19 May 2020 08:33
London, UK, 18 May 2020
Edison issues review on TR European Growth Trust (TRG)
TR European Growth Trust (TRG) suffered in the recent equity market sell-off for a number of reasons, including its relatively high level of gearing, procyclical bias and structural focus on the smaller end of the European small-cap market. However, by taking advantage of the chance to buy good companies at low valuations, and disposing of holdings whose balance sheets looked vulnerable, manager Ollie Beckett has so far outperformed the EMIX Smaller Europe ex-UK Index since the mid-March lows. The manager argues that while the COVID-19 pandemic may have wide-ranging effects, and an EU-wide approach to rebuilding economies is key to the union's long-term survival, there are many opportunities for small-cap investors to benefit from the recovery, whatever shape it takes.
At 15 May 2020, TRG's shares traded at a 14.9% discount to cum-income NAV. This is wider than both short- and longer-term averages (range of 9.6% to 13.6% over one, three, five and 10 years), suggesting scope for a re-rating, particularly if outperformance in recent weeks is maintained. Although focused on capital growth, TRG offers a 3.0% yield, and has a substantial revenue reserve to support future dividend payments.
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