The Ian Cowie portfolio: what I’ll do after buying this winner

Buying more shares in this property trust at its nadir in March proved a smart move for our columnist.

One swallow does not a summer make but, believe it or not, clouds of doubt about the coronavirus crisis are lifting as business begins to get back to a new normal. For example, this income-seeking investor in the recession-blighted property sector, welcomes the removal of “material uncertainty” clauses from investment trust valuations and dividends being delivered on time.

Two months ago, in this space, I pointed out there would be winners from Covid-19, as well as losers, and cited my shareholding in Aberdeen Standard European Logistics (LSE:ASLI) . This trust owns 14 warehouses spread across five Continental European countries that are benefiting from the boom in internet retail because most of the stuff we buy online has to be stored somewhere before it is delivered to our door.

Back then, ASLI was yielding 6% and trading at a 9.8% discount to its net asset value (NAV), priced at 85p. Since then, the shares hit 112p last month, when ASLI delivered its first interim dividend, currently yield 4.9% and are trading at a 4.4% premium to NAV, priced at 105p.

Full disclosure: I originally invested in ASLI at £1 per share in the initial public offering in December, 2017, and also bought more shares at 75p each last March when the coronavirus crisis and global markets were near their worst - at least in terms of what we have seen so far. I am not celebrating yet but suspect those who sold in the spring must be feeling a bit silly now.

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On a brighter note, the summer seems to be bringing a better view of what investors own today and might expect in future. ASLI’s directors updated the market earlier this month: “The board is pleased to note the positive development that the Covid-19 'material uncertainty' clause will no longer be applied to our company's portfolio valuation.

“It was concluded that reporting a material valuation uncertainty for industrial and logistics real estate assets was no longer appropriate with sufficient amounts of up-to-date comparable market evidence upon which to base opinions of value. Given the unknown impact that Covid-19 might have on the real estate market in the future, valuations will be kept under frequent review.”

Cautious optimism with regular reappraisals sounds about right with so much fear and pessimism elsewhere. Earlier this week, interactive investor reported that a poll of 1,872 investors found that almost two-thirds, or 63%, are worried about a coronavirus second spike.

But our worst fears are not always realised, and reality can also surprise on the upside. For example, ASLI reports that 85% of the rental income it was due to receive in the second quarter of this year has been collected, slightly exceeding its forecast of 82%.

Priyesh Parmar, an analyst at Numis Investment Companies, pointed out: “Improved rent collection, combined with the conclusion of rent negotiations across the portfolio, has given the board confidence to reiterate its target dividend which equates to an annualised yield of 5%.

“Having met with the manager earlier in the year, we like the asset management approach and believe the portfolio is well positioned in the current market. The share price has rallied with total returns of 20% in three months, leaving the shares on a modest premium to historic NAV.

“The relative strength of ASLI’s rating in part reflects the ability to continue to pay a dividend in the current market backdrop.”

Despite being less than three years old, the trust’s reserves already exceed six months’ dividends. But Simon Elliott, an analyst at Winterflood Investment Trusts, argues there is better value elsewhere in the Association of Investment Companies (AIC) Property - Europe sector.

He said: “Tritax EuroBox (LSE:BOXE) appears to be a beneficiary of the longer-term impacts of the Covid-19 pandemic, primarily an acceleration of e-commerce and the onshoring of supply chains, strengthening the outlook for logistics assets.

“Given the growth opportunities in this sector, we believe that BOXE’s current discount of 14% offers an attractive entry point, particularly relative to its closest peer, ASLI, which is trading on a premium.”

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Double-digit discounts are always tempting, but I note that BOXE has an even shorter track record than ASLI, with the former having been launched in July 2018, and a lower yield of 4.3%. I also remember how long it took for ASLI to become fully invested and return cash to shareholders.

Independent statistics from Morningstar, via the AIC, show that BOXE has no dividend reserves as yet and achieved a total return of just 1.2% over the last year, compared to 9.4% from ASLI. The latter result is the best in its sector of five funds, so I intend to wait patiently for further dividends and growth to be delivered as clicks and mortar replace bricks and mortar in the post-coronavirus retail market.

Ian Cowie owns shares in Aberdeen Standard European Logistics Income as part of a global portfolio of investment trust shares.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.