SME Credit Realisation Fund

SME Credit Realisation Fund (LON: SCRF) is a closed-end investments company, operating with the objective to provide shareholders with attractive and sustainable dividend income. The group through Funding Circle’s marketplaces lend to small businesses creating a diversified Credit Assets portfolio directly and indirectly.

Recent News
On 1^st April 2020, SME Credit Realisation Fund announced the purchase of 50,000 ordinary shares on 31^st March 2020 with no par value at a gross price (average) of 51.0825 pence/share.

Company Update
On 7^th February 2020, SME Credit Realisation Fund released an update related to the price discovery process to sell SME loans of the company initiated in the fourth quarter of the financial year 2019. The group have received a high level of interest from buyers and will continue to pursue a small portion of its assets.

Financial highlights – H1 Financial Year 2020 (30^th September 2019, GBP)
In the first half of the financial year 2020, the company’soperating income stood at GBP 17,492,589 versus GBP 20,230,289 in the first half of the financial year 2019. The group has managed to control its operating expenses for the period, a reported total comprehensive income of GBP 3,611,559 in the first half of the financial year 2020 versus GBP 3,020,299 in the first half of the financial year 2019. The basic and diluted earnings per share stood at 1.17 pence in H1 FY2020 versus basic and diluted earnings per share of 0.92 pence in the first half of the financial year 2019. The group’s cash balance stood at GBP 40,982,210 as on 30^th September 2019 versus GBP 29,408,480 as on 31^st March 2019. The group’s total assets stood at GBP 324,501,871 as on 30^th September 2019 versus GBP 383,563,288 as on 31^st March 2019.

Share Price Performance

Daily Chart as of April 1^st, 2020, after the market close (Source: Thomson Reuters)

SME Credit Realisation Fund shares were trading at GBX 48.9 at the time of writing after the market close on 1^st April 2020. Stock's 52 weeks High is GBX 98.86 and Low is GBX 48.00.

Conclusion
The group has shown an increase in financial performance for the first half of the financial year 2020. Although the top-line performance has declined, while the bottom-line performance has improved for the period.The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. With the outbreak of Covid-19, many countries-imposed restrictions on travel and resulted in a sharp fall in the stock markets globally.The Covid-19 has resulted in increased volatility and reduced the liquidity, which has resulted in a decline shares of the company.

Therefore, considering the uncertainties in near-term due to Covid-19 pandemic, we have given a “Watch” recommendation at the closing price of GBX 48.90 (as on 1^st April 2020), while we look for any upcoming catalysts in the near term.

Electra Private Equity Plc

Electra Private Equity Plc (LON: ELTA) is the London Stock Exchange (LSE) listed investment trust concentrated on private equity investments. On 30th September 2019, the company had a net asset value per share of 548.4 pence and net assets of £210 million.

Recent News
On 6th March 2020, Electra Private Equity announced the selection of Numis Securities Limited as Joint Corporate Broker. Numis Securities Limited will work with HSBC Bank Plc as Joint Corporate Broker effective immediately.

Covid-19 Update
On 20^th March 2020, Electra Private Equity released an update on the impact of Covid-19 outbreak and countermeasures announced by the Government of the UK. The trading position and valuations of the group’s portfolio companies have been materially impacted by the spread of Covid-19. The company is focusing on ensuring the safety of employees and customers of its portfolio companies and flowing the practice of social distancing as advised by the Government. The group has taken required measures to manage most impacted businesses and procedure to tackle the challenging times. The group believe that each of its businesses with the available liquidity, support from Government and banking partners will survive the challenging situation and emerge stronger. The group believe it’s too early to determine the long-term impact and will continue to develop plans to tackle the outbreak.

Share Price Performance

Daily Chart as of April 1^st, 2020, after the market close (Source: Thomson Reuters)

Electra Private Equity Plc shares were trading at GBX 165.00 at the time of writing after the market close on 1^st April 2020. Stock's 52 weeks High is GBX 405.00 and Low is GBX 154.20.

Conclusion
The group is going through an existential crisis as its lead investment manager was ousted from the company. It is also under intense regulatory oversight, which might lead to punitive measures in the future. The general market sentiments do not help either due to the Brexit uncertainties. The company’s operations are impacted by multiple risks and uncertainties, such as the impact of volatility of commodity prices, currency fluctuations, environmental risks, government regulation, etc. The development made by some of the company’s higher unquoted holdings has resulted, in the decrease in NAV per share (net asset value) during the current period (30th September 2019) of 548.43 pence. The company operates in an industry with low barriers to entry and exit for new competitors, which can disrupt the market locally. The group’s operations are impacted by the outbreak of Covid-19 as the trading and valuation of most of the portfolio companies are materially impacted by the outbreak. The Covid-19 has resulted in increased volatility and reduced the liquidity, which has resulted in a decline shares of the company.

Therefore, considering the ongoing challenges in the UK’s market and uncertainties in near-term due to Covid-19 pandemic, we have given a “Watch” recommendation at the closing price of GBX 165.00 (as on 1^st April 2020), while we look for any upcoming catalysts in the near term.

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