BLACKROCK FRONTIERS INVESTMENT TRUST PLC: Portfolio Update
BLACKROCK FRONTIERS INVESTMENT TRUST PLC
All information is at 31 October 2013 and unaudited.
Performance of portfolio at month end with net income reinvested
One Three Six One Since
month months months year launch* Sterling: Share price 3.6% 3.2% 11.1% 47.5% 24.1% Net asset value 2.6% -1.7% 9.8% 32.9% 19.0% MSCI Frontiers Index (NR) 3.3% -2.3% 4.6% 26.0% 5.7% MSCI EM Markets (NR) 5.7% 3.6% -2.0% 6.8% -2.7%
US Dollars: Net asset value 1.9% 4.3% 13.5% 32.7% 22.8% MSCI Frontiers Index (NR) 2.5% 3.6% 8.0% 25.6% 8.9% MSCI EM Markets (NR) 4.9% 9.8% 1.2% 6.5% 0.2%
Sources: BlackRock and Standard & Poor's Micropal
* 17 December 2010.
At month end US Dollar: Net asset value - capital only: 172.19c Net asset value - cum income: 172.70c Sterling: Net asset value - capital only: 107.10p Net asset value - cum income: 107.42p Share price: 114.00p Total assets (including income): £161.8m Premium to cum-income NAV: 6.1% Gearing: nil Gearing range (as a % of gross assets): 0-20% Net yield*: 4.5% Ordinary shares in issue: 150,621,621
*Yield calculations are based on dividends announced in the last 12 months as at the date of the release of this announcement, including the 2012 final dividend per share of 2.60 cents per share (1.64557 pence per share) announced on 30 November 2012, the 2013 interim dividend of 2.00 cents per share and the special interim dividend of 3.40 cents per share announced on 30 May 2013, payable to shareholders on 5 July 2013. The interim and special dividends announced on 30 May 2013 that total 5.40 cents per share (3.45003 pence per share) are the total dividends for the financial year ending 30 September 2013. The special dividend represents the final dividend which is normally paid in March each year. Therefore, a more accurate indication of the annual yield for the year to 30 October 2013 would be 3.0% (based on the latest available share price as at the date of this announcement of 114.00 pence per share). The Board does not currently anticipate any further distributions for the current financial year.
Benchmark Sector Analysis Gross assets(%)* Country Analysis Gross assets(%)*
Financials 32.7 United Arab Emirates 11.7 Consumer Staples 14.2 Saudi Arabia 11.5 Energy 13.8 Qatar 10.5 Health Care 9.9 Nigeria 10.2 Telecommunication 9.2 Bangladesh 6.5 Industrials 8.6 Kazakhstan 5.7 Materials 7.8 Iraq 5.5 Consumer Discretionary 2.3 Kuwait 5.1 Utilities 1.9 Pakistan 4.2
----- Ukraine 3.9 Total 100.4 Sri Lanka 3.8
----- Oman 3.4 Short positions -1.6 Vietnam 3.3
===== Turkmenistan 3.0 Panama 2.5 Slovenia 2.3 Pan Africa 2.2 Kyrgyzstan 1.6 Croatia 1.3 Estonia 1.3 Other 0.9 ----- 100.4 ===== Short positions -1.6 ===== *reflects gross market exposure from contracts for difference (CFDs) Market Exposure
30.11 31.12 31.01 28.02 31.03 30.04 31.05 30.06 31.07 31.08 30.09 31.10
2012 2012 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013
% % % % % % % % % % % %
Long 102.0 103.4 105.1 104.1 99.5 99.2 99.8 95.9 103.2 98.9 98.8 100.4 Short 4.9 5.2 3.5 1.2 1.2 1.2 1.1 2.5 3.0 3.3 1.4 1.6 Gross 106.9 108.6 108.6 105.3 100.7 100.4 100.9 98.4 106.2 102.2 100.2 102.0 Net 97.1 98.2 101.6 102.9 98.3 98.0 98.7 93.4 100.2 95.6 97.4 98.8
Ten Largest Equity Investments
Company Country of Risk % of gross assets
Zenith Bank Nigeria 4.8% Emaar Properties United Arab Emirates 4.2% Doha Bank Qatar 3.9% Saudi Basic Industries Saudi Arabia 3.6% Halyk Bank Kazakhstan 3.4% Abdullah Al-Othaim Markets Saudi Arabia 3.1% Square Pharmaceuticals Bangladesh 3.1% Dragon Oil Turkmenistan 3.0% Qatar Gas Transportation Qatar 3.0% Qatar National Bank Qatar 2.9%
Commenting on the markets, Sam Vecht, representing the Investment Manager noted:
The MSCI Frontier Market Index returned 2.5% in October. Frontier Markets underperformed mainstream Emerging Markets which rose 4.9% triggered by the delay of the US Federal Reserve tapering of its Quantitative Easing Program. We maintain the contention that Quantitative Easing does little to address Emerging Markets economic imbalance and that Frontier Countries generally remain better positioned. Year to date Frontier Markets have risen 21.1% whereas Emerging Markets have only risen 0.3%. (All calculations on a US Dollar basis with net income reinvested.)
