REG-BlackRock Latin Am: Portfolio Update
21/11/2019 13:23
BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at 31 October 2019 and unaudited.
Performance at month end with net income reinvested
One month % Three months % One year % Three years % Five years %
Sterling:
Net asset value^ 1.0 -9.8 5.1 10.4 24.6
Share price 0.3 -13.7 10.5 14.1 25.9
MSCI EM Latin America (Net Return)^^ -0.5 -6.8 6.4 9.2 24.3
US Dollars:
Net asset value^ 6.1 -4.6 6.4 16.9 0.8
Share price 5.4 -8.8 11.9 20.9 1.7
MSCI EM Latin America (Net Return)^^ 4.5 -1.5 7.7 15.8 0.6
^cum income
^^The Company’s performance benchmark (the MSCI EM Latin America Index) may
be calculated on either a Gross or a Net return basis. Net return (NR) indices
calculate the reinvestment of dividends net of withholding taxes using the tax
rates applicable to non-resident institutional investors, and hence give a
lower total return than indices where calculations are on a Gross basis (which
assumes that no withholding tax is suffered). As the Company is subject to
withholding tax rates for the majority of countries in which it invests, the
NR basis is felt to be the most accurate, appropriate, consistent and fair
comparison for the Company.
Sources: BlackRock, Standard & Poor’s Micropal
At month end
Net asset value – capital only: 519.50p
Net asset value – cum income: 520.11p
Share price: 456.00p
Total Assets#: £226.2m
Discount (share price to cum income NAV): 12.3%
Average discount* over the month – cum income: 12.8%
Net gearing at month end**: 11.3%
Gearing range (as a % of net assets): 0-25%
Net yield##: 5.8%
Ordinary shares in issue (excluding 2,181,662 shares held in treasury): 39,259,620
Ongoing charges***: 1.0%
#Total assets include current year revenue.
##The yield of 5.7% is calculated based on total dividends declared in the
last 12 months as at the date of this announcement as set out below (totalling
33.87 cents per share) and using a share price of 590.06 US cents per share
(equivalent to the sterling price of 456.00 pence per share translated in to
US cents at the rate prevailing at 31 October 2019 of $1.294 dollars to
£1.00).
2018 Q4 interim dividend of 8.13 cents per share (paid on 8 February 2019)
2019 Q1 interim dividend of 8.56 cents per share (paid on 17 May 2019).
2019 Q2 interim dividend of 9.15 cents per share (paid on 16 August 2019).
2019 Q3 interim dividend of 8.03 cents per share (ex-date 10 October and
payable on 08 November 2019).
*The discount is calculated using the cum income NAV (expressed in sterling
terms).
**Net cash/net gearing is calculated using debt at par, less cash and cash
equivalents and fixed interest investments as a percentage of net assets.
*** Calculated as a percentage of average net assets and using expenses,
excluding interest costs for the year ended 31 December 2018.
Geographic Exposure % of Total Assets^ % of Equity Portfolio * MSCI EM Latin America Index
Brazil 66.1 65.9 64.1
Mexico 24.4 24.3 20.8
Argentina 4.2 4.2 1.4
Colombia 2.4 2.4 3.5
Panama 1.2 1.2 0.0
Peru 1.2 1.2 3.1
Chile 0.9 0.8 7.1
Net current liabilities (inc. fixed interest) -0.4 0.0 0.0
----- ----- -----
Total 100.0 100.0 100.0
----- ----- -----
^Total assets for the purposes of these calculations exclude bank overdrafts,
and the net current liabilities figure shown in the table above therefore
excludes bank overdrafts equivalent to 10.8% of the Company’s net asset
value.
Sector % of Equity Portfolio * % of Benchmark
Financials 26.8 33.7
Energy 14.0 10.8
Consumer Staples 13.9 14.9
Materials 10.4 12.7
Industrials 10.3 6.4
Utilities 5.4 5.8
Consumer Discretionary 5.3 5.7
Real Estate 4.9 1.5
Communication Services 4.5 6.5
Health Care 3.2 1.3
Information Technology 1.3 0.7
----- -----
Total 100.0 100.0
----- -----
*excluding net current assets & fixed interest
Ten Largest Equity Investments (in percentage order)
Company Country of Risk % of % of
Equity Portfolio Benchmark
Petrobras Brazil 10.4 8.4
Itau Unibanco Brazil 7.5 6.5
Banco Bradesco Brazil 5.7 6.8
Banco do Brasil Brazil 4.1 1.5
America Movil Mexico 4.0 4.0
FEMSA Mexico 3.7 2.6
Grupo Financiero Banorte Mexico 3.6 2.1
Walmart de Mexico y Centroamerica Mexico 3.5 2.4
B3 Brazil 3.3 3.7
Rumo Logística Operadora Multimodal Brazil 2.9 0.9
Commenting on the markets, Ed Kuczma and Sam Vecht, representing the
Investment Manager noted;
For the month of October 2019, the Company’s NAV returned +1.0%(1) with the
share price increasing marginally by 0.3%(1). The Company’s benchmark, the
MSCI EM Latin America Index, returned -0.5%(1) (net basis) (all performance
figures are in sterling terms with dividends reinvested).
