13% to c 15%. This indicates that the manager, and MRCH's board, see good value in the UK market, particularly in the type of stocks that fit Gergel's disciplined investment criteria. The manager continues to seek undervalued companies with solid fundamentals, aiming to generate a high and growing level of income and long-term capital growth. MRCH has a commendable performance track record, outperforming the broad UK market over the short, medium and longer term. It also ranks highly versus its peers in the 22-strong AIC UK Equity Income sector. The trust's annual dividend has grown for the last 40 consecutive years.
There continues to be high demand for MRCH's shares, which is illustrated by an acceleration in its share issuance and, unlike most of its peers, the trust regularly trades at a premium. In FY22, MRCH's share count increased by 5.6%, and so far in FY23 a further 9.2% has been issued. The trust is trading at a 1.8% premium to cum-income NAV, which compares with a range of an average 0.8% premium to a 1.8% discount over the last one, three, five and 10 years.
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