26 Mar 2019 11:50
London, UK, 26 March 2019
Edison issues review on Standard Life UK Smaller Companies (SLS)
Standard Life UK Smaller Companies (SLS) is managed by experienced UK smaller-cap specialist Harry Nimmo. He is somewhat cautious on the near-term outlook for UK equities, citing ongoing Brexit uncertainty, lower US earnings growth and the US/China trade dispute. The manager continues to follow his tried-and-tested investment process, seeking high-quality firms that can grow their businesses regardless of the stage of the economic cycle. He notes that SLS's portfolio companies are generally trading well, showing good earnings momentum and beating expectations, which he expects will lead to higher dividend payments. The trust currently offers a yield of 1.6%.
SLS is currently trading at an 8.9% discount to cum-income NAV, which is wider than the 5.1% to 6.4% range of average discounts over the last one, three, five and 10 years. The board aims to limit the discount to 8.0% in normal market conditions, primarily via share repurchases, although there are also periodic discretionary tender offers. While SLS aims to generate long-term capital growth, its annual dividends have compounded by 11.6% pa over the last five years and its current yield is 1.6%. Net gearing is permitted up to 25% of NAV (0.8% net cash at end-January 2019, reflecting the manager's relatively cautious near-term outlook).
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