The alternative credit focused investment trust has not hit its target dividend for several years.
The £727m P2P Global Investments fund could be due a re-rating following its first on-target dividend since 2015, according to analysts at investment bank Liberum, who say its Q4 payout could return to 15p.
P2P GI, which has paid out a below target c.12p per quarter for nearly three years, was one of the first investment trust launches to offer investors exposure to disintermediated lending when it listed back in 2014, first mainly in the p2p space more recently in various areas of alternative credit. Returns, including dividends, have not met targets for approximately three years and the portfolio has seen a consistent double digit discount to its net asset value over this period. Today the discount sits at 17.4 per cent.
For more than two years the fund has been transitioning capital into more niche areas of od alternative credit that offer more downside protection and often some form of lending security.
The run-off portfolio has reduced to 23 per cent of the total portfolio (25 per cent at September 2018), Liberum says, and the net return on the ongoing assets suggests it is hitting expectations to meet the target dividend.
Unsecured consumer lending is more of a feature of the old portfolio while the newer portfolio is more focused towards SME loans and secured property lending.
Liberum says because P2PGI's underlying income returns have been improved steadily in 2018, it estimates the fund will be able to pay out a 15p dividend for the fourth quarter of 2018
“Returns should continue to improve as the legacy portfolio winds down resulting in an increased dividend.”
“We believe this will help to drive a re-rating from the current -17.4 per cent discount (15p target quarterly dividend implies 7.6per cent dividend yield). Partners of the investment manager have recently acquired in excess of £1.5m of shares in the company, demonstrating confidence in the outlook for the portfolio performance.”
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