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P2P Global Investments ramps up dividend outlook




By Daniel Lanyon on 30th November 2017


In a warmly received market update, PSC Eaglewood has revealed further details about the £800m fund’s future.

 

 

P2P Global Investments, the largest alternative credit investment trust in the UK, has increased its dividend forecast to 15p by the end of Q2 2018.

 

Following its investment manager’s recent merger with Pollen Street Capital, manager of another investment trust – the £352m Honeycomb portfolio – the £798m fund’s longer term shift away from pure P2P exposure has accelerated. It is moving more towards assets with higher-risk adjusted returns, from a wider range of origination channels.

 

The news has been seen as positive by the market with the fund up more than 6 per cent in early morning trading.

 

P2P GI's share price today

Source: Google

 

 

P2P GI’s investors have seen, since its launch in May 2014, consistent monthly net asset value (NAV) returns but a on-going weakness in its share price as well as lower than expected dividends.

 

This year, the portfolio began a transition away from its original core exposure of unsecured US assets, mostly originated from P2P platforms.

 

Today’s update both underlines that shift as well as bringing forward to expected improvement in returns.

 

PSC Eaglewood, the fund’s investment manager, says that now two-thirds of credit assets are at, or exceeding target returns, increasing its confidence that it will achieve returns to cover a 15p dividend by the end of Q2 2018 and has committed to a 12p dividend in the transition period.

 

Analysts at Numis Securities say historic returns have “certainly been disappointing for investors” with NAV total returns of 4.4 per cent per annum since launch.

 

“The fund’s official target dividend at launch was 6-8 per cent per annum, however, we believe many investors had expectations of 10 per cent returns.

 

However, they say there is potential for an improvement in returns going forward.

 

“This a positive update from P2P Global Investments which brings forward the timetable of delivering an expected return of 6 per cent on the asset value. We understand that target assets are being added with a 7-9 per cent plus yields.”

 

“We believe that there is scope for the current discount to narrow given the support from the enhance buyback policy and the prospect of increasing returns in the near term. In addition, given that the portfolio may become more similar to Honeycomb IT, the differential between the 15 per cent premium on Honeycomb and 19 per cent discount on P2P GI appears anomalous,” Numis said.

 

Numis’ analysts also note that the manager intends to reduce its funding costs and the complexity of its leverage structures.

 

“It has also refinanced its expensive facilities with a cheaper cost of funding and increased it term facility from £150m to £200m with a slightly higher advance rates. Overall this has reduced funding spread from 260bps to 180bps. The fund will also seek to hold lower cash balance, which was historically required to cover currency hedging requirements,” Numis said.

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