TIDMMINI
Miton UK MicroCap Trust plc
14 December 2023
Miton UK MicroCap (MINI)
14/12/2023
Results analysis from Kepler Trust Intelligence
Miton UK MicroCap (MINI) has released its interim financial
results for the half year ending 31/10/2023. Over the period, the
trust saw its NAV decrease by 15.5% versus its closest comparator,
the Numis Smaller Companies 1000 ex Investment Companies Index,
which fell by 9.1% in the same period. The AIC UK Smaller Companies
peer group average fell by 6.1%.
Performance has been affected by negative sentiment,
particularly at companies at the lower end of the market cap
spectrum. This has led to a particularly challenging period, though
the managers argue that the outlook is strong as micro-caps
typically outperform over the long term.
MINI offers a voluntary annual redemption facility, which is
designed to ensure that the share price does not deviate too far
from the underlying NAV. At the most recent redemption point,
holders of 17.7m ordinary shares or 18.7% of the issued share
capital requested to redeem their holdings.
The discount widened to 12.2% over the period. This takes the
discount to approximately in line with the peer group average
though significantly wider than the trust average since
inception.
The trust holds a FTSE 100 put option to mid-December providing
cover in the event of a sharp market fall. An additional put
covering the period to June 2024 has recently been added.
Chairman Ashe Windham acknowledged the headwinds in the smaller
companies space saying, "UK equities have been deeply out of favour
with both domestic and international buyers... [but] ... When the
mood music changes, the gains in the better companies will be
explosive."
Kepler View
Miton UK MicroCap (MINI) aims to provide investors with exposure
to the exponential growth opportunity available in the smallest
listed UK equities. It has been managed by Gervais Williams and
Martin Turner since the trust's inception. The trust has been
facing headwinds for the past couple of years as negative sentiment
has increased.
However, the managers have described the outlook as unusually
strong. They highlight that while micro caps typically outperform
over the long-term. They believe the portfolio can bounce back,
just as it did in the Covid recovery period. They believe that
micro caps are uniquely placed due to their option-like upside
meaning that when they do recover, they do so quickly and sharply.
We note that the market conditions that have caused the most recent
pullback are arguably easing and as such, we believe there is scope
for significant upside potential in the portfolio.
The managers continue to hold cash in order to take advantage of
opportunities. The level as at 31/10/2023 was 11.9% which we
believe offers the managers considerable flexibility to take
advantage of mispricing.
The discount widened to 12.2% in the period. This is notably
wider than MINI's five-year average and in line with the sector
average. The trust has a redemption facility in place with the aim
of minimising the discount, which has historically led to the trust
trading closer to NAV than its peers. We believe the wider discount
is especially attractive given the redemption mechanism, which
reduces the risk of the discount widening further especially so
when combined with the potential for a sharp bounce in the
portfolio, should the managers' belief of considerable upside
optionality prove accurate.
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(END) Dow Jones Newswires
December 14, 2023 08:51 ET (13:51 GMT)
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