Perpetual Credit Income Trust

Announcement of 1HFY19 Results Awaited: Perpetual Credit Income Trust (ASX: PCI) offers investors an attractive income stream through a diversified exposure to domestic and global credit and fixed income assets. It also offers an opportunity to invest with one of the leading active credit fund managers in Australia. The portfolio of credit and fixed income assets is diversified based on country, asset type, credit quality, loan maturity and issuer.

The management expects that the portfolio will comprise of ~50 to 100 assets. The flexible investment strategy of PIC suggests that the portfolio manager can actively switch within the given range of asset according to the market conditions.


Key Facts- Perpetual Credit Income Trust (Source: Company Reports)
 
Admission and Commencement of Official Quotation: PCI was admitted to the official list of ASX Limited (‘ASX’) on 13 May 2019. Official quotation of PCI’s ordinary fully paid units was started on 14 May 2019. PCI raised $440,000,000 pursuant to the offer under its product disclosure statement dated 8 March 2019 (‘PDS’) by the issue 400,000,000 units at an issue price of $1.10 per unit.

Top 10 Shareholders: The company recently released the report of its top 10 shareholders, have been highlighted in the table which together forms around 13.85% of the total shareholding. The HSBC Custody Nominees (Australia) Limited and Capricorn Investment Partners (Nominees) Pty Ltd hold maximum interest in the company at 3.63% and 2.25%, respectively.


Top Ten Shareholders of PCI (Source: Company Reports)
 
Daily Net Tangible Asset Estimate: NTA (Net Tangible Asset) backing per unit of the PCI was $1.101 as at the close of business on 20 May 2019.

Performance in FY18: PCI’s sources of income are the value of FUM (funds under management) in Perpetual Investments and FUA (funds under advice) in Perpetual Private. Perpetual Investments’ FUM and Perpetual Private’s FUA stood at 75% and 59% exposed to equity markets, respectively at the end of FY18. Perpetual generated total operating revenue of $533.7 million in FY18, which was $18.3 million or 4% higher than in FY17.

Higher revenues in FY18 was largely on the back of higher levels of FUM and FUA as a result of strong performance by equity markets, continued positive net flows within Perpetual Private and new business growth in Perpetual Corporate Trust. However, the mentioned positives were partly compensated by prior period distributions and net outflows within Perpetual Investments. Performance fees earned in FY18 at $9.2 million was $2.5 million higher than in FY17.

Cash and cash equivalents for FY18 declined from $323.5 million in FY17 to $320.2 million, down $3.3 million or 1%. Liquid investments stood at $75.0 million in FY18 as compared to $63.1 million in FY17. The rise in the liquid investments was mainly on the back of additional investment in existing unit trusts, which was offset by the redemption of few incubation funds.

Gross corporate debt for Perpetual posted no change at $87 million as on FY18 as compared to FY17. The gearing ratio in FY18 was stable at 11.6% against 12.1% in FY17, well within the Group’s stated risk appetite limit of 30%.

Total reserves on the balance sheet in FY18 saw an increase of $4.0 million to $24.2 million, primarily on the back of an increase in the Equity Compensation Reserve of $2.2 million and an increase in the AFS (available-for-sale) reserve of $1.6 million.
 

Profitability and key performance indicators for FY18 (Source: Company Reports)
 
Outlook: The Group mainly focuses on executing its existing strategy. The profitability of the Trust is directly correlated to the growing requirement for savings, advice and income in retirement. Simultaneously, factors such as regulatory and political uncertainty in the system, and stock market behaviour throw near-term challenges, not only to Perpetual but to the overall financial services sector. However, the Group believes that with the continued investment in its core businesses and extensions into adjacent areas and new markets, it can deliver growth to its shareholders successfully over the period of time.

The company has not come up with the results for the first half of FY19 yet. Hence, the announcement of first results after listing will be one of the key factors to decide the performance, going forward.

Stock Price Performance since Listing:Since its listing on ASX till date, the stock has made a high of $1.120 and low of $1.105. The stock price of the company closed at $1.120 per share as on 21 May 2019 which is a tad higher than its issue price of $1.10 per unit.

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