TIDMEDIN
Edinburgh Investment Trust PLC
25 November 2022
Edinburgh Investment Trust (EDIN)
25/11/2022
Results analysis from Kepler Trust Intelligence
Edinburgh Investment Trust (EDIN) has released its half year
results to the 30/09/2022 during which it delivered a NAV total
return (with debt at fair value) of -8.2%, while the FTSE All-Share
Index fell by 8.3%. Although EDIN only did marginally better than
the benchmark index over the six month period, James de Uphaugh and
his team have built on the solid performance since they took over
the management of the trust in late March 2020, since when they
have generated a cumulative NAV total return of 41.2% while the
FTSE All-Share Index has risen by 31.3%.
The yield on the company's shares based on the last four
quarterly dividends paid was 4.5% as at 30/09/2022 Since then the
board has declared the first interim dividend for 2023 of 6.4p that
is due to be paid on 25/11/2022. This is 6.7% higher than the
dividend paid at the same stage last year and an ongoing
improvement since the 2020 pandemic lows.
Chair of the board Elisabeth Stheeman said: "it is encouraging
to see that over three years the company's returns are now ahead of
the index.... the company is in a strong position to take advantage
of the attractive opportunities that are now arising, as well as to
continue with the important business of working with existing
holdings that underpin the income and capital value of the
portfolio"
Kepler View
The strategy instigated by James de Uphaugh and the team for
Edinburgh Investment Trust (EDIN) since they took over management
two and a half years ago has worked wonders for the portfolio's
returns. Although this is a short period to judge success by,
investors should be pleased with the significant outperformance.
Understandably, the volatile and difficult market conditions have
resulted in the portfolio dropping over the first half, nonetheless
this was marginally better than the benchmark index.
The board have done well to refinance maturing debt when
interest rates were low, this has locked in a borrowing cost which
looks extremely cheap at today's rates and will allow the managers
to invest in the portfolio when the recovery comes. When market
optimism returns, the lower cost debt profile should mean a lower
hurdle to jump over to generate outperformance.
EDIN's discount has widened during these six months, we believe
this is chiefly down to challenging market conditions rather than
specifically a reflection on the trust. We expect that the board's
willingness to intervene and buyback shares is a positive signal,
providing value to investors. Meanwhile we note that the historic
dividend yield of EDIN (c. 4.5%) is lower than the simple average
of its peers, (though comfortably higher than the benchmark), we
believe and agree with the board and management that a focus on
generating attractive total returns through a combination of
dividend income and capital growth is more sustainable and will
serve investors better over the long run.
James and the team run a concentrated portfolio of around 40-50
stocks that are selected through a bottom-up fundamental analysis
approach. They seek to identify companies whose medium-term
earnings are mispriced. Aside from this there is no overarching
style bias, making for a portfolio that can adapt to changing
market conditions. James believes that UK stocks continue to trade
at attractive valuations, even after a slight rotation to value
stocks away from growth stocks. EDIN currently uses a modest level
of gearing but the team seem intent on putting more of the cash
balance to use in anticipation of UK and global markets eventually
moving out of this 'sticky' phase. We believe that EDIN could serve
as a core holding for investors looking for exposure to UK
companies with the potential to deliver a mix of growth and
income.
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November 25, 2022 07:03 ET (12:03 GMT)
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