Fund Research

Aberforth Split Level Income Trust

Last update 26 November 2018
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Aberforth Partners LLP is a client of Kepler Trust Intelligence. Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

Please see the important information by following this link or at the bottom of the page.

Investment objective

The Trust’s investment objective is to provide Ordinary Shareholders with a high level of income, together with the potential for income and capital growth, and to provide ZDP Shareholders with a pre-determined final capital entitlement of 127.25p on the planned winding up date of 1 July 2024.

Group/Investment

Aberforth Split Level Income

Ticker

ASIT

Management Company

Aberforth Partners LLP

Manager Name

Alistair Whyte; Chris Watt; Euan Macdonald; Keith Muir; Peter Shaw; Richard Newbery; Jeremy Hall

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield

4.9%

Dividend Distribution Frequency

Semi-Annually

Latest Market Capitalisation

£156,005,000

Latest Net Gearing (Cum Fair)

123%

Latest Ongoing Charge Ex Perf Fee %

1.1

Turnover Ratio %

25.6

Shares Outstanding

190,250,000

Discount % (Cum Fair)

-3.6

Daily Closing Price

82p

Aberforth Split Level Income Trust (ASLIT) is now in its second year having launched on 3 July 2017. In contrast to the first twelve months, in which the trust outperformed the Numis Smaller Companies index (excl. Investment Companies), the period since the summer has been challenging for the trust. Distinct to big-sister Aberforth Smaller Companies Trust (ASCOT), the trust has an inherent income bias.

Being contrarian and value investors, the portfolio is unsurprisingly heavily exposed to UK domestic stocks. However, the managers highlight that their portfolio currently represents many layers of opportunity, with UK stocks being out of favour (from the perspective of international investors), small caps having underperformed large caps, value having underperformed growth over a number of years, and lastly, the domestic focus of many of the underlying companies.

The Aberforth approach, the income mandate and the company’s structure means that ASLIT is highly differentiated to its peers in both the closed- and open-ended sectors. ASLIT has the most extreme positioning towards value (according to Morningstar). Relative to peers, the ordinary shares of ASLIT have the highest gearing to equities of peers.

The dividend of 4p (ex last year’s special) currently yields 4.9% on a historic basis, is one of the key draws for ASLIT. ASLIT is currently delivering ahead of target on the income front having generated earnings per share of 5.43p for the first full year to 30th June 2018. The board have banked revenue reserves of 0.8p per share. Taking the difference between the company’s cum- and ex-income NAV’s and the dividend so far paid (the company pays two dividends per year) reveals that earnings this year (for the five months to mid-November) have so far been in the order of 2.1p per share. The managers currently expect mid single digit dividend growth from small caps in the current year, which would be a deceleration compared with recent years but which would still represent progress in real terms.

The managers aim to have ASLIT near fully invested at a portfolio level at all times. The company has structural gearing in the form of zero dividend preference shares, which means that the ordinary shares are 28% geared, considerably higher than most smaller company trust peers, most of which do not have any gearing at all.

The Aberforth team has decades of experience between its members, but the original partners have gradually been retiring, being replaced by a committed team of experienced investors. Alistair Whyte and Richard Newbery are the last of the original partners, having been on the team since launch in 1990. Richard has recently announced his intention to retire in April 2019. The newest recruit is Jeremy Hall who has recently joined from Cartesian and Nikko.

When we last reviewed ASLIT the shares were trading on a discount of c.7.5%. Since then, that rating has improved to c 4.5% and the shares continue to trade at a premium to the wider smaller companies peer group, but in line with the higher income trusts such as Chelverton UK Dividend Trust and Acorn Income Trust.

Important Information

Aberforth Partners LLP is a client of Kepler Trust Intelligence. Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

Please see the important information by following this link or at the bottom of the page.

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Fund History: Aberforth Split Level Income Trust

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