Gerry557 wrote:Catching up with Town Center Securities Finals yesterday there was a comment -
whilst the opportunity for an earnings and NAV enhancing share buy-back given our deeply discounted share price is also under consideration.
Whilst LTV are relatively high but with some headroom, the divi yield higher than the ongoing loan costs, how do investors feel about the buyback and how practical that this might be.
I suspect that they will need cash to help with the pipeline but a small buyback might prove useful proving the SP hovers or gets lower than this level. Could this just be "talk" to up the share price
Another company in a different market maybe, but VSL (VPC Specialty Lending Investments plc) which has just released its results says:
During the period, the Company bought back a total of 34,881,241 shares at an average price of 71.36 pence per share, representing 9.69% of the Company's issued shares as at 31 December 2018. There were significant trading volumes during the period as a result of events we believe to be unrelated to the fundamental performance of the Company. These included the sale of the holding by a fund managed by Woodford Investment Management Ltd. ("Woodford") as well as the ejection and subsequent reinstatement of the Company in the FTSE Russell All Share Index. Further details are provided below. These events presented a favourable opportunity to buy back shares in sizeable numbers.
On 30 April 2019, Woodford notified the Company that it intended selling the shares under its control in the Company. We worked with the Company's broker, Jefferies, to place substantially all of the shares with a mix of existing and new shareholders as well as to repurchase a tranche of shares using the buyback. Woodford had been a supportive shareholder in the Company prior to the sale.
The addition of gearing has allowed us to take advantage of buyback opportunities that are accretive to the Company given recent market prices and the wide discount to NAV, while continuing to deploy capital into new and existing investments. The gearing is in the form of US Dollar borrowings which also assist the Company to hedge its US Dollar exposure in a flexible and cost-effective manner. We closed the period with a look-through gearing ratio of 0.42x which is well below the limit of 1.50x outlined in the IPO Prospectus, and is a conservative level of gearing for a portfolio of senior debt investments. It should be noted that approximately half the borrowings are non-recourse to the Company and are linked to specific investments.
Clearly, the best form of discount management over time is to have strong and consistent investment performance and be able to demonstrate that to existing and potential shareholders. We have also taken measures to broaden our contact with the market through the appointment of Winterflood as joint broker as well as a variety of other initiatives that are starting to bear fruit.
and went on to say
The Company generated gross revenue returns of 6.96% as a percentage of NAV. The other revenue return of 0.41% was made up of interest earned on the Company's outstanding cash balances and the impact of share buybacks. Expenses were -2.91% for a net revenue return of 4.46%. Capital returns contributed 1.27%, comprising -0.36% from balance sheet IFRS 9 reserves, 0.21% from marketplace investments, 0.02% from securitisation residuals, 0.66% from equity investments and 0.74% from other capital returns, primarily related to share buybacks offset by the cost of the Company's foreign exchange hedging program, for a net total return of 5.73%. Share buybacks accounted for one time increases in the NAV of 2.04% for the period.
so the net effect of buying back eary 10% of the company was a 2% increase in NAV and not a big effect on the SP. Was it worth it? Only time will tell. But TOWN is trading at the same price as it was 7 years ago.