Fund Research

BlackRock Energy and Resources Income

01 February 2019 View latest version

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Energy and Resources Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Investment objective

The Company aims to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sectors.

As at:

30-01-19

Group/Investment

BlackRock Commodities Income

Ticker

BRCI

Management Company

BlackRock Inc

Manager Name

Olivia Markham;Thomas Holl;

Association of Investment Companies (AIC) Sector

Sector Specialist: Commodities & Natural Resources

12 Mo Yield

5.6%

Dividend Distribution Frequency

Quarterly



Latest Market Capitalisation

£82,914,332

Latest Net Gearing (Cum Fair)

8%

Latest Ongoing Charge Ex Perf Fee %

1.39

Turnover Ratio %

94.2

Shares Outstanding

116,126,515

(Discount)/ Premium % (Cum Fair)

-6.1

Daily Closing Price

71.4p

BlackRock Commodities Income (BRCI) has a conviction-led approach to delivering a high income from the global mining and energy sectors. The shares currently yield 5.7%, considerably more than funds exposed to many other areas of the market. The managers have flexibility to invest in equities and fixed income to generate this income. With the top ten holdings currently accounting for 51% of total assets, relative to most equity funds it can be considered highly concentrated.

Managed by Olivia Markham and Tom Holl, BRCI typically has a roughly even split between mining and energy stocks. Reflecting the income mandate as well as the current outlook of the managers, a significant proportion of the trust is invested in the larger, diversified companies within each sector. The managers believe that within both of these sectors, diversified mega-caps are hugely cash-generative at current commodity price levels. With solid balance sheets and management focused on shareholders, they seem set fair for dividend hungry investors.

BRCI’s objectives are to achieve both an annual dividend target and, over the long term, capital growth. The board considers a “reference index”, of 50% EMIX Global Mining and 50% MSCI World Energy Index to compare performance, but does not see it as a benchmark, given the high-income mandate of the trust. Over the longer term, during what has been a severely volatile time for mining and energy companies, the trust has not kept pace with the reference index. 2018 started very positively, with the managers generating significant outperformance of the reference index, only to see worries of a China slow down and trade wars, erode it. BRCI has started 2019 in a positive manner, with the NAV + 1.9% at the time of writing, outperforming the AIC peer group which is -0.6% in NAV terms.

Income has been (and continues to be) a major focus for the managers and board. However, the trust was not insulated from the dividend cuts experienced by the sector, and the board reduced the dividend from 6p paid in 2015 to the current level of 4p. In the recently published annual results, the board has renewed its commitment to targeting 4p for the financial year ending 30th November 2019.

William Heathcoat Amory

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This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

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Fund History: BlackRock Energy and Resources Income

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