In Brazil, the approval of the pension reform in October, one of the greatest
political and economic achievements in the country in recent years, was
largely responsible for driving the stock market higher during the month. The
Brazilian Central Bank reducing benchmark interest rates by 50bps, to an
all-time low, provided further tailwind for Brazilian equities and prospects
for future economic growth. Mexican markets also climbed higher, whilst Chile
was the notable underperformer this month as social unrest and demonstrations
put pressure on the government to release a social package and reshuffle its
cabinet. Argentina reacted negatively to the arrival of Peronist leader,
Alberto Fernandez, at the presidency following October’s election. The
portfolio’s underweight positioning in Chile was the largest contributor to
returns in the month, while Mexican stock selection weighed on relative
performance in October.
The absence of JBS , the largest meat processing company in the world, in our
portfolio was the month’s top relative contributor as the stock declined on
the back of a US senators’ letter requesting the US Committee on Foreign
Investment launch a probe in to the company’s engagement in illicit
financial activities. Overweight positioning in the Brazilian petroleum
company, Petrobras, was also among the top contributors as the stock rose
after strong third quarter 2019 results. A lack of positioning in Magazine
Luiza, one of the largest Brazilian retail companies, was the largest
detractor over the month as the company reported better than expected results
and strong top line growth with sequential acceleration. We do not hold the
stock as we view it as being overvalued relative to the other e-commerce
retail companies in Brazil. Overweight positioning in Ambev, a Brazilian
brewing company, also weighed on returns during the month as the stock missed
earnings results on the back of lower beer volumes in Brazil resulting from a
price increase early in the quarter, which their competitor did not follow,
and a challenging macro environment.
Over the month, we reduced our position in Ambev following weaker than
expected results. Increasing competition and slower volume growth has led to
margin contraction. This has led us to conclude that the stock is trading at
above average valuation multiples considering a below average earnings
expansion power. Following strong outperformance during the year, we took
profit from a position in Localiza, a Brazilian car rental company, as we
believe the sector is at risk of adding too much capacity which could result
in an erosion of returns during a period where the stock is trading at peak
valuation multiples. Furthermore, we reduced country exposure to Chile by
selling Antofagasta, which owns and operates copper mines, and traded into
Southern Copper, a Peruvian mining company, to maintain copper exposure. In
addition, we added to Light, a Brazilian electricity generator and
distributor, as we see structural improvements to the investment case stemming
from improvements in the company’s balance sheet, the introduction of new
management and an enhanced focus on corporate governance. The portfolio ended
the month maintaining overweight positions in Brazil and Mexico, while being
underweight Chile, Colombia and Peru. We also maintain an off-benchmark
allocation to Panama. At the sector level, we are overweight healthcare and
energy and are underweight materials and financials.
Brazil continues to display a constructive environment in congress to advance
President Jair Bolsonaro’s ambitious set of fiscal and administrative
reforms. We maintain the view that Brazil is on the path of modest economic
recovery backed by structural tailwinds including an uptick in private
investment, a significant increase in oil production and increased formal job
creation. In Mexico, economic growth has grinded to a halt as the private
sector has reigned in investment in response to President Lopez Obrador’s
uncertain policy initiatives. We see equity valuations in Mexico trading at
multi-year lows, reflecting lower growth environment and look towards easing
monetary policy, and eventual approval of USMCA (United States-Mexico-Canada)
trade agreement in North America and the launch of a national infrastructure
plan as catalysts to improve business sentiment. In Peru, we are underweight
as we see negative political newsflow as President Vizcarra’s initiatives to
dissolve Congress continues to result in further political uncertainty,
leading to reduced business confidence. The portfolio has recently reduced its
underweight position in Colombia as valuations and economic stability has led
to intriguing investment opportunities. Argentina’s presidential transition
continues to present uncertainty and we look to take advantage of
opportunities arising from volatility and extreme pessimism in the near term.
Finally, we remain comfortable with an underweight position in Chile amidst a
background of protests related to social inequality and signs of economic
growth deceleration in the economy. While the political landscape in Latin
America continues to present both opportunities and challenges in equity
markets, we are encouraged as the external environment appears to support
asset prices due to reduction in trade tensions between the US and China and
global coordination to maintain low interest rates, supporting economic
expansion.
(1)Source: BlackRock as of 31 October 2019.
21 November 2019
ENDS
Latest information is available by typing www.blackrock.co.uk/brla 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.
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