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Life Sciences Investor Briefing Webcast

We reviewed RMDL in detail in our initiation report, Predictable revenue streams generating high yield, published on 5 June 2019. RMDL published its interim report on 14 August. The June NAV was known so the Chairman’s positive tone and priorities were most interesting. “We remain disciplined in our approach to steadily growing the Company … objective to improve liquidity … for Investors, increase the portfolio diversity and ... to reduce the ongoing charges ratio. Overall, we believe that the investment opportunity in secured debt remains significant ... and we are confident of the Investment Manager’s ability to generate stable attractive returns for Investors.”

  • 1H’19 results: As a reminder, the NAV total return in June was 0.41% and in 1H’19 4.82% (which is a little ahead of target). The portfolio had 35 investments (one net in month, three gross), with an average yield of 8.61%. The fixed / floating rate split was 60/40, and the average life of the portfolio is 3.46 years.
  • Peer news flow: GCP Asset Backed’s June Quarterly Factsheet noted the 0.9% 3 month performance (12.7% annual). On 27 August, SQN announced that its July NAV performance had been 0.49% (one-year return 5.25%). SEQI (infrastructure debt IC) reported a July dividend adjusted NAV increase of 1.33%.
  • Valuation: RMDL trades at a small premium to NAV and to the average of its closest peers. Investors can take comfort from the NAV being robustly reviewed by external agents. RMDL issuing equity above NAV enhances existing shareholders (see 24 July announcement). RMDL has not seen a major loss.
  • Risks: Credit remains key for any lender, and we examine in detail the investment manager’s approach. We believe the right approaches to limit both the probability of default and loss, given default, are in place. The book has shown a surprising propensity to turn over. There are modest currency and key personnel risks.
  • Investment summary: RMDL offers investors a different asset class, with a substantial yield generated on a sustainable basis from long-term assets with predictable income streams and a strong pipeline. Any lending business needs to correctly assess and manage credit. RMDL has all these characteristics. The market has given it a small premium to NAV, reflecting these traits and a material element of market-driven valuation.
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