A shift in focus by Real Estate Credit Investments (RECI) towards direct lending to property companies has proved timely, because the drop in profits in the year to March was primarily a worse-than-expected performance from its bond portfolio. That's not surprising, given the huge volatility affecting markets in general, and the nominal face value of the bond portfolio fell from £69.3m a year earlier to £48.4m.
At the same time, the drawn loan portfolio rose from £87m to £113m, at the same time increasing its exposure to higher-yielding loans. So, while interest income from bonds fell by over a quarter to £4.7m, interest generated from the loan portfolio rose 37 per cent to £12.9m, lifting total interest income from £15.8m to £17.7m.
Identifying attractive opportunities within the secured residential and commercial debt market has been helped by the expertise contained within Cheyne Capital which acts as its alternative investment fund manager. With investments made on a buy-to-hold basis, it's important to recognise that total returns, if held to maturity, will be driven by the actual performance of the underlying real estate loans rather than market prices.
The previous year's profits have been restated to exclude returns from the European Residential Income Investments Cell, the final part of which was sold in January this year.
| REAL ESTATE CREDIT INVESTMENTS (RECI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 155p | MARKET VALUE: | £113m | |
| TOUCH: | 153.75-157.25p | 12-MONTH HIGH: | 183p | LOW: 152p |
| DIVIDEND YIELD: | 7.1% | PE RATIO: | 13 | |
| DISCOUNT TO NAV: | 5% | |||
| INVESTMENT PROP: | £153m | NET CASH: | £5.3m# | |
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 110 | -0.7 | -2.0 | 4.64 |
| 2013 | 150 | 19.0 | 47.6 | 7.4 |
| 2014 | 154 | 11.3 | 15.0 | 10.7 |
| 2015 | 162 | 17.3** | 19.0 | 10.8 |
| 2016 | 163 | 12.0 | 12.0 | 10.8* |
| % change | +1 | -31 | -37 | - |
Ex-div: 30 Jun Payment: 22 Jul *Excluding special dividend of 0.8p a share **Restated to exclude ERII # Excludes £41.8m of preference shares | ||||