Argentina continued its strong run in 2013, rising by 7.9% in October. Investors began to countenance the possibility of political change in the 2015 elections following a weak showing from the government in the recent mid-term elections. The optimism extends to the likelihood of Argentina beginning market friendly reforms, fuelled by speculation that the government is planning to unfreeze tariffs in the heavily regulated utilities sector.
Pakistan also performed well in October, rising by 5.7%. The government has met the majority of the conditions put in place by the IMF and so expect the next tranche of funding to be released before year end. In addition, positive negotiations with other multilateral organisations seem likely to result in Pakistan receiving the funding required to prevent a crisis in its precarious Balance of Payments situation.
Nigeria was a strong performer, rising by 4.9%, as the stresses seen in the financial system normalised.
Croatia was the weakest performer over the month, falling by 5.0%. Sentiment remained impacted by the downgrade to junk of the country's sovereign debt by rating agency, Fitch.
The Company's NAV per share increased by 1.9% in October, underperforming the benchmark by 0.6%. Year to date, the Company's NAV has returned 27.2% compared to the MSCI Frontier Markets Index return of 21.1%(all calculations on a US Dollar Basis with net income reinvested).
The Company benefitted from a position in Iraqi focussed oil producer, DNO. Investors were encouraged by excellent results from the Tawke oilfield in the Kurdistan region of Iraq. We have recently exited the position given that the stock has risen 70% year to date in USD. However, it was not all good news for positions with Iraqi oil exposure. The positive relative performance of DNO was largely offset by Gulf Keystone. The company has experienced a delay in moving its listing to the main board of the FTSE which has concerned investors.
Cable & Wireless, the telecom company with operations in Panama and across the Caribbean was also a notable outperformer. Investors were cheered by the continued turnaround as highlighted by the recent results. In addition, the company announced that it will spend $100m of the cash raised from recent asset consolidation on extending their licence in Panama. This helped to reduce investor fears that the company would look to aggressively spend its cash pile without sufficient concern for valuation.
Kyrgyzstan miner, Centerra was the largest individual detractor from performance over the month as the Kyrgyz government announced that it was looking to renegotiate the terms of the company's mining licence.
The Company increased exposure to Pakistan over the month, the Company initiating a new position in Fertiliser company, Engro. We expect to report improved financial results based on improved gas allocation from government over the next few quarters, which should help to somewhat ease the pressure that it is facing from a large debt burden.
We also added a new position in Genel Energy, another Iraqi focused oil company, following an insightful trip to the region. The company has attractive assets which appear undervalued as the likelihood of exports from the region increases.
We exited our position in Saudi Telecom, Etihad Etisalat, following a period of strong performance. The most recent results showed that data growth has slowed dramatically leading us to believe that the company is fully valued at current prices.
Markets are likely to remain turbulent over the next few months as the Quantitative Easing debate continues across the world. In this environment, Frontier Markets remain better positioned and are therefore likely to experience lower volatility than their Emerging Market counterparts. Due to the strong outperformance of Frontier Markets over Emerging Markets year to date, Frontier Markets may well underperform a strong year-end rally in Emerging Markets. However, we believe that Frontier Market valuations remain attractive both in absolute terms and relative to mainstream Emerging Markets. Companies operating very profitably in Sub-Saharan Africa, Asia and the Middle East offer exposure to some of the fastest growing markets globally yet are often trading on valuations of under 10 times the price to earnings ratio supported by high dividend yields.
More than 2 billion people live in Frontier Markets but until now they have attracted little investor attention. With their strong GDP growth, positive demographic profile, low debt burden and relatively low correlation to developed and emerging markets, we think Frontier Markets are a great place to invest for those who have both a long term horizon and wish to see capital and income growth. In a changing world, we believe that opportunities abound for unconventional investors.
21 November 2013
Latest information is available by typing www.blackrock.co.uk/brfi on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement.
-0- Nov/21/2013 15:06 GMT