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Background: Global Investments Limited (GIL) is a mutual fund company which invests primarily in operating lease assets and loan portfolio and securitization assets. It was heavily affected by the global financial crisis due to several loans that it has invested in being reduced to junk ratings. This led to the appointment of ST Asset Management as the replacement manager of the company.
Recent development: GIL has completed a non-underwritten 2-for-5 rights issue of 157m new shares at S$0.138 per share, which was 152% oversubscribed. Net proceeds of $21.47m would be used for further investments. Operationally, the company has recorded a third consecutive profit-making quarter of $7.2m since FY09.
Key ratios…
Price-to-earnings: 13.0x
NAV per share: $0.27
Dividend per share / yield: $0.0075 / 4.8%
Net cash/(debt) per share: $0.04
Net cash as % of market cap: 23.3%
Share price S$0.156
Issued shares (m) 550.2
Market cap (S$m) 86.4
Free float (%) 91.6%
Recent fundraising activities Mar 11 – 2-for-5 rights issue of 157m shares at S$0.138/share
Financial YE 31 Dec
Major shareholders Boon Swan Foo – 8.4%
YTD change -17.9%
52-wk price range S$0.14-0.20
Our view:
Portfolio breakdown. GIL’s portfolio of assets and economic exposures include an investment in a listed entity operating in the aviation industry, an investment in two commercial aircraft subject to lease, freight rolling stock operating in North America, and passenger train fleets, locomotives and freight wagons operating in Europe, all subject to lease. It also has a diversified portfolio of loans, equity notes and net interest margin notes in securitisations secured against residential and commercial properties in Australia and the United Kingdom, as well as investments in European collateralised loan obligation vehicles and a loan secured by inventory and receivables.
Prudent investment approach. GIL is prudent on booking in investments to ensure stability in the balance sheet. In fact, some of the investments’ carrying value has already been written down to zero, which could only have a positive impact should the company decide to sell the assets or loans. Its latest investments involve floating rate notes, which are immune to interest rate risk and provide a steady income.
Valuations improvement. If the rights issue were excluded, the NAV in 1Q11 would have risen to 33 cents (+6.4% YoY). GIL is committed to distributing the bulk of its economic income as dividends. It has provided dividend guidance for 1H11 of 0.75 cents a share, translating to a 4.8% yield. The stock currently trades at a huge discount with P/B at 0.6x.
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